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Memorandum of Support

Empire Justice Memo of Support: Due Process for Consumers in Medicaid and Family Health Plus Overpayment Actions

S.3184A (Little)/A.5686A (Gottfried)

This bill would put an end to the “wild wild west” that currently exists in New York State for families and individuals who are pursued for Medicaid and Family Health Plus overpayments.  These actions are initiated when errors result in payments that should not have been made, regardless of whether the error was on the part of the applicant or the local social service district. 

Consumers have no procedural rights during these investigations and often sign repayment agreements under threat of criminal prosecution or action by a collection agency, with very little information about the underlying error and no opportunity to present their side of the case.


Currently, in New York State, counties are charged with conducting the vast majority of Medicaid and Family Health Plus eligibility determinations, both at initial application and upon recertification.  Economic hardships have resulted in a tremendous growth in the number of low-income New Yorkers seeking Medicaid coverage, at the same time as shrinking county budgets have created staffing shortages. 

In this context, it is not surprising that, given the complexities of federal and state rules for processing Medicaid cases, errors are often made.  Counties then initiate overpayment actions in which either the local district or the collection agency it contracts with pursues the families and individuals for money “incorrectly” paid out by the Medicaid or Family Health Plus program. 

These recovery actions against Medicaid consumers are pursued even when the error is on the part of the county.  Empire Justice has learned of numerous instances where families have communicated changes in income or residence, but overwhelmed county workers have either lost the information or failed to act upon it.  In other cases, parents applying for Family Health Plus have been told that coverage would be in effect, regardless of income, for a full year, only to be pursued for payments made to their health plan for the second six months of the year, even when no services were actually utilized.  

To make matters worse, there are no procedural protections for consumers when these recovery actions are commenced.  The process varies from county to county, but common themes emerge.  Demands for repayment are often threatening in tone and are made without any written account of the facts that led to the claim of overpayment.  Very often, demands for repayment are made before the county has conducted a thorough investigation of the underlying facts; consumers are put under significant time pressure to agree to repayment; and consumers almost never have the opportunity to present their side of the situation.

In many counties, families are asked to sign waivers of their right to be heard in court.  The initial contact is made orally, by phone, and the person contacted is told that unless they come down to the district within the next several days to sign a repayment agreement and waiver of court process, the case will be referred to the district attorney’s office for criminal investigation. 

In other counties, the first contact is from a collection agency, which sends a letter threatening legal action unless a repayment plan is agreed to within a specified time period, generally no more than ten days.  The individuals and families being pursued in these actions receive no explanation of appeal rights and no information about obtaining legal advice or assistance.


S.3184A/A.5686A provides a procedural framework for Medicaid and Family Health Plus overpayment actions.  The bill requires the agency initiating the action to follow three basic, but critically important procedures:

1.  First, the agency must investigate the basis for an overpayment action. 

Recipients can elect to be interviewed as part of the investigation and must receive notice of the investigation five days before it commences.  Recipients are allowed to bring an advocate, relative or friend with him or her to the interview. 

2.  Second, the agency must provide notice of the outcome of the investigation to the recipient. 

This notice must state the basis for the amount of money the consumer is asked to repay, the evidence relied upon by the agency, and contact information for local legal services offices.  Consumers must be given at least 30 days to respond to the notice by either agreeing to a voluntary repayment schedule or contesting the outcome of the investigation.

3.  Third, agencies must allow consumers to utilize the fair hearing procedure in the Medicaid and Family Health Plus program if they elect to contest the outcome of the investigation.

The fair hearing process is better suited to the needs of low-income families than a formal court process, which is the only venue for contesting recovery actions currently.  Low-income families subject to overpayment actions are often unable to secure legal representation, and the fair hearing process is a much more efficient utilization of state resources than formal court proceedings.

Empire Justice Center strongly supports the consumer protection provisions of S.3184A/A.5686A and urges the Governor to sign the legislation without delay.