United States District Court, District of Columbia
STATE OF DELAWARE DEPARTMENT OF HEALTH AND SOCIAL SERVICES, DIVISION OF MEDICAID & MEDICAL ASSISTANCE, Plaintiff,
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Defendants.
MEMORANDUM OPINION AND ORDER
COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE.
pending case raises a thicket of regulatory and
jurisdictional issues. Plaintiff is the entity charged with
administering Delaware's Medicaid program. Due to a
technological limitation, Delaware's computer systems
were unable to separately report certain collections that the
State made from third-parties. Part of these collections were
owed to the federal government. Plaintiff addressed this
technological limitation by simply netting these collections
from its Medicaid expenditures, and only seeking federal
funding based on the net amount. The federal government
issued two reports warning Delaware that this approach was
unacceptable, principally because there was insufficient
evidence that the relevant collections were actually being
netted, and that the federal government was receiving due
credit. Not long after the second report was issued, the
federal government “disallowed” $10, 080, 378 in
federal funding, equal to what it viewed as the amount that
Delaware had failed to credit the federal government from
third-party collections. Delaware sees this is a manifest
injustice, believing that it has already credited the federal
government with this amount, and must now double pay.
this indignation, however, Delaware missed the deadline to
seek administrative review of the disallowance determination
by two weeks. After a lengthy period during which Delaware
allegedly sought a retroactive extension of the filing
deadline, Delaware filed an appeal with the Departmental
Appeals Board (the “Board”), which summarily
rejected the appeal for untimeliness. Plaintiff sought review
of the rejection before this Court, and Defendants moved to
dismiss, principally on the basis that judicial review was
unavailable. Upon consideration of the pleadings,
relevant legal authorities, and the record as a whole, the
Court shall GRANT-IN-PART and
DENY-IN-PART the motion to dismiss.
Court finds that it has subject-matter jurisdiction under 42
U.S.C. § 1316(e)(2)(C) to exert judicial review over the
Board's decision to reject Plaintiff's appeal, and
that under a standard of review set by the Administrative
Procedure Act (“APA”), Plaintiff has stated a
plausible claim that the Board's decision was arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law. Given the availability of an adequate
remedy at law, however, Plaintiff's common law claims for
unjust enrichment and for money had and received are
dismissed without prejudice because they sound in equity,
among other considerations.
the alleged APA violations were pled only against Defendants
United States Department of Health and Human Services
(“HHS”) and the Secretary of the United States
Department of Health and Human Services (the
“Secretary”). See Compl., Counts I-III.
Only the common law claims were brought against the other two
Defendants, the Centers for Medicare and Medicaid Services
(“CMS”), and the Administrator for the Centers
for Medicare and Medicaid Services (the
“Administrator”). Id., Counts IV-V.
Accordingly, CMS and the Administrator are dismissed from
this lawsuit without prejudice.
Statutory and Regulatory Background
is a cooperative federal-state program through which the
federal government provides financial assistance for States
to furnish medical care to low-income families and
individuals. Wilder v. Virginia Hosp. Ass'n, 496
U.S. 498, 502 (1990). In order to participate in Medicaid, a
State must first develop a Medicaid plan “describing
conditions of eligibility and covered services.”
Bowen v. Massachusetts, 487 U.S. 879, 883 (1988).
That plan must then be approved by CMS. 42 U.S.C. §
approved, the federal government pays the State on a
quarterly basis for a specified percentage of the State's
Medicaid expenditures. Id. § 1396b. This
financial contribution is called the “federal financial
participation” (“FFP”). The quarterly
federal contribution is made as an advance payment
“based on the State's estimate of its anticipated
future expenditures.” Bowen, 487 U.S. at
883-84. Then, within 30 days after the end of the quarter,
the State must submit a Form CMS-64, entitled the Quarterly
Medicaid Statement of Expenditures for the Medical Assistance
Program (“QSE”), on which the State reports its
actual expenditures for the quarter. See 42 C.F.R.
the Medicaid program is a payor of last resort, the State is
responsible for recovering payments from third-parties that
were legally obligated to cover medical care that was
ultimately paid for the by the State. 42 U.S.C. §
1396a(a)(25)(A). If the State receives federal funds for
services for which it later recovers monies from
third-parties, the corresponding federal contributions are
considered “overpayments” and the State must
refund those amounts to the federal government. 42 U.S.C.
§ 1396b(d)(2)(B). The State must report and refund
overpayments through a credit to the federal government on
its quarterly QSE. 42 C.F.R. § 433.320(a)(1). If a State
does not credit the federal government with overpayments,
then CMS “will disallow expenditures equal to the
determined overpayment amount.” Compl. ¶ 20;
see 42 U.S.C. § 1316(d); 42 C.F.R. §
430.42(a) (describing disallowance procedure).
Reconsideration and Appeals Process
1316(e) and accompanying regulations set forth two routes for
the State to contest a disallowance determination. The first
route is the reconsideration process, which allows the State
to request “reconsideration of the disallowance,
provided that such request is made during the 60-day period
that begins on the date the State receives notice of the
disallowance.” 42 U.S.C. § 1316(e)(1). Within 60
days of receiving the request for reconsideration, the
Administrator “shall . . . issue a written decision or
a request for additional information . . . .”
Id. § 430.42(c)(2). If the State is required to
submit additional information, the Administrator “shall
issue a written decision, within 60 days from the due date of
such information.” Id. § 430.42(c)(5).
The final written decision “shall constitute final CMS
administrative action on the reconsideration.”
Id. § 430.42(b)(6). If the State receives an
adverse reconsideration decision, it may then appeal
“during the 60-day period that begins on the date the
State receives notice of . . . the unfavorable
reconsideration . . . to the Departmental Appeals
Board.” 42 U.S.C. § 1316(e)(2)(A); 42 C.F.R.
§ 430.42(b)(5) (“The State may . . . seek
reconsideration, and following the reconsideration decision,
request a review from the Board.”).
second option-the appeal route-permits the State to bypass
the reconsideration process and appeal the disallowance
decision directly to the Departmental Appeals Board. 42
U.S.C. § 1316(e)(2)(A) (“A State may appeal a
disallowance . . . during the 60-day period that begins on
the date the State receives notice of the disallowance . . .
by filing a notice of appeal with the Board.”); 42
C.F.R. § 430.42(b)(4) (“The State is not required
to seek reconsideration before seeking review from the
Departmental Appeals Board.”). The State may pursue
either the reconsideration route or the appeal route, but may
not pursue both at the same time. If the State “elects
reconsideration, the reconsideration process must be
completed or withdrawn before requesting review by the
Board.” 42 C.F.R. § 430.42(b)(6).
on direct appeal, or following the reconsideration process,
the statute directs the Board to “conduct a thorough
review of the issues, taking into account all relevant
evidence.” Id. The Board's decision of an
appeal is “the final decision of the Secretary.”
42 U.S.C. § 1316(e)(2)(B). Either party may then move
the Board to reconsider its “final decision”
within 60 days of the Board's decision “upon a
motion by either party that alleges a clear error of fact or
law.” Id.; 42 C.F.R. § 430.42(f).
a State may “obtain judicial review of a decision of
the Board by filing an action in any United States District
Court located within the appealing State . . . or the United
States District Court for the District of Columbia, ”
by filing such an action within 60 days of the Board's
decision. 42 U.S.C. § 1316(e)(2)(C).
Factual and Procedural Background
is the agency charged with administering Delaware's
Medicaid program. Compl. ¶ 23. As a result, Plaintiff is
required to collect payments from third-parties who are
legally obligated to pay the expenses of Medicaid
participants who have received government funding.
Id. ¶ 24. Such recoveries are treated as
overpayments, and must therefore be credited to the federal
government on Delaware's quarterly QSEs. Id.
¶¶ 24- 25.
are supposed to be separately reported on the QSEs.
Id. ¶ 25. However, the computer system that
Delaware used to track collections from third-parties was
unable to distinguish between overpayments and other types of
collections. Id. To address this technological
limitation, Delaware simply netted all of its collections
from third-parties against its total Medicaid expenditures,
and reported the net amount as its claim for federal
assistance. Id. In Delaware's view, this
approach resulted in the federal ...