Opinion ID: 375761
Heading Depth: 2
Heading Rank: 3

Heading: Assurance of payment clause

Text: 30 The appellants argue that the State of Alabama violated the assurance of payment provision contained in the reimbursement plan by failing to appropriate sufficient funds for its Medicaid program. The district court determined that there could be no breach of the provision until the defendant state officials failed to make payments as specified in the plan. Because of events that have occurred since the district court decision, we vacate this portion of the district court's judgment and remand for further proceedings. 31 The assurance of payment provision contained in the Alabama plan 13 has two purposes. First, it assures that the state will, in fact, reimburse provider institutions for services rendered under the plan. Second, it assures that such reimbursement, when made, will be made on a reasonable cost related basis within the meaning of § 1396a(a)(13)(E). 32 As HEW observes, a state may not assure anything less than reasonable cost related reimbursement. 33 (A) State would not satisfy the requirement of section (1396a(a)(13)(E)) if it . . . gave assurance to pay, the amount determined under this section to the extent State funds are available, or to the extent that State appropriations permit. To allow a State to limit its obligation under the statute by such a provision, . . . would permit a State to defeat a major part of Congress' purpose in enacting section (1396a(a)(13)(E)). 34 41 Fed.Reg. at 27,303. 35 The Medicaid program in Alabama has a history of financial crisis and inadequate funding that stems from the ongoing refusal of the Alabama Department of Health to permit the Alabama Medical Services Administration to submit an adequate budget request to the state legislature. During 1976 and 1977, the state's Medicaid program failed to comply with the § 1396a(a)(13)(E) requirement of reasonable cost related reimbursement because the legislature had failed to appropriate sufficient funds to pay for the increase in expenditures that would result from compliance with the statute. In August and September, 1977, the state imposed a ten percent cutback on reimbursement payments because of inadequate state funding. During fiscal 1978, the Alabama Medicaid program operated despite a projected budget deficit of over $4,900,000. As a result of a similar budget deficit during the past fiscal year, the State of Alabama did not reimburse provider institutions for services rendered in July, August, and September, 1979, until the beginning of this fiscal year, October 1, 1979. While counsel advises that all provider institutions have now received the reimbursement payments specified in the plan, it appears that Alabama again is operating with a projected budget deficit that ultimately will result in the delay or reduction in Medicaid reimbursement payments. 36 A state is not obligated to participate in the Medicaid program. However, once it has voluntarily elected to participate in the program, the state must comply with federal standards. Florida v. Matthews, 526 F.2d 319, 326 (5th Cir. 1976); Rodriguez v. Vowell, 472 F.2d 622, 624 (5th Cir.), cert. denied, 412 U.S. 944, 93 S.Ct. 2777, 37 L.Ed.2d 404 (1973); Reyna v. Vowell, 470 F.2d 494, 496 (5th Cir. 1972). Inadequate state appropriations do not excuse noncompliance. A state may not circumvent its previous guarantee of reasonable cost related reimbursement by failing to take requisite steps to ensure adequate funding of the program's projected expenditures. 37 On remand, the district may, on an appropriate motion and a proper record, grant such relief as is necessary and appropriate. 38 REVERSED in part, VACATED in part, and REMANDED.