Opinion ID: 777287
Heading Depth: 3
Heading Rank: 3

Heading: History of agency interpretation

Text: 55 The history of 42 C.F.R. § 431.10, the regulation interpreting the Medicaid Act's single state agency requirement, is more illuminating in identifying the purpose of the requirement, but is of no help to Plaintiffs. That history suggests that the single state agency requirement was intended primarily to ensure systemwide accountability of state Medicaid programs to the federal government. And, more to the point, that history provides no evidence that the requirement was intended to benefit Medicaid providers. 56 Prior to the 1965 enactment of the Medicaid Act, the United States Bureau of Family Services — the agency responsible for social security programs at the time — issued a Handbook of Public Assistance Administration. Bureau of Family Servs., U.S. Dep't of Health, Educ., and Welfare, Handbook of Public Assistance Administration (1963/1964) (the  Handbook ). The Handbook was the official medium for issuance of interpretations and instructions concerning requirements of the public assistance titles of the Social Security Act and recommendations for the administration of State public assistance programs. Id. at i. 57 The Handbook prohibited — as 42 C.F.R. § 431.10(e) does now — delegation by the single state agency of authority for exercising administrative discretion in the administration or supervision of the plan and also provided that other state agencies performing services for the single state agency could not substitute their judgment for that of the single state agency. Compare Handbook §§ 2200(3), (5) with 42 C.F.R. §§ 431.10(e)(1)(i), (e)(3). The Handbook states that the single state agency's purpose was to provide a single state actor that would be accountable to the federal government for systemwide performance: 58 Once the single State agency is established or designated, it is the agency of the State government that represents the State in its dealings with the Federal agency on all aspects of the plan and its operation. It is the agency of the State government responsible for the development and maintenance of a plan in conformity with all requirements of the Social Security Act and for the administration of the plan throughout the State. This State agency is accountable for the expenditure of Federal funds in accordance with the requirements of the Social Security Act, whether such funds are expended by the localities or by the State. It is accountable for insuring that funds will be available in all political subdivisions for assistance payments and for operation of the program on a uniform basis. The single State agency is charged with final administrative responsibility. 59 Handbook § 2300 (emphasis added). According to the Handbook, the single state agency has continuing responsibility for the quantity, quality, utilization, and payment for services provided to recipients, but this responsibility, as expressed by the Handbook, clearly is imposed to promote systemwide efficiency rather than to benefit providers. Id. § 2310. 60 After the Medicaid Act was enacted in 1965, Supplement D, addressing medical assistance programs, was added to the Handbook. Supplement D reiterated the Handbook 's view that the single state agency requirement ensures systemwide performance and, in particular, ensures accountability to the federal government: 61 Once the single State agency is established or designated it is the agency of the State government that represents the State in its dealings with the [federal agency in charge of Medicaid] on all aspects of the medical assistance plan and its operation. It is the agency of the State government responsible for: obtaining the statutory authority necessary to submit a plan meeting all Federal requirements; preparing the State plan and establishing policies for the operation of the program; assuring that it can carry out the plan in all political subdivisions; obtaining the State funds or the State-local funds (as the case may be); meeting all audit requirements; and being accountable to the [federal agency in charge of Medicaid] for the proper and efficient administration of the program. 62 Id. § D-2140 (1966). 63 Subsequently, the nondelegation principles set forth in the Handbook were codified in 42 C.F.R. § 431.10(e). Public Assistance Programs, 35 Fed.Reg. 8780 (June 5, 1970) (stating that the proposed regulations set forth certain requirements and provisions for the public assistance programs under the Social Security Act now contained in the Handbook of Public Assistance Administration and the purpose is to incorporate existing requirements in the Code of Federal Regulations). In the rulemaking that resulted in the new regulations, there is no discussion of the purposes served by the single state agency requirement. From this silence, we can infer that 42 C.F.R. § 431.10, implementing the Medicaid Act's single state agency requirement, is premised on the same view of the single state agency requirement expressed in the Handbook. 64 In sum, we find no evidence in the text of 42 U.S.C. § 1396a(a)(5), 42 C.F.R. § 431.10(e), or in the legislative and regulatory history that Medicaid providers were the intended beneficiaries of the single state agency requirement within the meaning of Blessing. B. Significance of 42 C.F.R. § 455.23 65 Our conclusion that Plaintiffs do not have a right under § 1983 to enforce the single state agency requirement does not completely resolve Defendants' appeal from the district court's summary judgments. Simonyan and Nagapetyan also urge us to affirm on the basis that DHS impermissibly withheld payments from them in violation of 42 C.F.R. § 455.23. As set forth above, 42 C.F.R. § 455.23 prohibits DHS from withholding provider payments unless DHS recei[ves] reliable evidence of fraud or willful misrepresentation. 66 The district court's conclusion that DHS withheld payments in violation of § 455.23 rested on two grounds. The district court ruled that evidence from the Controller's audit was unreliable as a matter of law because the audit resulted from an improper delegation of discretion in violation of the single state agency requirement. Our holding on the single state agency issue eliminates this ground for the district court's ruling. 67 We also decline Plaintiffs' invitation to affirm on a second ground. Plaintiffs contend that DHS violated § 455.23 when it failed to receive the evidence of fraud and independently evaluate its reliability. They argue that DHS impermissibly relied solely on the FBI's assertion in its letter that the evidence of fraud or misrepresentation was sufficient to withhold the payments. 68 The record reflects that DHS ultimately obtained and independently evaluated the results of the Controller's audit and other information indicating that Simonyan and Nagapetyan had billed Medi-Cal for providing more goods than they were capable of supplying. DHS concluded that the information constituted reliable evidence of fraud or willful misrepresentation. Plaintiffs do not contend that § 455.23 requires more. Because DHS ultimately complied with § 455.23, this ground for affirming the injunction is without merit. 12 69    70 In sum, Plaintiffs cannot assert a right enforceable under § 1983. The district court erred in holding to the contrary. IV. Attorney's Fees 71 Because Plaintiffs prevailed solely due to the district court's erroneous view of the law, their attorney's fee awards must be reversed. See Lovell v. Poway Unified Sch. Dist., 90 F.3d 367, 373-74 (9th Cir. 1996) ([b]ecause we have reversed the judgment ... on the merits, [plaintiff] can no longer be considered a prevailing party); see also Ward v. County of San Diego, 791 F.2d 1329, 1334 (9th Cir.1986) ([a]n erroneously granted injunction cannot be the basis for an award of attorney fees as the prevailing party). V.