Petitioner submitted five sets of claims to respondent Department of Health (hereinafter DOH) for reimbursement of certain Medicaid expenditures, known as overburden expenses, made by petitioner prior to January 2006. At the time the expenditures were made, DOH was obligated to reimburse petitioner for those expenses (see Social Services Law § 368-a [1] [h]). After the expenditures were made by petitioner, but before it submitted claims for reimbursement, a new statute was enacted that caps Medicaid expenditures made by counties at the amount paid in the year 2005, with certain exceptions and a yearly percentage-based increase (see L 2005, ch 58, part C, as amended by L 2006, ch 57, part A, § 60 [hereinafter Medicaid Cap Statute]). Respondents ultimately denied petitioner’s claims on the ground that the newly enacted Medicaid Cap Statute bars reimbursement for overburden expenditures and that such claims were untimely. Petitioner thereafter commenced this CPLR article 78 proceeding seeking, among other things, to compel respondents to reimburse it for the claimed overburden expenditures and the imposition of sanctions for respondents’ alleged frivolous defenses and bad faith. Supreme Court granted the petition in its entirety, finding that respondents’ denial of petitioner’s claims resulted from an improper retroactive application of the Medicaid Cap Statute and, further, that the time requirements set forth in 18 NYCRR 601.3 were inapplicable to petitioner’s claims. The court also imposed sanctions upon respondents in the form of counsel fees. Respondents appeal.
Recently, the Fourth Department, addressing the same issue presented here, determined that respondents improperly applied the Medicaid Cap Statute retroactively to reimbursement claims for overburden expenditures incurred prior to 2006 (see Matter of County of Niagara v Daines,
Under New York law, “retroactive operation is not favored by courts and statutes will not be given such construction unless the language expressly or by necessary implication requires it” (Majewski v Broadalbin-Perth Cent. School Dist.,
Here, the Legislature did not explicitly provide for retroactivity. Furthermore, upon our review of the language of the Medicaid Cap Statute and the legislative history, we find no clear indication that it is to be applied retroactively. To the contrary, the statute expressly states that the calculation of medical assistance expenditure amounts for social services districts “shall be” governed by its provisions “[c]ommencing with the calendar year beginning January 1, 2006” (L 2005, ch 58, part C, § 1 [c]). The fact that the statute speaks only of the present and future militates against retroactive application (see Bolarinwa v Albany Med. Ctr. Hosp.,
Additionally, to the extent that respondents argue that the Medicaid Cap Statute was not applied retroactively here because the claims for reimbursement were submitted, and the requested
Respondents alternatively assert that petitioner’s claims for overburden reimbursement are untimely under 18 NYCRR 601.3 (c). Respondents initially denied four of the five sets of claims on the sole ground that the Medicaid Cap Statute barred reimbursement for such claims. Then, within days of the Fourth Department’s decisions rejecting that argument (see Matter of County of Niagara v Daines,
Pursuant to 18 NYCRR 601.3 (c),
“[ejxcept as otherwise provided within the requirements for any particular activity, expenditures made by a social services district may not be reimbursed if such costs are related to expenditures, services, supplies or other costs incurred on behalf of a recipient or an individual more than 12 months prior to the month in which the claim for reimbursement is made, unless such costs are specifically approved by [DOH].”
There is no dispute that the time limitations set forth therein apply to situations, unlike here, where a social services district (i.e., a county) is billed directly by a medical provider for services rendered on behalf of a Medicaid recipient and subsequently seeks reimbursement from the state for those expenditures. Clearly, under such circumstances, the claimed reimbursement is for “expenditures made by a social services district” (18 NYCRR 601.3 [c]). Respondents contend that the regulation also applies in situations where, as here, the state— rather than a county—is billed for and pays a medical provider for services rendered on behalf of a Medicaid recipient and then collects from the county its local share of those costs. Although an agency’s interpretation of its regulations will not be disturbed unless the determination is irrational or unreasonable (see Matter of Marzec v DeBuono,
Quite simply, the reimbursement claimed by petitioner here is not for “expenditures made by a social services district” (18 NYCRR 601.3 [c]). Rather, the overburden expenditures were incurred and paid by the state. The state then over-billed petitioner for its share and, therefore, petitioner was entitled to reimbursement. Thus, what is being sought by petitioner is a refund of moneys paid by it to the state for expenses incurred by the state. Indeed, Peter Gallagher, DOH’s Director of the Bureau of Medicaid Statistics and Program Analysis, explained that,
Indeed, when considering the reimbursement scheme as a whole, the only reasonable construction of 18 NYCRR 601.3 is that the time requirements contained therein are limited to reimbursement claims for expenditures made by a social services district to a vendor. As Supreme Court aptly noted, when a county is directly billed by a medical provider for overburden services in which it is entitled to reimbursement from the state, the county must submit a claim for reimbursement to the state, and the time limitations set forth in 18 NYCRR 601.3 serve to relieve the state of the burden of verifying reimbursable expenses paid by a county to any number of different vendors after more than a year has elapsed. However, it is hardly reasonable to construe 18 NYCRR 601.3 as applicable to situations such as this—where it is the state that is billed for and pays a medical provider for services rendered on behalf of a Medicaid recipient, and then subsequently collects from a county its local share of those costs—since no claim for overburden expense reimbursement need be submitted by a county. Rather, the state (which directly incurred the costs) identifies the reimbursement patients and unilaterally issues reimbursement to the county. Thus, since a county need not take any action to receive reimbursement for overburden expenses under these circumstances,
Finally, we are compelled to conclude that Supreme Court abused its discretion in awarding sanctions. Although the Fourth Department and various tried courts within that Department have rejected respondents’ retroactivity argument, this Court is not bound by the Fourth Department’s determination on that issue and the arguments raised by respondents in relation thereto are not “completely without merit in law” (22 NYCRR 130-1.1 [c] [1]). Furthermore, it should be apparent from the foregoing discussion regarding the applicability of 18 NYCRR 601.3 that we view an award of sanctions against respondents based on their assertion of this defense to be unwarranted. Contrary to petitioner’s contentions, we cannot say that respondents’ invocation of that regulation was a dilatory tactic done solely in an attempt to prolong their payment of petitioner’s claims.
Malone Jr., Stein, McCarthy and Egan Jr., JJ., concur.
Ordered that the judgment is modified, on the law, by reversing so much thereof as awarded petitioner sanctions in the form of counsel fees, and, as so modified, affirmed.
Notes
. 18 NYCRR 601.4 provides that “[a] determination by [DOH] concerning the allowability of a claim for reimbursement submitted by a social services district is final and is not subject to administrative review,” and nothing within the regulations authorizes respondents to “supplement” a final determination (see 18 NYCRR part 601).
. Here, the only reason why petitioner was required to submit these claims for reimbursement is because the state erroneously failed to reimburse petitioner for such overburden expenses.