Recoupment Following an Adverse Medicaid Appeal

Produced by Jane Perkins with a grant from the Training and Advocacy Support Center (TASC)
Q. After my client?s services were terminated by the state Medicaid agency, she appealed. At her request, her benefits were continued during the pendency of the appeal. The client lost the hearing, and the agency is now seeking to recover the amounts it paid while the hearing was pending. Is this legal?
A. Yes, the federal Medicaid regulations authorize the state Medicaid agency to recover the cost of medical assistance provided during the pendency of the administrative hearing. See 42 C.F.R. § 431.230(b). The enrollee would not be liable for all services provided during this time period, but only for the services continued because of their appeal.
Medicaid applicants and recipients have rights to notice and administrative hearings when their claims for medical assistance are denied or not acted upon with reasonable promptness. These rights are found in the Medicaid Act and regulations, see 42 U.S.C. § 1396a(a)(3); 42 C.F.R. §§ 431.200-431.250, and are guaranteed by the Due Process Clause of the United States Constitution, see U.S. Const. amend. XIV, § 1; see also Goldberg v. Kelly, 397 U.S. 254, 266 (1970). Goldberg holds that public benefits recipients, such as Medicaid recipients, have the constitutional due process right to receive an effective notice and hearing before benefits may be terminated. Id. at 267; see also Mathews v. Eldridge, 424 U.S. 319 (1976). Medicaid regulations explicitly implement the protections guaranteed by Goldberg. See 42 C.F.R. § 431.205(d).

Under both Goldberg and the Medicaid regulations, the essential elements of ?due process? are an adequate written notice and the opportunity to challenge the state action before an impartial decision maker. Goldberg, 397 U.S. at 267; 42 C.F.R. §§ 431.210-431.240. Thus, when the state is going to terminate, reduce or suspend a service that an enrollee has been receiving through the Medicaid program, special protections arise. In general, the state must send the enrollee an advance notice informing them of the pending action at least 10 days prior to the time of the anticipated action. See 42 C.F.R. §§ 431.210-431.211 (requiring 10-day advance notice and describing required content of the notice). An enrollee who requests a hearing prior to the effective date of the adverse action generally has the right to receive continued benefits (also called ?aid paid pending?) at the previously-authorized level pending the results of the hearing. Id. §431.230.

If the decision is favorable to the claimant or if the agency decides in her favor prior to the hearing, corrective payments must be made retroactive to the date that the incorrect action was taken. Id. § 431.246. On the other hand, if the state?s decision is affirmed, the state may recover the costs of the continued benefits from the recipient. According to 42 C.F.R. § 431.230(b),
If the agency?s action is sustained by the hearing decision, the agency may institute recovery procedures against the applicant or recipient to recoup the cost of any services furnished the recipient, to the extent they were furnished solely by reason of this section.
The federal Medicaid agency, the Centers for Medicare & Medicaid Services (CMS), has further clarified the recovery policy in its State Medicaid Manual, informing states:
A. You may recover from the recipient money you paid for services provided the recipient if:
The services were provided as a result of ? [the recipient requesting continued Medicaid services], and
The recipient?s appeal is unsuccessful.
B. Inform the recipient of this provision at the time a hearing is requested if you employ recovery.

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