Published Online: September 7, 2007
Published in Print: September 12, 2007, as U.S. Proposes to Trim School Medicaid Funding

U.S. Proposes to Trim School Medicaid Funding

Tightened rules could save $3.6 billion over 5 years, HHS says.

Federal officials have proposed a plan to stop reimbursements for some of the services schools provide to Medicaid-eligible students, a move long predicted—and dreaded—by local educators.

The policy changes were announced late last month by the Centers for Medicare and Medicaid Services, a branch of the U.S. Department of Health and Human Services. Under the proposal, Medicaid would no longer reimburse schools for the costs of transporting eligible children from home to school and back.

The program would also stop paying school administrative costs now covered by federal aid—money that goes for identifying and enrolling Medicaid-eligible students and for coordinating the provision of medical services covered under a state’s Medicaid plan. The program would still pay for certain health services needed by eligible children and for transportation from school to the service providers.

Medicaid officials estimate the changes would yield $635 million in savings to the federal health-insurance program for the poor in the 2008-09 school year, the first year of implementation, and an estimated $3.6 billion in savings over five years, said Mary M. Kahn, a spokeswoman for the Centers for Medicare and Medicaid Services, known as CMS.

The overall aim is to make sure that Medicaid is paying for appropriate services, not shouldering costs that should be borne by school districts or other agencies, federal officials say.

“Medicaid is an extremely costly program, and we have to make dollars stretch as far as possible,” Ms. Kahn said. “That is the issue. Medicaid funds are not limitless. If a service is genuinely the responsibility of a different agency, it’s our fiduciary responsibility to make sure that we are not paying for it out of Medicaid dollars.”

The proposed rule was scheduled to be published in the Federal Register on Sept. 7.

Districts Decry Cuts

Officials of school districts reacted angrily to the proposed changes, which were announced on the CMS Web site Aug. 31 but had been expected since President Bush released a fiscal 2007 budget plan that included the proposed cuts. Schools are legally required to provide certain services to students with disabilities, district administrators say, and Medicaid is shifting its responsibility to pay for poor students onto cash-strapped school districts.

“This seems incredibly shortsighted,” said John P. DiCecco, the director of health partnerships and Medi-Cal programs for the 708,000-student Los Angeles Unified School District. Medi-Cal is his state’s Medicaid program.

“It’s all cost-shifting down to the states from the federal government,” Mr. DiCecco said. “I find it astounding that this would be the focus of cuts.”

The district would lose about $2 million in transportation reimbursements per year and $8 million to $10 million in reimbursements for administrative outreach per year, he said.

Planned Changes

The Department of Health and Human Services is proposing changes to its program for reimbursing schools for certain health services provided to children eligible for Medicaid. Payments to schools would no longer be available for:

■ Administrative activities performed by school employees or contractors, or anyone under the control of a public or private educational institution.

■ Transportation from home to school and back for school-age children with individualized education programs, or IEPs.

Payments would remain available for certain covered services in a child’s IEP and for transportation from school to a health-care provider for a covered service.

That money is just a small fraction of the district’s $6.2 billion budget for 2007-08. However, Mr. DiCecco said, it pays for what he believes are essential services that would have to be curtailed.

For example, children enrolling in Los Angeles schools fill out applications to determine their eligibility for free or reduced-price lunches. District officials take that information and determine whether a child is also eligible for Medicaid. That kind of outreach effort by school officials is part of the administrative aid that the Health and Human Services Department proposes to cut, Mr. DiCecco said.

“The loss of funding is just going to be devastating,” said Wendy Gonsher, the director of fiscal and data operations for the 257,000-student Broward County, Fla., school district. She estimates that her district would no longer receive about $6 million to $8 million a year in federal reimbursements for administrative services. The district does not submit transportation claims.

Broward County’s reimbursements are placed in the general fund and then paid out again in health and health-related services, Ms. Gonsher said. “We’re buying nurses. We’re buying psychologists,” she said. “This latest move—we feared it was coming. We hoped it wouldn’t.”

Problems Identified

The Medicaid program and school districts have had an uneasy partnership since 1988, when the adoption of the federal Medical Catastrophic Coverage Act allowed schools to receive payment for certain health services provided to Medicaid-eligible children, such as speech, physical, and occupational therapies to students in special education, as part of their individualized education programs, or IEPs.

Reports from government watchdog agencies have suggested that the school reimbursement process has been poorly overseen by CMS, and there has been abuse and fraud at the state and local levels.

For example, in a 2000 reportRequires Adobe Acrobat Reader, the Government Accountability Office noted that Michigan had submitted to the federal agency $30 million in questionable administrative claims from schools in late 1998. The office of the Health and Human Services Department’s inspector general examined claims made by the New York City school district in 1993 through 2001 and said that more than $96 million in federal Medicaid reimbursements for student transportation should be disallowed. The district disputes both the inspector general’s methodology and conclusions.

Districts contend that any abuses in the system were partly the fault of CMS and of unclear rules. They also claim that the federal agency is scrutinizing school Medicaid reimbursements based on guidelines that didn’t exist when the questioned spending occurred.

“We did nothing untoward,” said Kathleen Cummins Merry, the director of Medicaid services for Michigan’s Wayne County Regional Education Services Agency, which provides special education services to 34 school districts, including Detroit.

CMS “outlined the rules, and we followed them to the letter. Now they’ve determined that they didn’t like the rules they’ve created,” Ms. Merry said.

School district officials say they plan to use the 60 days they have to comment on the proposed regulation to rally support both among their fellow school officials and among federal lawmakers. A bill that would have barred the action then being contemplated by the Health and Human Services Department was introduced in July 2006 by Sen. Edward M. Kennedy, D-Mass. It didn’t pass in the last Congress, and it was reintroduced this year.

In addition, current legislation pending in the House for reauthorizing the State Children’s Health Insurance Program, or SCHIP, would also bar CMS from adopting the changes.

“We want to let everyone know about this proposed elimination [of support],”Ms. Merry said. The program “does, in fact, reach out and help kids and help families find the help they need.”

Mr. DiCecco of the Los Angeles district said he hoped federal lawmakers would also weigh in. “I don’t think this is either Congress’ intent or anyone’s understanding,” he said.

Vol. 27, Issue 03, Pages 1,17

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