Use of Grant Funds by the Sacramento Foundation

The Foundation Community Health Plan of the Medical Care Foundation of Sacramento was reviewed to determine: (1) if the Federal Government had recovered Medicaid funds paid to the Foundation as recommended in previous reports; and (2) if the State of California should refund Federal Government grant funds paid to the Foundation as part of a rate-setting demonstration study. As of December 1977, HEW had not attempted to recoup funds from California based on 1975 recommendations on fiscal years 1973 and 1974 Foundation activities. HEW had not recovered the Federal share of the $1.6 million in per capita rates, and the issue remained unresolved. The State failed to justify paying rates to the Foundation exceeding those that would normally have been paid to a prepaid health plan. The law is not specific on how extensively the Foundation had to participate in the rate-setting study; the HEW grant to the State only required the Foundation to provide data to the State. Because the Foundation provided the data, there are no grounds on which to demand repayment from California for its payment of demonstration grant funds to the Foundation.