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OCA proposes progressive enforcement: commensurate spending‑target penalties with adjustment factors and procedural fines
Summary
OCA proposed calculating spending‑target penalties initially as the excess spending growth over the target (commensurate penalty), then adjusting up or down using statutory justification factors; staff suggested a range up to 125% of the commensurate amount and procedural penalties for PIP noncompliance (up to $10,000/day or $500,000 flat). Committee members raised concerns about double counting and public disclosure.
OCA staff proposed a two‑step structure for assessing spending‑target penalties: first calculate an "initially commensurate" penalty equal to the difference between an entity’s actual spending growth and the growth that would have occurred if it had met the target; second, adjust that amount upward or downward based on statutory justification factors, including the nature, number and gravity of offenses, the entity’s fiscal condition and market impact, and provision of non‑federal share.
"OCA would calculate penalties that are initially commensurate with the degree to which the entity exceeded the target," said Vishal Pagani, walking the committee through examples and an illustrative percentage range. Staff recommended a flexible range—up to 125% of the initially commensurate penalty—to allow adjustments for aggravating or mitigating circumstances. The presentation included illustrative commensurate penalty ranges for hypothetical commercial plans if a spending‑target regime had been enforceable in 2023.
On procedural penalties for enforcement noncompliance, OCA proposed per‑day penalties (up to $10,000/day) for repeatedly failing to file an acceptable PIP or required information, and a flat one‑time penalty (staff proposed up to $500,000) for repeated failure to implement a PIP or knowingly falsifying information. Committee members raised concerns about the size and timing of penalties, how state mandates and systemwide events (for example new mandated benefits) would be accounted for, the risk of double counting penalties across payers and providers, the possibility of perverse incentives, and public disclosure of PIP progress and penalty assessments.
Staff noted enforcement is progressive—entities receive technical assistance and an opportunity to propose PIPs with milestones before penalties are assessed—and that OCA will consult other state agencies when considering enforcement or penalties that could affect public financing or access. The board is expected to vote later this summer on penalty scope, ranges and justification factors; staff will then draft the implementing regulations.
