Medicaid program; interest on disputed Medicaid claims--HCFA. Final rule

These regulations clarify HCFA policies relating to disallowances of State claims for Federal matching of State Medicaid expenditures. Before the enactment of the Omnibus Reconciliation Act of 1980 (Pub. L. 96-499), States were permitted to retain, interest-free, the Federal matching funds for State Medicaid expenditures that had been disallowed until there was a final Federal determination under the administrative appeals process. If the determination upheld part or all of the disallowance, the State returned only that amount and did not pay the Federal government any interest on the disallowed amounts. Section 961(a) of the Omnibus Reconciliation Act of 1980 changed these procedures by giving the State the option of either returning the disallowed funds immediately to HCFA or of retaining the disallowed funds held by the State until there is a final determination. If the State chooses to retain the disallowed funds, it will be required to pay interest on any portion of the disallowance that is sustained on appeal. The statute is self-implementing and these regulations simply specify the procedures to be followed when a State chooses to retain the funds.