MEDICAID COST SHIFT: LEGISLATIVE, JUDICIAL, AND ADMINISTRATIVE - - PDF document

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MEDICAID COST SHIFT: LEGISLATIVE, JUDICIAL, AND ADMINISTRATIVE ISSUES.

By Terrell K. Arline Bay County Attorney May 2012

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Introduction. Florida counties contribute to the state’s costs of Medicaid. Since 1972,1 counties have been required to pay for certain hospital, nursing home, intermediate care, and other services covered by Medicaid.2 The 2012 legislative session changed the way the state recoups the counties’ payments.3 What was formerly an invoice issued by the State Agency for Health Care Administration (AHCA) and paid by the counties, after a review at the local level for correctness, is now a direct diversion of state shared revenues by the Department of Revenue (DOR) to pay for prospective costs and retroactive costs going back to 2001. The new law transfers the risk of billing error from the state to the

• counties. This new approach to paying for shared Medicaid costs has

already resulted in a circuit court suit brought by counties and FAC. The implementation of the law will result in potentially hundreds of formal administrative petitions filed by counties challenging AHCA’s charges, as well rule challenge proceedings. Finally, there are implications for counties existing and future debt that is tied directly or indirectly to state revenue shares dollars.

1 Chapter 72-225, Laws of Fla. 2 409.915, F.S formerly numbered 409.267, F.S. 3 SB 5301, codified in 2012-33 Laws of Fla. A copy of the law and hill is

located on FAC’s Medicaid Unfunded Mandate Updates website.

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A Short History of Medicaid Cost Share in Florida. Medicaid is a federal program originally enacted in 1965 under Title XIX of the Social Security Act. It is a means-tested program that covers health care costs of low income adults, their children, and people with certain disabilities. The Medicaid program is jointly funded by the state and federal governments and is managed by the states. The federal Centers for Medicare and Medicaid Services (CMS), a division of the U.S. Department

• f Health and Human Services, “monitor the state-run programs and

establish requirements for service delivery, quality, funding, and eligibility standards.”4 States must ensure they can fund their share of Medicaid expenditures for the care and services available under their state plan, which is approved by CMS. Florida has long had an approved plan, which has been amended many times over the years.5 Medicaid serves approximately 3 million people in Florida over half

• f whom are 20 years of age or younger. Estimated expenditures for fiscal

year 2011-2012 are approximately $20 billion. In Florida, counties contribute to the state’s share of the cost of the federal Medicaid program.

4 Medicaid.gov and Wikipedia on Medicaid. 5 The state plan is 592 pages and contained on AHCA’s website.

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Annually the federal government pays approximately 56% of these costs and Florida pays approximately 44%.6 The State Revenue Estimating Conference (REC) report entitled “Florida Tax Handbook 2012”, describes the history of the Medicaid cost share program stating: Chapter 72-225 created section 409.267, F.S., which required county participation in the cost of the following items provided under Medicaid: 35% of the cost of inpatient hospitalization in excess of 12 days; and 35% of the cost of nursing home or intermediate care facilities in excess of $170 per month. In 1975, a limitation of $55 per resident per month on the required reimbursements for services provided by nursing home and intermediate care facilities was

• enacted. In 1991, Section 409.267, F.S. was repealed and replaced

with section 409.915, F.S. An exemption for county residents in the Medically Needy program component of Medicaid was also enacted at this time. In 1996, required reimbursements were extended to services provided to health maintenance organization members if the services would have been reimbursable in a fee-for-service setting. In 2001, the 12 day exclusion for inpatient hospital services was reduced to 10 days, and an exemption for the cost of adult lung transplant services was established.7 Section 409.915, Fla. Stat. (2010) is entitled “County contributions to Medicaid”. The statute begins with recognition that the obligation for Medicaid payments rests with the State of Florida. The introduction states:

6 Complaint Alachua County et al. v. Elizabeth Dudek, et al. Case No. 37

2012 CA 001328. A copy of the complaint is located on FAC’s Medicaid Unfunded Mandate Updates website.

7 State Revenue Estimating Conference, “Florida Tax Handbook” (2012) at

page 121.

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Although the state is responsible for the full portion of the state share

• f the matching funds required for the Medicaid program, in order to

acquire a certain portion of these funds, the state shall charge the counties for certain items of care and service as provided in this section. The new law left intact provisions setting forth the counties’ specific and limited obligations for Medicaid payments, which are as follows. (1) Each county shall participate in the following items of care and service: (a) For both health maintenance members and fee-for-service beneficiaries, payments for inpatient hospitalization in excess of 10 days, but not in excess of 45 days, with the exception of pregnant women and children whose income is in excess of the federal poverty level and who do not participate in the Medicaid medically needy program, and for adult lung transplant services. (b) For both health maintenance members and fee-for-service beneficiaries, payments for nursing home or intermediate facilities care in excess of $ 170 per month, with the exception of skilled nursing care for children under age 21. (2) A county's participation must be 35 percent of the total cost, or the applicable discounted cost paid by the state for Medicaid recipients enrolled in health maintenance organizations or prepaid health plans, of providing the items listed in subsection (1), except that the payments for items listed in paragraph (1)(b) may not exceed $ 55 per month per person. Section 409.915(3) Fla. Stat. (2010), focuses on which Medicaid recipient is covered by a county’s obligation to pay. Not the paragon of clarity, the statute states:

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(3) Each county shall set aside sufficient funds to pay for items of care and service provided to the county's eligible recipients for which county contributions are required, regardless of where in the state the care or service is rendered. AHCA adopted Rule 59G-1.020 Fla. Admin. Code based this statutory provision. The rule provides that for “the purpose of the county financial participation in the Medicaid program, the county of residence for inpatient hospital care and nursing home care” is defined as follows: (1) A person is considered to be residing in a county when they establish or maintain a physical living arrangement, outside of a medical facility, which they or someone responsible for them, consider to be home. A visit to another county does not make a person a resident of that county, nor does a planned temporary living arrangement prior to admission in a medical facility. Except in unusual situations related to an extended visit, it makes no difference how long a person has been physically located in the county if they maintain a primary residence in another county, and intend to return to that county. In all instances the person’s intent to reside in a county is the determining factor, regardless of the length of time involved. (Emphasis added). (2) When an applicant has been admitted to a nursing home directly from a place of residence outside of the State of Florida, so that no Florida residency has been established, the certified county of residency will be considered as that county in which the nursing home is located. (3) In situations that are not clear cut, or otherwise unusually complicated, the determination of residency should be made on the basis of the preponderance of evidence. If a decision is not possible

• n this basis, the case should be referred to the Office of Social and

Economic Services for determination.

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AHCA’s deference to the individual Medicaid recipient’s “intent to reside in a county” as the “determining factor” has been problematic. One county notes instances where a commercial mall located across the street from a service provider was accepted by the agency as sufficient to establish an address for billing purposes. A rule challenge proceeding under Section 120.56, Fla. Stat. (2010), provides the process to test the validity of this rule, which was adopted in 1977 well before significant legislative changes were made to Chapter 120 to limit agencies rule making authority. While the counties’ share of the overall Medicaid payments is relatively small when compared with the total cost to the state, it is still a lot

• f money. According to the REC, counties’ reimbursement for hospital

inpatient services is approximately 5-6%, for nursing home services it is 1- 2%; reimbursement for hospital inpatient services provided through health maintenance organizations is approximately 1.5-2%.8 Counties pay a “per diem” cost established by AHCA for these services.9 The counties’ payments are deposited into the General Revenue Fund.

8 State Revenue Estimating Conference, “Florida Tax Handbook” (2012), at

page 120.

9 Agency for health Care Administration “County Billing Guidelines”

update 5/1/2012.

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The following chart shows that the counties’ total payments to the state for all categories of shared Medicaid expenses since 2009. FY Collections Annual Change % 2012-13* 315,400,000 11.21% 2011-12* 283,600,000 35.96% 2010-11 208,597,751

• 0.78%

2009-10 210,239,434 52.22% 2008-09 138,114,189

• 16.74%

2007-08 165,875,669

• 3.87%

2006-07 172,551,366

• 4.66%

2005-06 180,986,967

• 0.10%

2004-05 181,160,363 9.19% (* = estimate)10 Note the reduction in payments from year 2007 to 2008 and from year 2009 to 2010. The state’s Medicaid cost share program is not unusual. According to the REC: Twenty states besides Florida use local government funding to support their state Medicaid programs. This support takes various

• forms. Some local governments levy a tax which is remitted to the
• state. At least one state diverts state revenue sharing funds to support

Medicaid expenditures. More commonly, local governments participate in the program administration or provision of services.

10 Id.

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The Old Billing Process. Prior to 2012, counties were required to “set aside sufficient funds to pay for items of care and service provided to the county’s eligible recipients for whom county contributions are required, regardless of where in the state the care or service is rendered.” Section 409.915(3), Fla. Stat. (2010). At that time, AHCA generated a monthly statement “rendered . . . in consultation with the counties.” Section 409.915(4), Fla. Stat. (2010). This meant that bills were reviewed at the local level by the Clerk or local Finance Officer for correctness. Because counties only have to pay costs for “the county’s eligible recipients”, counties often rejected bills with address errors or if the bill contained an inadequate basis to assign an address of a recipient to the county. A few counties challenged bills based on improper billing amounts. After this review of the monthly bill claims were “accepted” as valid and payment remitted to AHCA, or claims were “denied” and the payment was reduced by the amount rejected by the county. AHCA could re-bill a county for denied claims if the agency could substantiate the disputed claim.11 Often AHCA simply resubmitted a challenged bill in a subsequent month, which a diligent county would presumably simply reject again.

11 See Fla. H.R. Approp. Comm., HB 5301 (2012) Staff Analysis.

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Under the prior law, the State was authorized to withhold cigarette tax receipts or any other funds distributed to the county to offset payments not made by counties. Section 409.915(5), Fla. Stat. (2010). In reality, this retention of shared revenues seldom occurred. Counties could pay their Medicaid bills from any source of revenue, local or state. An example shows how this billing system worked. Prior to 2009, AHCA sent paper bills to Bay County. Now the bill is in digital format and address and billing data may be viewed on AHCA’s on-line, web-based data

• system. To the dismay of the Bay County Clerk, the format of the data from

AHCA seems to change monthly. Addresses are shown on AHCA’s website. There are, however, other and perhaps more reliable address data bases. Medicaid recipient addresses are inputted into the ACCESS Florida Program operated by the Department

• f Children and Family Services (DCFS), which maintains the Medicaid

roles in Florida. Unfortunately, AHCA has not made this source available to counties in the past, although that may change. Other sources include state and federal criminal records, and searches provided by on-line web based private vendors. Certainly, counties may benefit from a thorough review of specific addresses and charges.

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The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the Standards for Privacy of Individually Identifiable Health Information established by the U.S. Department of Health and Human Services protect the privacy of medical records.12 Medicaid regulations restrict the use and disclosure of information concerning Medicaid applicants and recipients to purposes directly connected with the administration of the Medicaid State Plan.13 Bay County’s bills typically contain approximately 600-700 entries per month. After going over each entry on the bill, the Bay County Clerk rejects about 1.1% of the claims, which is a low rejection rate compared to

• ther counties.

Over the past five years Bay County’s payments have been as follows: FY Amount Paid 2007 $1,483,512 2008 $1,436,513 2009 $1,965,613 2010 $1,871,606 2011 $2,297,684

12 Pub. L. 104-191. 13 42 United States Code 1396(a)(7))

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This data shows that Bay County’s Medicaid cost increased every

• year. However, as noted above, the state’s data demonstrates an erratic

collection rate since 2008. AHCA agrees with this contention. The agency’s website states: Historically, the state has collected approximately 90% of claims as counties have had an opportunity to deny claims if they do not believe the individual served was a resident of their county. When the Agency transitioned to a new system in 2008, collections dropped to 65%, on average. While every county is different, the statewide collections are now averaging at about 74%.14 This may be the result of computer error. In 2008, AHCA launched a new billing system called the Florida Medicaid Management Information System (MMIS) after it was certified by

• CMS. Certification is provided when the federal agency determines that the

state’s system is likely to provide “more efficient, economical and effective administration of the state’s Medicaid program.”15 The counties have alleged in the circuit court case that after this computerized billing program was put in place, the “frequency and type of errors experienced increased dramatically and the amount of collections from the Counties decreased significantly”.16

14 Agency for Health Care Administration Press Release: Florida Medicaid

Achieves Federal Certification of Fiscal Agent System (July 27, 2010).

15 Id.

16 Complaint Alachua et al. v. Elizabeth Dudek et al.

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Plaintiffs claim that since 2008, counties have also spent more time identifying and correcting errors. Some of the errors reported by counties include: (a) billing for non-county residents; (b) multiple billings for the same event; (c) billing health care provider costs at zero dollars; (d) billing incorrect rates; (e) bills containing incorrect addresses or addresses that do not physically exist; (f) billing for non-Florida residents; (g) billing for services not rendered; and (h) bills that are facially fraudulent.17 Because it is first on the state’s alphabetical list of counties, Alachua County was often the “default” county where no address was available. Hence it got bills for other counties. Some counties have investigated billing errors. In a report published February 22, 2012, the Orange County Comptroller found that Orange County had received over $3.5 million in duplicate bills since 2005. The audit found $2 million had been billed for addresses outside of the State of

• Florida. In one example, AHCA submitted a bill for the same recipient’s

hospital stay 15 times.18

17 Id. 18 A copy of the Orange County Comptroller’s report is located on FAC’s

Medicaid Unfunded Mandate Updates website.

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The New Medicaid Cost Share Law. On March 29th, Governor Rick Scott signed H.B. 5301, which went into law immediately. The new law permits the State to withhold counties’ share of ½ cent sales tax revenues to pay for prospective Medicaid costs, and authorizes AHCA and DOR to collect “backlog” payments retroactive to November 1, 2001 through April 30, 2012. The backlog payments will be deducted from the counties’ share of other general state revenue funds over the next five years. The bill was codified in 2012-33, Laws of Fla. The new law employs a fundamental shift in the way the state receives the counties’ Medicaid contributions, from the former bill, review and pay approach, to a system where DOR withholds from a county’s state shared revenues the amount AHCA “certifies” as due. The Legislature deleted the

• bligation to “pay” and substituted in its place a requirement to “contribute”.

Retroactive Payments. The state has estimated that the “backlog” amount from 2001 through 2011 is $325.5 million.19 This amount includes disputed and rejected address claims left unresolved by AHCA for many years.

19 See staff analysis note 8 at 6.

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By August 1, 2012, AHCA is to “certify” each county’s backlog amount to DOR, which will then implement a complicated, statutory formula to collect this amount monthly over a five (5) year period by withholding revenues in the “Revenue Sharing Trust Fund for Counties” authorized under Section 218.26, Fla. Stat. (2010). This fund is comprised

• f a portion of taxes collected on cigarettes, intangible taxes on personal

property, road taxes, and taxes on motor fuels. The new law employees a rather arbitrary hammer to encourage counties to pay the backlog. If counties do not dispute their backlog payment by filing a petition for a formal administrative hearing under Chapter 120, DOR will only take 85% of the amount certified by AHCA. If a county disputes the backlog and files a challenge, DOR will take 100%. Petitions for a formal administrative hearing must be filed by September 1, 2012, which is 30 days after the backlog amount is certified by the Agency.20 The statute places the burden of proof on the county to prove by a “preponderance of the evidence, that a recipient was not an eligible recipient of that county or that the amount certified was otherwise in error.”21

20 AHCA has submitted to counties estimates of this backlog amount. Bay

County’s estimate is $725,000.00.

21 Section 409.915(7)(a).

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The new law shifted the burden from the state to prove the bills are correct to the counties to prove they are not. Filing a petition at DOAH is the “exclusive method to challenge the amount certified.”22 Given that the notice from AHCA may go to the Clerk’s office, it is prudent for county attornies and the Clerks to coordinate well in advance of August 1st. One presumes the agency would provide additional notice to counsel upon request, but this is not required by Chapter 120. There is the potential for the certification of backlog payments to shift bills from county to county. For example, Bay County has a regional hospital, which serves Medicaid patients from surrounding counties. These counties legitimately fear that the backlog billing process will generate new costs for their Medicaid residents that were previously avoided when Bay County simply refused to pay the bill for that resident. DOR begins to take the backlog from shared revenues on October 1,

• 2012. If a county prevails in the administrative hearing, the state will apply

any amount determined not to be owed as a “credit” toward the backlog payments going forward “in a manner that results in the remaining total distribution reduction being applied in equal monthly amounts.”23

22 Id.

23 Section 409.915(7)(c).

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Prospective Payments. Prospective payments for counties Medicaid cost share payments are to be certified by AHCA on a monthly basis beginning May 1, 2012. DOR will withhold the amount certified from the county’s share of ½ sales tax receipts in the trust fund established under Section 218.61 Fla. Stat. (2010). AHCA has been working with the counties to implement the new law. It has proposed what it calls a “glide path” and to adopt a rule which would allow certification based on the amount owed two months prior to the date of

• certification. The May certified amount will be zero ($0.00) based on the

March bill, which is a backlog month. This means that on June 7th the agency will certify for the month of April 2010. DOR will take that amount from the ½ sales tax revenues when it distributes these funds for May. The agency will allow counties to prepay the amount certified out of any revenue source up to 2 days prior to certification. For at least the first six (6) months

• f the program, AHCA will give counties thirty (30) days rather than seven

(7) days provided by the statute to review and object to bills. An “advanced refund” will be given if a county’s disputes are deemed “reasonable”, which is determined by a ratio of the rate of rejections taken from prior year.24 AHCA has noticed rulemaking to implement this new policy.

24 A copy of this proposed policy is located on the AHCA website.

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Notably, the agency has no current rules on the subject other than the address rule mentioned above. Consequently, Chapter 120 requires that it will have to adopt rules to implement the new law. Substantially affected persons may engage in rulemaking or challenge new rules pursuant to Sections 120.54 and 120.56, Fla. Stat. (2010). AHCA has been touring the state to discuss the implementation of the new law. The agency proposes to meet with all counties and has promised to improve its on line address data. The new law is unclear about the process for objecting to prospective

• payments. The law does not state that counties must file an administrative

petition to challenge prospective monthly certifications. The Legislature seemed to “punt” on this issue by essentially delegating to the AHCA, DOR and FAC the obligation to “develop a process for refund requests” for prospective billings. The law articulates the minimum components for this new dispute process, which: (a) Allows counties to submit to the agency written requests for refunds . . . and which set forth the reasons for the refund requests. (b) Requires the agency to make a determination as to whether a refund request is appropriate and should be approved, in which case the agency shall certify the amount of the refund to the department [DOR]. (c) Requires the department [DOR] to issue the refund for the certified amount to the county from the General Revenue Fund. The Department of Revenue may issue the refund in the form of a credit against reductions to be applied to subsequent monthly distributions.

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Given this uncertainty about the process to dispute prospective billings, if a county cannot convince the agency to reject certain billings prior to certification, basic principals of administrative law would seem to require filing a petition for formal hearings pursuant to Section 120.569 within 21 days of notice of the certification.25 Presumably, if the approach to resolving prospective invoices for Medicaid services is “bill then sue”, then there will be numerous formal administrative hearings against AHCA filed at DOAH. Given the evidentiary nature of disputes over addresses and amounts on particular bills, it is questionable whether consolidation among numerous counties would make sense. One strategy to employ, at least until the new dispute resolution process is developed, would be to file petitions monthly and then with agreement of the agency immediately abate the case. Later, counties and the agency could consolidate these cases for one hearing, which would promote administrative efficiencies. Obviously, a cost benefit analysis must be done before filing a petition with DOAH. This requires close and timely cooperation between county attorneys, administration, and the Clerks or local Finance Officers to review all claims for defects in advance of the date of monthly certifications.

25 Rule 28-106.111, Fla. Admin. Code.

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Recognizing the problems with addresses, the Legislature required DCF in consultation with hospitals and nursing homes that serve Medicaid recipients to “to update a recipient’s address in the Medicaid eligibility system at the time a recipient is admitted to a hospital or nursing home.” 26 Impact on Local Finance. Many local governments have issued debt in the form of bonds or bank loans that directly pledge state shared revenues or indirectly pledge such revenue through covenants. An example is the rather common local bond directly pledged with ½ sale tax shared revenues. Moreover, many bonds also include a “covenant to budget and appropriate” from all legally available non-ad valorem revenues to pay debt obligations. Fortunately, the Legislature showed some sensitivity to counties existing financial obligations. DOR is not supposed to divert shared revenues where a county demonstrates that such revenues are subject to existing debt obligations. The new law states twice, in a similar fashion for both backlog and prospective certifications, as follows: (b) As an assurance to holders of bonds issued before the effective date of this act to which distributions made pursuant to s. 218.26 [or 218.61 for prospective billings] are pledged, or bonds issued to refund such bonds which mature no later than the bonds they refunded and which result in a reduction of debt service payable in each fiscal year, the amount available for distribution to a county

26 Section 13, 2012-33 Laws of Fla.

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shall remain as provided by law and continue to be subject to any lien or claim on behalf of the bondholders. The Department of Revenue must ensure, based on information provided by an affected county, that any reduction in amounts distributed pursuant to paragraph (a) does not reduce the amount of distribution to a county below the amount necessary for the timely payment of principal and interest when due on the bonds and the amount necessary to comply with any covenant under the bond resolution or other documents relating to the issuance of the bonds. If a reduction to a county’s monthly distribution must be decreased in order to comply with this paragraph, the Department of Revenue must notify the agency of the amount of the decrease and the agency must send a bill for payment

• f such amount to the affected county.

The DOR has no rules to implement this program and has been visibly absent in the discussions between AHCA and the counties. At this point it is unclear how far DOR will apply the “any covenant” provision in the law. Therefore, it is prudent to assume bonds with covenants to budget and appropriate are covered. On April 13, 2012, DOR sent a letter to all counties asking them by April 27th to provide:

• A list of each series of bonds or any other debt directly secured by

revenue sharing under s. 218.26, F.S., including annual payment

• bligations, debt service schedules and total amount secured.
• A list of each series of bonds or any other debt directly secured by

half-cent sales tax revenue under s. 218.61, F.S., including annual payment obligations, debt service schedules and total amount secured. April 27th is DOR’s date. It is not in the statute and it has not been adopted by rule. Therefore, presumably counties have up until the time

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DOR makes the monthly distribution to notify the agency of its debt

• bligations tied to state revenue share dollars. Given the potential for

pledged revenues of existing bonds to be affected by the new law, it is prudent for counties to assess their monthly debt service payment

• bligations as it relates to state shared revenues and contact DOR well

before September 1, 2012. Many bonds require only two payments a year, one on March 1st for interest and one on September 1st for principal and interest. Because certification for both backlog and prospective Medicaid payments will be taken monthly by DOR, it is important for counties to be able to demonstrate a monthly offset for debt obligations from shared revenues. The new law may affect the bond market. On April 20, 2012, Moody’s Investor Services issued a report entitled “New State Withholding for Medicaid Costs is Credit Negative for Florida Counties”, which outlined how the new law affected state shared revenues.27 Moody’s wrote about the new law “[t]his procedural change weakens available revenue to service sales tax bonds and non-ad valorem obligations.”

27 A copy of Moody’s report is located on FAC’s Medicaid Unfunded

Mandate Updates website.

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Discussing the new process to collect the backlog payments, Moody’s report stated: Roughly one-third of the $325.5 million will be recouped in the first year, and the remaining two-thirds will be spread equally over the following four years. Consequently, revenues are expected by county

• fficials to fall by a total of $75 million in the first year, and between

$30 million and $60 million over the four remaining years. The lost revenues add another financial strain on counties already challenged by waning property tax and other operating revenues. Moody’s acknowledged that the new law credits counties for bonds pledged with state revenue share dollars, but intimated this may not be enough to fully protect counties’ future borrowing potential, stating: Although these protections should ensure that the bonds will maintain at least sum-sufficient coverage, the increased withholdings of counties’ sales tax revenues will invariably reduce debt service coverage and bonding capacity. Circuit Court Litigation. On April 26, 2012, FAC together with 47 counties filed suit in Leon County Circuit Court to challenge the new law. Judge Terry Lewis is

• presiding. Since the filing more counties have joined the suit.

The complaint seeks declaratory and injunctive relief and includes three counts. Two counts were brought under the “unfunded mandate” provisions of the Florida Constitution contained in Article VII, Section 18. Count I claims the new law violates Section 18(c), which states in part:

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(c) Except upon approval of each house of the legislature by two- thirds of the membership, the legislature may not enact, amend, or repeal any general law if the anticipated effect of doing so would be to reduce the percentage of a state tax shared with counties and municipalities as an aggregate on February 1, 1989. Noting that the new law will result in the aggregate loss of $325.5 million in county revenue share funds, the counties claim the anticipated effect of the new law is to reduce the percentage that counties receive of state taxes shared with counties. Count II claims the new law is not binding on counties under Section 18(a), which states: (a) No county or municipality shall be bound by any general law requiring such county or municipality to spend funds or to take an action requiring the expenditure of funds unless the legislature has determined that such law fulfills an important state interest and unless: funds have been appropriated that have been estimated at the time of enactment to be sufficient to fund such expenditure; the legislature authorizes or has authorized a county or municipality to enact a funding source not available for such county or municipality

• n February 1, 1989, that can be used to generate the amount of

funds estimated to be sufficient to fund such expenditure by a simple majority vote of the governing body of such county or municipality; the law requiring such expenditure is approved by two-thirds of the membership in each house of the legislature; the expenditure is required to comply with a law that applies to all persons similarly situated, including the state and local governments; or the law is either required to comply with a federal requirement or required for eligibility for a federal entitlement, which federal requirement specifically contemplates actions by counties or municipalities for compliance.

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Referring to the new law, which is contained in Section 12 of 2012- 33, Laws of Fla., the plaintiffs allege the new law “requires counties to expend funds or take an action requiring the expenditure of funds in at least four ways:

• a. Section 12 requires counties to reimburse the State for disputed

Medicaid billings that extend beyond the four-year statute of limitations prescribed in sections 95.11(3)(f)or (p), Florida Statutes.

• b. Section 12 will cause counties to expend additional funds for

higher interest rates on revenue bonds where the revenue source pledged for payment of the bonds comes from the State Shared

• Revenues. However, this change is so recent that no bonds have been

issued pledging the State Shared Revenues since Section 12 was enacted.

• c. Section 12 will cause those counties that have been historically
• verbilled to expend additional funds and utilize additional personnel

and resources to challenge erroneous Prior Unpaid Amounts in a formal administrative hearing process under chapter 120, Florida Statutes.

• d. Section 12 mandates each county to pay a share of Future Billings

that may not be a valid obligation.” The counties claim the new law is the equivalent of mandating counties to expend funds and violates Article VII, Section 18(a), because the Legislature did not pass the bill with the required 2/3rd vote or find it “fulfills an important state interest.”

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Count III claims the new law is invalid because it seeks to “revive time barred claims for prior unpaid amounts”. An attack levied directly against the backlog provisions, the counties claim that the new law improperly goes back beyond the 4 year statute of limitations established by Section 95.11(3)(f), and (p), Fla. Stat. (2010), and Section 95.11(6), Fla.

• Stat. (2010). Under the Statute of Limitations the state may not file a legal

action to recover prior unpaid Medicaid amounts accruing prior to March 29,

• 2008. Simultaneous with filing the complaint, the counties filed a motion

for temporary injunction seeking to bar the implementation of the new law.28 Conclusion. There is a crisis in Florida involving the costs of Medicaid. While there are various factors contributing to this crisis, most of these are beyond the control of counties. The law has long required counties to pay the state for a certain portion of the costs of Medicaid services provided to their residents. The billing system appears to have worked well, at least until 2008 when a new computerize billing system was put in place.

28 Additional claims that could be brought include waiver and estoppel. Both

AHCA and DOR took actions or failed to take actions, upon which the counties relied to their detriment. These claims, as well as the Statute of Limitations argument could be made in an administrative proceeding brought against the backlog bill.

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This may have resulted in a reduction of the state’s collection of Medicaid costs. It may have also contributed to the rise in counties legitimate rejection of bills. The Legislature has decided that the state should not bear the costs associated with the mistakes in the Medicaid billing system. The new law shifts the risk of error from the state, which is in the best position to identify and bill correctly Medicaid costs, to the 67 individual counties, which are individually less capable of precision in Medicaid billing. At the same time, the Legislature took $325.5 million from the counties’ revenue share trust fund retroactive to 2001. This created a new financial obligation for all counties to bear that they were not expecting. Many do not believe this is justified. Counties will pay legitimate bills. None of the Plaintiffs are trying to shirk their share of Medicaid costs. That being said, under the new law counties are going to lose revenues to pay bills they do not legitimately owe. Their budgets will be impacted through the loss of state shared revenues. Their ability to bond revenue share dollars in the future will be adversely

• affected. Given these impacts, counties were right to fight.

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AHCA is also burdened by the new law. To certify the backlog, the agency has to review 1.5 million bills, most of which were paper documents created before 2009. To defend the circuit court litigation and numerous administrative proceedings the agency will divert significant staff resources. DOR will probably not be able avoid the fray. The litigation expenses to the state and local governments will be enormous. Administrative proceedings can be protracted. Results may not be known for many months. This will complicate county budgets over the next couple of years as the backlog hearings are processed through DOAH. Fortunately, AHCA and the counties, assisted by FAC are working diligently to sort out the details of the implementation of the new law. Already coordination has resulted in some improvements with the billing

• process. The agency is meeting with counties and has proposed to “phase

in” the implementation of the new law. Hopefully this spirit of cooperation among reluctant litigants will prove effective in the 2013 legislative session.