More than half the states and the District of Columbia plan to file suit in federal court here today to block more than $200 million in federal penalties for overpayment errors in two major welfare programs in 1981 and 1982, the American Public Welfare Association said yesterday.
The penalties are based on 1980 Health and Human Services Department regulations carrying out the Michel amendment, named for House Republican Leader Robert H. Michel (R-Ill.), which required each state to bring its error rates for the federal-state Aid to Families with Dependent Children and Medicaid programs to 4 percent by 1983. The regulations required each state to progress one-third of the way toward that goal in fiscal 1981, another third in fiscal 1982 and reach the goal in 1983.
Error rates measure overpayments to beneficiaries and payments to ineligible persons.
In 1981, the national average error rate was 7.7 percent for AFDC and 3.8 percent for Medicaid, according to the association's summaries of department reports, but many states were over the target set by HHS. In 1982, the national AFDC error rate was 6.9 percent and the national Medicaid rate 3.8 percent.
The 27 states, the District and three California counties said in court papers that 25 states and the Commonwealth of Puerto Rico would lose $82 million for fiscal 1981, and 32 states, Puerto Rico and the District would lose $136.6 million for fiscal 1982.
According to documents, the District would lose $6.3 million in penalties over the two years and Maryland $1.1 million. The association did not list any penalties for Virginia.
Not all the losing states participated in the suit.
The states' basic argument is that certain requirements of the Michel proposal were never spelled out for 1981 and 1982, so the penalty provisions are inoperable for those years.
HHS spokesman Chuck Kline said the department would have no comment until it studied the suit.