State May Recoup Medicaid Benefits Incorrectly Paid

In PR v. Division of Medical Assistance and Health Services (NJ. App. Div. 6/8/2023), the State was authorized to recover Medicaid benefits incorrectly paid. It was not, however, authorized to play fast and loose by withdrawing a waiver of a portion of its claim as part of the Commissioner’s review.

Peter and Uma, an unmarried couple, had two children. New Jersey’s Medicaid program, or at least the class of assistance applied for, was based on family income. The limit was hirer while a mother was pregnant. The State requested Peter’s income tax returns to prove income and initially they were within the limits (Uma did not work). When their case came up for renewal, Peter’s tax returns for the following year showed increased income and their eligibility was terminated (technically they were referred to the State for NJFC coverage and there would be no lapse in the children’s existing coverage). However, the State calculated a $5,335.20 and demanded repayment.

Peter and Uma disputed the amount demanded and requested two fair hearings, neither of which were provided. After a State tax return was intercepted to recover a portion of the alleged over payment, Peter and Uma retained counsel and were able to secure a fair hearing. At the fair hearing, the State’s witness testified that the State had adjusted the amount claimed, lowering it to $3,297.68. The revision was due to the State’s error in allowing benefits to continue longer than they should before terminating coverage. During the hearing “the ALJ asked Lesko, “So, the County is only looking for the lower amount right now?” Lesko replied, “Yes, Your Honor.” Lesko reiterated on cross-examination that the Board “eliminated” the months of December 2016 to February 2017 from its reimbursement request, and only sought the reduced amount of $3,297.68 from petitioners.” The ALJ also made findings that an additional amount should be waived for similar reasons and entered an order requiring repayment of $1,648.84.

On review, the Commissioner found that nothing in the record demonstrates any financial harm or hardship that warranted a waiver and reinstated the entire claim of $5,335.20. The Commissioner did, however, allow for a reasonable payment plan.

Peter and Uma appealed, arguing the Commissioner’s order was “arbitrary and capricious” because it “disregard[ed] the findings of fact and conclusions of law of the ALJ without any basis in the record for doing so.” They also argued the entire claim was barred because federal law only authorizes recoupment from providers, not beneficiaries; this second argument was rejected.

Regarding the recoupment claim, the Court found that Medicaid is required to recover benefits incorrectly paid, but it is also “authorized and empowered . . . [t]o compromise, waive, or settle and execute a release of any claim arising under this act . . . in whole or in part.” The Court found that where “the Board specifically waived reimbursement of benefits improperly paid from December 2016 to February 2017, and it repeatedly represented during the fair hearing it would not seek to recoup these benefits, we are convinced the final agency’s decision not to abide by this waiver was arbitrary, capricious, and unreasonable.” The Appellate Division found that the reimbursement claim was limited to $3,297.68, minus any payments already made, such as the tax refund intercept. “This result is consistent with the Board’s repeated waiver statements during the fair hearing, a waiver on which petitioners presumably relied when they later testified.”