Erie and Niagara counties are among 11 counties in New York faced with unexpected demands to pay back federal money related to Medicaid aid for nursing homes and hospitals from 2009.
Erie County must pay back $5.3 million by June 30, and Niagara County owes $1.3 million.
The federal Center for Medicare and Medicaid Services is demanding a $16 million repayment from the state Health Department, which in turn is trying to get the money it owes Washington from the counties that ultimately received it, Niagara County Attorney Claude A. Joerg said.
The counties, meanwhile, accuse the Obama administration of changing the interpretation of how and when the additional money paid to the counties in Medicaid reimbursements should have been requested.
Federal officials deny that, saying they are merely enforcing a law passed more than 30 years ago.
Erie County officials said the federal money went directly to Erie County Medical Center for the hospital and its nursing home. Niagara County placed the money into its budget and spent it, Niagara County Budget Director Daniel R. Huntington said.
"At the end of the day, Erie County and these other counties did everything by the book," said Mark Cornell, a spokesman for Erie County Executive Mark C. Poloncarz. "We did what we were told to do, and now we're paying the consequences for other people's actions."
The issue is when a two-year window began for the counties to seek supplemental reimbursement for past Medicaid expenses pertaining to nursing homes and hospitals as part of the 2009 economic stimulus package.
Up until now, the counties were told the clock started when the original Medicaid reimbursements were received.
The federal agency now claims that the clock started when the Medicaid services were actually delivered to patients, which can be months or years sooner than the arrival of the reimbursements, which originate in Washington and are passed to the counties through Albany.
Joerg said the state Health Department issued a memo about how to apply for the 2009 reimbursement.
"The way in which we made the claim was exactly the way the state Department of Health told us," Joerg said.
New York's U.S. senators and the local congressional delegation have offered their help in trying to get a federal agency to back down from its demands for repayment.
County officials held a conference call last week with staffers for Sens. Charles E. Schumer and Kirsten E. Gillibrand, and Reps. Louise M. Slaughter, Kathleen C. Hochul and Brian Higgins.
"What's going to happen is, the congressional delegation is going to sign onto correspondence seeking a decision not to seek this recoupment," Joerg said.
The Niagara County Legislature last week authorized participation in a lawsuit against the Center for Medicare and Medicaid Services and the state Health Department.
However, litigation is on hold until the counties see the impact of the letters.
A number of options have been discussed between the counties, said Mary Rozak, a spokeswoman for Albany County Executive Daniel P. McCoy.
News Staff Reporter Denise Jewell Gee contributed to this report.