Opinion ID: 375761
Heading Depth: 1
Heading Rank: 2

Heading: statutory and regulatory requirements

Text: 6 In 1972, Congress amended Title XIX of the Social Security Act to require that a state plan for long-term health care assistance provide 7 for payment of the skilled nursing facility and intermediate care facility services provided under the plan on a reasonable cost related basis, as determined in accordance with methods and standards which shall be developed by the State on the basis of cost-finding methods approved and verified by the Secretary of HEW). 8 Social Security Amendments of 1972, § 249(a), 42 U.S.C. § 1396a(a)(13)(E). Subsequent regulations read in the context of congressional intent amplify and define the specific requirements of this section.
9 Congress intended that state authorities in developing methodologies for reasonable cost related reimbursement have great flexibility in the areas of cost-finding and rate-setting. The legislative history indicates that states are to be free to experiment with methods and standards for payment that would be simpler and less expensive than the complex Medicare reasonable cost formula. See S.Rep.No.92-1230, 92d Cong., 2d Sess. 287 (1972) (hereinafter Senate Report). See also 43 Fed.Reg. 4,861 at 4,862 (1978); 41 Fed.Reg. 27,300 at 27,300-02 (1976). Congress approved the setting of reasonable cost related rates on either a prospective or retrospective basis. See Senate Report at 288. See also 43 Fed.Reg. at 4,861-63. Congress similarly approved the setting of payment rates on a geographical, class, or facility-by-facility basis. See Senate Report at 287-88. See also 43 Fed.Reg. at 4,862-64; 41 Fed.Reg. at 27,304. Additionally, Congress intended that states have freedom both to define allowable cost items and to set a value on the reasonable cost of such items. See Senate Report at 287. See also Fed.Reg. at 27,303. 10 As a result of the flexibility that states possess in these areas, a state may select its reasonable cost related reimbursement rate from a spectrum of acceptable figures. As HEW has observed, 11 a variety of cost-finding methods could be used to determine reasonable cost, which methods would produce a range of amounts representing reasonable cost. Rather than any one figure representing reasonable cost, each figure within the acceptable range represents a reasonable cost. 12 41 Fed.Reg. at 27,301. See also 43 Fed.Reg. at 4,862; 41 Fed.Reg. at 27,303. This acceptable range of reasonable cost related rates is not without bounds, however. 13 The Senate Report makes clear Congress' concern over the effect that both underpayment and overpayment have on the quality of care given at long-term health care facilities. 6 Recognizing these concerns, HEW formulated regulations that prescribe definitive upper and lower limits on the acceptable range of reasonable cost related reimbursement rates. Pursuant to these regulations, a state may set its payment rate no lower than the level which the State reasonably finds, or in the case of a prospectively determined rate, the level which the State reasonably expects, to be adequate to reimburse in full such actual allowable costs of a facility that is economically and efficiently operated. 42 C.F.R. § 450.30(a)(3)(iv)(A) (1977). 7 See also 43 Fed.Reg. at 4,862; 41 Fed.Reg. at 27,302-04. Neither may it set a reimbursement rate higher than the highest costs the individual provider . . . or the highest cost provider in the class . . . can reasonably be expected to incur, and which would be found reasonable if incurred. 43 Fed.Reg. at 4,86 2. See C.F.R. § 450.30(b)(6) (1977). See also 41 Fed.Reg. at 27,301-04. See generally 42 U.S.C. § 1396a(a)(30). Accordingly, to be approvable, a State title XIX plan for reimbursement of long-term care facility services must provide for a method of determining payment rates which assures that all participating providers' payment rates will fall somewhere between the maximum and minimum reasonable cost related rates. 43 Fed.Reg. at 4,862-63.
14 Section 1396a(a)(13)(E) obligates HEW to approve and verify the cost-finding methods utilized in a state's reimbursement plan. However, Congress clearly intended that HEW's obligations to approve and verify extend beyond the cost-finding methods so as to encompass the state's proposed rate-setting methodology. 15 The States would use acceptable cost-finding techniques . . . to determine reasonable reimbursement and apply to the results appropriate methodologies for determining payment. The methods would have to be approved and validated by the Secretary (of HEW). 16 Senate Report at 287 (emphasis added). HEW previously has recognized and accepted this enlarged obligation. 17 The language of the Committee Report makes clear that the State's methodologies for rate-setting, as well as the State's methods for cost-finding, are subject to the Secretary's approval. 18 . . . In light of the concern expressed in the legislative history of section (1396a(a)(13)(E)) about the dangers to the objectives of the Medicaid statute of either underpayment or overpayment of long-term care facilities, the Secretary (of HEW) in carrying out his statutory functions of reviewing, approving, and verifying the States' methodologies, has the responsibility to seek to assure that the methodologies will in fact result in reasonable cost-related reimbursement, . . . . 19 41 Fed.Reg. at 27,300 (emphasis added).
20 Federal regulations require that a state plan contain an express provision assuring 21 that the State will pay to a provider of long term care facility services who furnishes services in accordance with the requirements of the State plan the amount determined for services furnished by the provider under the plan according to the methods and standards set forth in its plan . . . . 42 C.F.R. § 450.30(a)(v) (1977). 8