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The Immediate Winner of Papa v. DHS: In-Home Medicaid Providers

At GLLF, we love the Wisconsin Supreme Court’s decision last week in Papa v. DHS and we’ve written about how it sets an important precedent for protecting the rights of the regulated community. But it is worth remembering why this case came about in the first place. Agency regulations don’t just harm in the abstract.

With Wis. Stat. § 49.45(3)(f)1.-2, the Wisconsin Legislature authorized the Department of Health Services (DHS) to audit in-home Medicaid providers for fraud or overpayment and recoup funds paid in error. DHS promulgated some further rules, but effectually, the standard came down to: can the Medicaid providers prove they did the work they billed for?

But several years ago, DHS started auditing in-home Medicaid providers and demanding hundreds of thousands of dollars in already paid wages for documentation errors where no one disputed the providers actually did the work. 

For example, if a provider got oral instructions from a doctor, performed the task, and then had the doctor sign the order, DHS would demand the payment back because that violated a documentation procedure.

Or in another instance, a provider did not first bill the minor patient’s parent’s health insurance because it was previously established they would not cover her services. Her wages working with the minor patient got recouped.

For many in-home care providers, Medicaid work represents their sole source of income. If their documentation wasn’t perfect, DHS’s recoupment could cost them up to five years of past earnings. They started calling DHS’s policy “the perfection rule”—meaning your paperwork needed to be perfect, or you could lose everything.

Many declared bankruptcy. Others mortgaged their houses. Most ended up leaving the already understaffed profession, or decreasing their hours to limit potential fallout.

Again, no one disputed they did the work they billed for. The dispute was whether they followed the detailed, prescriptive procedure laid out in unpromulgated handbooks.

The Medicaid providers eventually sued. They won at the trial court but DHS appealed and they lost. The case went before the Wisconsin Supreme Court. GLLF wrote an amicus brief in support of the providers, emphasizing that agencies cannot just act on their own. They need explicit, statutory authority from the legislature. And while the legislature gave DHS authority to recoup, it was not for minor clerical errors.

The Supreme Court unanimously agreed. In fact, it put it quite succinctly: “The issue in this case is whether DHS has the authority to enforce this recoupment policy. The short answer is no, it does not.”

So, who is the winner in Papa v. DHS? Certainly the regulated community, as agencies must first look to their explicit authority before regulating. But more immediately, we have to celebrate with the hard-working health care providers who no longer have to worry that a minor clerical error will cost them their house.