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Medicaid Funds Barred for Some Special-Ed. Services

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WASHINGTON--The Health and Human Services Department has issued rules to clear up longstanding disagreements over the use of Medicaid funds to pay for some special-education services for disabled children in institutions and intermediate-care facilities.

Under the regulations, which take effect Dec. 21, Medicaid cannot be used to pay for vocational or "formal'' educational services.

The rules define the latter as instruction in traditional academic subjects such as science or history.

The key to determining whether a service is educational, the new rules say, is "subject matter, rather than setting, time of day, or class size.''

The rules also say that vocational services directly related to preparing a student for paid or unpaid employment later in life are ineligible for funding.

Educators have been eyeing the federal Medicaid program for years as a means of meeting rising special-education costs.

Their hopes were raised with the passage of a 1986 special-education law stipulating that a state's duty to educate disabled children "shall not be construed to permit a state to reduce medical assistance available or to alter eligibility under Medicaid.''

Federal health officials, however, resisted paying for such services and took the matter to the U.S. Supreme Court in 1988.

At issue in the dispute was the definition of educational services.

Federal officials wanted to restrict Medicaid payments to services provided by doctors. Educators countered that some special-education services that are not provided by doctors, such as physical therapy, might also be considered medical in nature.

Lower Court Upheld

In the 1988 case, Commonwealth of Massachusetts v. Bowen, the High Court upheld a district court's ruling that Medicaid could be used to pay for some services for disabled children in institutions, provided those services were not purely educational.

That determination, the lower court said, should rest on the "nature of the service, rather than what they are called or who provides them.''

The new rules, first proposed more than two years ago in the wake of the High Court ruling, further clarify the standard.

They also apply to adults over 21 who may qualify for vocational-rehabilitation services when they are no longer eligible for the federal special-education program.

The Health and Human Services Department's Health Care Financing Administration published the regulations in the Nov. 20 Federal Register.

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