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Law Broadens Medicaid Services

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WASHINGTON--In an action that could save state education agencies millions in special-education costs, President Reagan has signed into law a measure that allows the states to bill the federal Medicaid system for some health-related services provided to handicapped students.

The provision, which was tucked into the sweeping Medicare Catastrophic Coverage Act, or PL 100-360, directs Medicaid officials to reimburse states for all Medicaid-covered services provided to low-income handicapped students as part of their special-education programs.

The payments must be made even if those services are listed on the individualized education program that school districts must prepare for every special-education student under federal law.

The new provision also covers some early-intervention services provided to infants and their parents under the 1986 Education of the Handicapped Amendments Act of 1986 or PL 99-457.

Shifting Gears

The Presidential action represents a major policy reversal for the Reagan Administration, which has sought in recent years to force a number of states to pay for the "related services'' listed in an I.E.P., such as speech pathology and audiology, psychological services, physical and occupational therapy, and medical counseling and services for diagnostic and evaluation purposes.

The most visible of those court battles involved a long-running dispute with the state of Massachusetts over $11 million in Medicaid payments for services to mentally retarded students in state-owned facilities. (See Education Week, June 10, 1987.)

The case was resolved on June 29--just days before President Reagan signed the Medicare bill--when the U.S. Supreme Court took up the matter and ruled in favor of Massachusetts. The Court let stand a lower court's ruling directing the federal government to reimburse the state.

"What was happening was that in 1985 or 1984 the attitude of the Health Care Financing Administration changed towards services provided as part of an I.E.P.,'' said Joseph Manes, a senior analyst who has followed the issue for the Mental Health Law Project. The nonprofit group was one of 18 national organizations that formed a coalition to lobby for the education provision in the new catastrophic-coverage law.

"Primarily in order to save money,'' Mr. Manes said, "they took the position that Medicaid was the 'payer of last resort.'''

As a result, he said, some schools began drawing up "phantom I.E.P.'s'' that omitted some of the related services needed by handicapped children. Mr. Manes said school officials told the parents of those children to look elsewhere for the services so that Medicaid would shoulder the cost.

"In any case, it was the child who got caught in the middle between P.L. 94-142 and Medicaid,'' he said.

The Congress unsuccessfully attempted to remedy the problem in the 1986 measure, which strengthened a provision of federal handicapped law directing that special-education funds should not replace other sources of funding for necessary services.

"That was fine to tell the education system that they could seek other sources of funding, but it didn't change the Medicaid position,'' Mr. Manes said.

The new Medicaid provision took effect July 1.

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