Court Opinion

ID: 220400
Source: CourtListenerOpinion
Date Created: 2011-07-06 18:27:00+00
Date Added: 2024-06-11T17:28:45.074751
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
              FOR THE FOURTH CIRCUIT

WEST VIRGINIA DEPARTMENT OF             
HEALTH AND HUMAN RESOURCES,
Bureau for Medical Services,
                 Plaintiff-Appellant,
                 v.
KATHLEEN SEBELIUS, in her official
capacity as Secretary, United
States Department of Health and
Human Services; CHARLENE                   No. 10-1592
FRIZZERA, in her official capacity
of Acting Administrator, Centers
for Medicare and Medicaid
Services; UNITED STATES
DEPARTMENT OF HEALTH AND
HUMAN SERVICES; CENTERS FOR
MEDICARE AND MEDICAID SERVICES,
             Defendants-Appellees.
                                        
       Appeal from the United States District Court
 for the Southern District of West Virginia, at Charleston.
         Joseph R. Goodwin, Chief District Judge.
                     (2:09-cv-00847)

                   Argued: May 12, 2011

                    Decided: July 6, 2011

       Before MOTZ and DIAZ, Circuit Judges, and
            HAMILTON, Senior Circuit Judge.
2               WEST VIRGINIA HHS v. SEBELIUS
Affirmed by published opinion. Judge Diaz wrote the opinion,
in which Judge Motz and Senior Judge Hamilton joined.

                         COUNSEL

ARGUED: Scott E. Johnson, Kings Mountain, North Caro-
lina, for Appellant. Alisa Beth Klein, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appel-
lees. ON BRIEF: Frances A. Hughes, Thomas W. Smith,
Mary McQuain, OFFICE OF THE ATTORNEY GENERAL
OF WEST VIRGINIA, Charleston, West Virginia, for Appel-
lant. Mark B. Childress, Acting General Counsel, Janice L.
Hoffman, Associate General Counsel, Carol J. Bennett, Dep-
uty General Counsel for Program Integrity, Howard Cohen,
Department of Health and Human Services, Tony West,
Assistant Attorney General, Mark B. Stern, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C.;
R. Booth Goodwin II, United States Attorney, Charleston,
West Virginia, for Appellees.

                         OPINION

DIAZ, Circuit Judge:

   This appeal arises from a grant of summary judgment. The
district court dismissed appellant’s challenge to an adminis-
trative ruling that sustained a disallowance in federal funding
for its Medicaid program. The unambiguous text of the gov-
erning statute authorized the disallowance, and agency
approval of the amount disallowed was neither arbitrary nor
capricious. Accordingly, we affirm.

                              I.

                              A.

  Congress created Medicaid in 1965 when it added Title
XIX to the Social Security Act. Medicaid Act, Title XIX, Pub.
                WEST VIRGINIA HHS v. SEBELIUS                  3
L. No. 89-97, 79 Stat. 343. Medicaid operates as a partnership
between the federal government and states choosing to partic-
ipate in the program. It provides federal funding to enable
states to furnish medical assistance to the most vulnerable
members of society. 42 U.S.C. § 1396-1. Congress has enu-
merated a number of conditions regulating a state’s receipt of
federal funds. Id. § 1396a. Each state wishing to receive such
funds is required to submit a plan for medical assistance, and
the Secretary of the U.S. Department of Health and Human
Services ("HHS") must approve the plan before funds are dis-
bursed. Id. § 1396-1. "Although participation in the Medicaid
program is entirely optional, once a State elects to participate,
it must comply with the requirements of Title XIX." Harris
v. McRae, 448 U.S. 297, 301 (1980).

   The Secretary of HHS ("Secretary") disburses quarterly to
each participating state "an amount equal to the Federal medi-
cal assistance percentage ["FMAP"] . . . of the total amount
expended during such quarter as medical assistance under the
State plan." 42 U.S.C. § 1396b(a)(1). The Secretary estimates
the quarterly "amount to which a State will be entitled" and
pays the funds so projected to the state. Id.
§§ 1396b(d)(1)–(2)(A). Adjustments are built into each quar-
terly disbursement, and the amount must be "reduced or
increased to the extent of any overpayment or underpayment
which the Secretary determines was made under this section
to such State for any prior quarter." Id. § 1396b(d)(2)(A).

   According to the accompanying regulations, an overpay-
ment is "the amount paid by a Medicaid agency to a provider
which is in excess of the amount that is allowable for services
furnished under section 1902 of the Act and which is required
to be refunded under section 1903 of the Act." 42 C.F.R.
§ 433.304; see also 42 U.S.C. § 1396b(d)(3)(A) (explaining
"overpayment" as "[t]he pro rata share to which the United
States is equitably entitled, as determined by the Secretary, of
the net amount recovered during any quarter by the State or
any political subdivision thereof with respect to medical assis-
4                   WEST VIRGINIA HHS v. SEBELIUS
tance furnished under the State plan"). A "provider" is "any
individual or entity furnishing Medicaid services under a pro-
vider agreement with the Medicaid agency." 42 C.F.R.
§ 433.304.

  The Medicaid Act sets out a procedure for recouping over-
payments made by the states:

        [W]hen an overpayment is discovered, which was
        made by a State to a person or other entity, the State
        shall have a period of 1 year in which to recover or
        attempt to recover such overpayment before adjust-
        ment is made in the Federal payment to such State
        on account of such overpayment.

42 U.S.C. § 1396b(d)(2)(C).1 After the one-year window has
expired, the federal government’s right to collect overpaid
funds operates independent of a state’s recovery of funds
wrongfully disbursed, subject to two exceptions not relevant
here. See id. ("[T]he adjustment in the Federal Payment shall
be made at the end of the 1-year period, whether or not recov-
ery was made.").

                                     B.

   In 2001, West Virginia filed suit in West Virginia state
court against a group of pharmaceutical manufacturers,
including Dey, Inc. ("Dey"), a company that manufactured
and sold albuterol sulfate. West Virginia proceeded against
the defendants on behalf of three state agencies: the Depart-
ment of Health and Human Resources ("DHHR"), the entity
    1
    At all times relevant to this litigation, the state had sixty days, rather
than one year, to recover the overpayment before the federal government
adjusted funding. 42 U.S.C. § 1396b(d)(2)(C), amended by Patient Protec-
tion and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010).
The parties agree that this altered time frame does not affect the analysis
here.
                WEST VIRGINIA HHS v. SEBELIUS                 5
that administers the state’s Medicaid program; the Public
Employees Insurance Agency ("PEIA"); and the State Work-
er’s Compensation Division ("WCD"). West Virginia claimed
that the defendants artificially inflated the reimbursement val-
ues of certain drugs, in violation of the West Virginia Con-
sumer Credit and Protection Act, W. Va. Code § 46A-1-101
et seq., and a state statute prohibiting fraud and abuse in the
Medicaid program, id. § 9-7-6 et seq.

   West Virginia’s claims centered on the links in the reim-
bursement process between pharmaceutical manufacturers,
providers, and insurance companies. Pharmacists—the pro-
viders at issue in this case—purchase drugs from pharmaceu-
tical manufacturers, like Dey, and then dispense them to
patients. Assuming the patient is insured, the pharmacist sub-
mits a claim for reimbursement for the drug purchase to the
patient’s health-insurance program. If the patient is covered
by Medicaid, the pharmacist submits the claim to the state
Medicaid program, which is funded largely through federal
dollars. The state Medicaid program then reimburses the phar-
macist for the drug sale. Reimbursement value is tied to the
industry-defined average wholesale price ("AWP") of the par-
ticular drug.

   West Virginia’s complaint alleged that the defendants
inflated the AWP of certain drugs. According to the state, the
defendants "then sold the drugs to providers . . . for a price
considerably below the published AWP," "knowing that
health insurers [specifically, West Virginia’s DHHR, PEIA,
and WCD] . . . relied on AWPs to determine the amount of
reimbursement to providers for most drugs." J.A. 98. "Defen-
dants’ fraud," West Virginia alleged, thus "caused the State to
pay an artificially inflated amount of reimbursement for these
drugs," because legitimate reimbursement rates must hew
closely to the actual cost of the drugs. Id.

   According to West Virginia, Dey fraudulently raised AWPs
to enhance its profits. Dey actually sold the drugs to providers
6              WEST VIRGINIA HHS v. SEBELIUS
at prices lower than the AWP, which meant that providers
would receive reimbursement much greater than the amount
that they actually spent on the drugs. And because Dey’s
"spread"—the difference between the reimbursement rate and
the price actually charged the provider—was substantial,
more providers purchased drugs from the company, in turn
enhancing Dey’s profitability.

   In 2004, West Virginia settled its claims against Dey,
which agreed to pay West Virginia $850,000, of which
$100,000 was earmarked for the Consumer Protection Fund
of the Office of the West Virginia Attorney General. The set-
tlement further mandated that Dey reimburse the state for
attorneys’ fees and costs. West Virginia in turn released Dey
from further claims arising out of the alleged overpayment.
The Kanawha County Circuit Court, in which the action was
originally filed, ratified the settlement and dismissed with
prejudice all claims against Dey.

                             C.

   After learning of the Dey settlement in 2007, the federal
Centers for Medicare & Medicaid Services ("CMS") notified
West Virginia’s DHHR of a disallowance in federal funding
for the state’s Medicaid program. CMS advised West Virginia
that "DHHR failed to credit the Federal government its share
of the settlement proceeds." J.A. 59. As a result, CMS
intended to withhold $634,525 in Medicaid funding, the
amount that it maintained represented its share of overpay-
ments made to providers as a result of Dey’s alleged fraud.

  West Virginia appealed the disallowance to the HHS
Departmental Appeals Board ("Board"), arguing that CMS
was not entitled to any portion of the settlement proceeds.
And even assuming that CMS rightfully claimed some of the
money, West Virginia continued, it erroneously calculated the
proper amount. The Board sustained the disallowance, ruling
                WEST VIRGINIA HHS v. SEBELIUS                 7
"that the federal government is entitled to a share of the Dey
settlement proceeds." Id. 18.

   The Board first concluded that the settlement proceeds
qualified as an overpayment. Looking to the applicable statu-
tory text and analogizing to a previous administrative deci-
sion, the Board determined that the government was entitled
to its share of an overpayment pursuant to 42 U.S.C.
§ 1396b(d)(2). West Virginia’s recovery of settlement pro-
ceeds "effectively reduced the Medicaid program’s overall
cost of providing medical and health services . . . to Medicaid
recipients," and CMS was authorized to recoup the money
already paid to cover the fraudulently inflated reimburse-
ments. J.A. 24. Because the state as a whole is responsible for
administering Medicaid, that some of the settlement proceeds
were earmarked for the Consumer Protection Fund did not, in
the view of the Board, affect the federal government’s rightful
share.

   Turning to CMS’s calculation of the disallowance, the
Board concluded that it was reasonable. CMS had previously
claimed that it was entitled to $634,525, but it had reduced
that figure to $446,607 prior to adjudication before the Board.
CMS arrived at this number as follows: Looking to West Vir-
ginia’s complaint in the Dey litigation, it first multiplied the
$850,000 settlement by the share of the state’s estimated dam-
ages allocable to Medicaid, 67.24 percent, which yielded
$571,546.80. CMS then multiplied this figure by West Vir-
ginia’s FMAP rate of 78.14 percent—the share of state Med-
icaid expenses covered by the federal government—and
arrived at the final amount of $446,607.

   Reasoning that "an allocation need only have some reason-
able basis," the Board held that CMS’s calculation satisfied
this standard. Id. 29–30. CMS based its allocation on the
state’s own damages estimate from the Dey litigation, and
there was no evidence to suggest that this method of computa-
tion was seriously flawed. And, in any event, West Virginia
8               WEST VIRGINIA HHS v. SEBELIUS
had proffered no alternative way to calculate the amount
owed to the federal government.

   West Virginia responded to the administrative ruling by fil-
ing suit in the U.S. District Court for the Southern District of
West Virginia, seeking judicial review of the Board’s deci-
sion. The district court upheld the agency’s action.

   The district court first addressed the issue of waiver. In
briefing before the court, West Virginia had proffered several
new grounds for challenging the disallowance. Because these
arguments had not been presented before the Board, the court
held that they had been waived. In the alternative, the court
summarily found that the arguments lacked merit.

   Turning to the merits of the appeal, the court reasoned that
the Secretary possesses statutory authority "to withhold funds
when she determines that a state made an overpayment." Id.
190. As the court explained, a disallowance need not be predi-
cated on state action against the wrongful party; federal right
to recovery of an overpayment is not dependent on whether
a state recovers from the putative wrongdoer. Rejecting the
state’s argument that a disallowance was improper because
Dey was not a provider, the court summarized its holding as
follows:

    The regulations define an overpayment as amounts
    paid to a provider in the first instance. But they do
    not say that a party settling an overpayment claim
    must be a provider.

    . . . The overpayments in this case were paid to pro-
    viders pursuant to the Medicaid program. HHS is
    entitled to its share of those recovered overpayments
    regardless of the source of the recovery.

Id. 192.
                WEST VIRGINIA HHS v. SEBELIUS                 9
   The district court similarly rebuffed West Virginia’s objec-
tions to the calculation of the overpayment. Because it was
based on the state’s own damages estimates, the amount was
reasonable, concluded the court. Moreover, the state never
proposed an alternate method of computation or cogently
explained why the model used was flawed.

  West Virginia now appeals the district court’s decision.

                              II.

   Before reaching the merits of the appeal, we address three
threshold issues.

                              A.

  The dictates of the Administrative Procedure Act ("APA")
govern our standard of review on appeal. Pursuant to the
APA, a reviewing court must "set aside agency action, find-
ings, and conclusions" when they are found to be "arbitrary,
capricious, an abuse of discretion, or otherwise not in accor-
dance with law." 5 U.S.C. § 706(2)(A).

  We review de novo a district court’s evaluation of agency
action, as to questions of both law and fact. Ohio Valley Envtl.
Coal. v. Aracoma Coal Co., 556 F.3d 177, 189 (4th Cir.
2009).

                              B.

   With the general standard of review established, we con-
sider whether deference to CMS’s statutory construction is
appropriate. West Virginia argues throughout its briefs that
this court should extend little deference to CMS’s interpreta-
tion of the "overpayment" statutory provisions. But deference
to agency construction of statutes enters the equation only
when legislation is ambiguous. See Chevron, USA, Inc. v.
Natural Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984)
10              WEST VIRGINIA HHS v. SEBELIUS
("If the intent of Congress is clear, that is the end of the mat-
ter; for the court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress."). Because we
conclude that the statutory provisions governing overpay-
ments are plain on their face, we need not accord deference
to the interpretation of CMS.

                               C.

   The Secretary argues that West Virginia has waived presen-
tation of two arguments that it presses on appeal: CMS mis-
construed the definition of "provider" in 42 C.F.R. § 433.304,
and the notice of disallowance constitutes a new rule that may
not be imposed absent prior notice-and-comment rulemaking.
Because West Virginia neglected to raise these contentions
before the Board, the Secretary urges us to refuse consider-
ation of them here.

   We doubt whether the waiver doctrine properly applies
here. See Toler v. E. Associated Coal Co., 43 F.3d 109, 113
(4th Cir. 1995) (rejecting waiver argument where petitioner
asserted same fundamental claim before the agency and dis-
trict court, but merely used different arguments in each forum
to press that claim). And, in any event, because waiver is a
prudential bar, we decline to invoke it in this case. See id.
("[W]aiver is a nonjurisdictional doctrine that calls for flexi-
ble application."). Thus we will consider all of the arguments
raised on appeal by West Virginia.

                               III.

   West Virginia principally contends that CMS’s disallow-
ance was not authorized by statute. Invoking a wooden
"super-clear-statement" rule, the state argues that the defini-
tion of "overpayment" advanced by CMS is untethered to the
statutory text. CMS thus lacks authority to withhold funds
from West Virginia, the state maintains, because the disallow-
ance was supported by neither the clear statutory text nor a
                WEST VIRGINIA HHS v. SEBELIUS                 11
prior rule promulgated pursuant to the notice-and-comment
framework.

   We disagree. Not only does the plain and unambiguous text
of the Medicaid Act authorize the disallowance here even
under West Virginia’s rigid model of interpretation, but the
state’s "super-clear-statement" rule misreads Supreme Court
precedent. As we explain below, applicable statutory text
gave CMS the authority to disallow payments to West Virgin-
ia’s Medicaid program based on the state’s settlement with
Dey, and West Virginia may not shirk this obligation.

                               A.

   West Virginia first asserts that a state has the right to "in-
formed consent" when participating in a federally financed
program. Relying primarily on Pennhurst State School &
Hospital v. Halderman, 451 U.S. 1 (1981), the state argues
that this court must require a "super-clear statement" of condi-
tions in the Medicaid Act. Such an unambiguous condition is
lacking in the statute, West Virginia continues, and as a result
the state must be allowed to retain all of the money obtained
from the Dey settlement. We find West Virginia’s argument
unavailing. The Medicaid Act sets out obligations clear
enough to satisfy any standard of precision, and the state’s
position misreads Pennhurst and its progeny.

   A quick survey of the U.S. Code reveals a multitude of stat-
utes enacted pursuant to Congress’s spending power. Most are
variations on a familiar theme: Congress disburses funds to
states, and in exchange the states agree to comply with a num-
ber of conditions. In this way, Congress can foster compliance
with a national objective through persuasion rather than coer-
cion, and states have the option of declining funding and
avoiding federal regulation. Limits are imposed, however, on
Congress’s ability to attach conditions to funding provided to
states. A state’s requisite "knowing acceptance" of the condi-
tions prescribed by Congress through its exercise of the
12              WEST VIRGINIA HHS v. SEBELIUS
spending power is impossible, the Supreme Court has held, "if
[the] State is unaware of the conditions or is unable to ascer-
tain what is expected of it." Pennhurst, 451 U.S. at 17. "Ac-
cordingly, if Congress intends to impose a condition on the
grant of federal moneys, it must do so unambiguously." Id.

   Of course, given the ever-increasing complexity of modern
legislation, Congress need not spell out every condition with
flawless precision for a provision to be enforceable. See Ben-
nett v. Ky. Dep’t of Educ., 470 U.S. 656, 666–69 (1985). In
Bennett, the federal government sought to recover funds used
by Kentucky allegedly in contravention of Title I of the Ele-
mentary and Secondary Education Act of 1965. Id. at 658–59.
Rejecting Kentucky’s argument that Pennhurst commanded
application of a standard analogous to West Virginia’s "super-
clear-statement" rule, the Court concluded that "Pennhurst
does not suggest that the Federal Government may recover
misused federal funds only if every improper expenditure has
been specifically identified and proscribed in advance." Id. at
666.

   The Court further rejected analogies between standard
bilateral contracts and federal grant programs, finding general
legislative guidelines sufficient to mandate state compliance.
Id. at 669. "Given the structure of the grant program, the Fed-
eral Government simply could not prospectively resolve every
possible ambiguity concerning particular applications of the
requirements of Title I." Id. And, continued the Court, states
must bear some responsibility for any harm to them allegedly
caused by an ambiguous provision, as they "had an opportu-
nity to seek clarification of the program requirements." Id.

   With these principles in tow, we turn to interpretation of
the Medicaid Act.

                              B.

   The thrust of West Virginia’s interpretive argument is that
the Medicaid Act authorizes a disallowance only when the
                WEST VIRGINIA HHS v. SEBELIUS                  13
state has recovered from a "provider." Because Dey is a third
party and not a "provider," asserts the state, CMS lacks
authority to withhold funds on account of the settlement. Yet
a closer reading of the Medicaid legislation reveals that West
Virginia’s interpretation lacks a textual basis and must be
rejected. We conclude that the Medicaid Act plainly autho-
rizes CMS to disallow payments to a state when that state
overpays a provider, regardless of whether the state has recov-
ered from a provider or a third party—or, indeed, recovered
from anyone at all.

   The sine qua non of a proper disallowance is an overpay-
ment: "The Secretary shall . . . pay to the State . . . the [quar-
terly estimated] amount . . . , reduced or increased to the
extent of any overpayment or underpayment which the Secre-
tary determines was made." 42 U.S.C. § 1396b(d)(2)(A).
Once the Secretary discovers an overpayment, she must give
the state one year to recover from the wrongdoer before
adjusting federal funding. Id. § 1396b(d)(2)(C). But once the
one-year period has expired, "the adjustment in the Federal
payment shall be made . . . , whether or not recovery was
made [by the state]." Id. (emphasis added). Thus aside from
its effect on the appropriate timing of a disallowance, from
whom a state recovers—or whether it recovers at all—is
immaterial.

   An overpayment is "the amount paid by a Medicaid agency
to a provider which is in excess of the amount that is allow-
able for services furnished under section 1902 of the Act and
which is required to be refunded under section 1903 of the
Act." 42 C.F.R. § 433.304. The Medicaid Act gives the Secre-
tary latitude to determine whether an overpayment has been
made and, if so, the amount of funding that CMS is entitled
to withhold from the state. 42 U.S.C. § 1396b(d)(3)(A).

  Straightforward application of the Medicaid Act compels
us to uphold the Board’s determination that there was an over-
payment and the Secretary is entitled to her equitable share.
14              WEST VIRGINIA HHS v. SEBELIUS
We need look no further than West Virginia’s own allegations
in the Dey litigation to confirm the existence of an overpay-
ment. "[Dey] knew that State Medicaid programs . . . rely on
AWP to pay for the drugs," West Virginia alleged, "and [Dey]
knew that [its] inflation of AWP would cause the State and
its citizens to overpay for these drugs." J.A. 110 (emphasis
added). By increasing the AWP of albuterol sulfate, West Vir-
ginia claimed, Dey enabled providers to receive artificially
inflated reimbursements, some of which were provided by the
federally funded state Medicaid program. Thus the wrongdo-
ing of Dey caused "the amount paid by a Medicaid agency to
a provider [to be] in excess of the amount that is allowable
[under the Medicaid Act]," 42 C.F.R. § 433.304. Because
CMS previously disbursed funds to West Virginia that cov-
ered the improperly high reimbursement rates, it is entitled to
disallow a portion of its future funding to recoup this overpay-
ment. See 42 U.S.C. § 1396b(d)(2)(A).

   That West Virginia recovered from a third party, not a pro-
vider, has no effect on the Secretary’s entitlement to a portion
of the settlement proceeds. To be sure, an overpayment
requires money "paid by a Medicaid agency to a provider." 42
C.F.R. § 433.304 (emphasis added). This requirement was
met in this case when West Virginia’s Medicaid program paid
pharmacists—indisputably providers—inflated prices to cover
Medicaid patients’ drug purchases. Indeed, the state’s com-
plaint in the Dey litigation alleged that Dey "marketed and
promoted the sale of the drugs to the providers based upon the
availability of the fraudulently inflated reimbursement pay-
ments from government and commercial health insurance pro-
grams." J.A. 98 (emphasis added). Once CMS has established
an overpayment to a provider, it may issue a disallowance
after the state has had one year to attempt a recovery. Indeed,
the Medicaid Act expressly rejects requiring state recovery
from a provider as a condition of issuing a disallowance;
                   WEST VIRGINIA HHS v. SEBELIUS                       15
rather, it authorizes CMS to act even if the state has recovered
from no one at all. 42 U.S.C. § 1396b(d)(2)(C).2

                                   IV.

   Even if the federal government is entitled to a portion of
the Dey settlement, West Virginia argues that CMS arbitrarily
calculated the proper amount of the disallowance. Notably,
however, the state has not come forward with an alternative
estimate. We conclude that the Board’s decision to uphold the
calculation of the disallowance was not "arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with
law," 5 U.S.C. § 706(2)(A).3

   CMS’s calculation of the disallowance was elegantly sim-
ple. Drawing on West Virginia’s own damages estimate from
the Dey litigation, CMS merely multiplied the amount of loss
suffered by West Virginia’s Medicaid program by the per-
centage of funds that the federal government contributes to
the state’s Medicaid program. The resulting figure was
$446,607. We fully endorse the Board’s rejection of West
Virginia’s argument:

      [A]bsent complete or perfect information, an alloca-
      tion need only have some reasonable basis. Because
      CMS’s allocation rests on the State’s own damages
      estimate in preparation for litigation, an estimate that
      in turn was based on a substantial volume of claims
  2
    Because we hold that the Medicaid Act’s clear and unambiguous over-
payment provisions authorized the agency action here, we reject West Vir-
ginia’s contention that CMS could not issue a disallowance absent prior
notice-and-comment rulemaking codifying its interpretation of the statute.
We find West Virginia’s reliance on Alabama v. Ctrs. for Medicare &
Medicaid Servs., No. 08-881, 2011 WL 671676 (M.D. Ala. Feb. 18,
2011), unpersuasive for the same reason.
  3
    At oral argument, counsel for West Virginia conceded the tenuous
nature of the calculation argument. Although counsel was unwilling to
waive the point, he declined to advocate in its favor.
16              WEST VIRGINIA HHS v. SEBELIUS
     and reimbursement data supplied by the affected
     programs, and because there is no indication in the
     [litigation materials] that the estimates were seri-
     ously flawed or substantially overstated the alleged
     relative loss to Medicaid, we conclude that a reason-
     able basis exists for CMS to allocate approximately
     67 percent of the Dey settlement proceeds to Medic-
     aid.

J.A. 29-30 (citation and footnote omitted).

                              V.

   West Virginia received federal Medicaid funding in excess
of that authorized by statute. The federal government is enti-
tled to recoup the overage. Accordingly, the judgment of the
district court is affirmed.

                                                  AFFIRMED