Published Online: January 4, 2008
Published in Print: January 9, 2008, as U.S. to Trim School Medicaid Payments After Freeze

U.S. to Trim School Medicaid Payments After Freeze

The Bush administration has followed through on a proposal to stop reimbursing schools for certain services provided to Medicaid-eligible students, but school groups say they plan to use the six months before the new rules go into effect to fight the changes.

The Centers for Medicare and Medicaid Services plans to halt the reimbursements for the costs of transporting eligible children from home to school and back. School districts contend they are entitled to those transportation expenses when Medicaid-eligible services such as speech or physical therapy are provided at school.

Medicaid would also stop paying school administrative costs for identifying and enrolling Medicaid-eligible students, and for coordinating the provision of medical services covered under a state’s Medicaid plan.

The changes were announced Dec. 21, the Friday before Congress and many school districts went on break before the winter holidays. However, before Congress wrapped up its session for the year, it approved the Medicare, Medicaid, and SCHIP Extension Act of 2007, which includes a provision that freezes the implementation of the new reimbursement rules until June 30. President Bush signed the bill Dec. 29.

“What’s great is that we have the moratorium,” 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. “We’re going to continue to work with our congressional delegations to see what can be done about extending the moratorium, or get legislation introduced to stop the changes.”

The Centers for Medicare and Medicaid Services, or CMS, a branch of the Department of Health and Human Services, proposed the changes last August. The centers estimated that eliminating certain reimbursements would save the federal health-insurance program for the poor an estimated $635 million in its first year of implementation, and $3.6 billion over five years. ("U.S. Proposes to Trim School Medicaid Funding," Sept. 12, 2007).

The revised policy will ensure that Medicaid is not paying for expenses that should properly be borne by other agencies, or that are inappropriate for a health-care program, the CMS has said. The final rule was published in the Federal Register on Dec. 28.

Response to Comments

The Medicaid agency was unconvinced by those who criticized the proposed rule change during a 60-day comment period. In its analysis of the comments, CMS said that district complaints about the loss of money bolstered the agency’s opinion that money is being spent inappropriately on non-Medicaid services.

For example, some commenters said that the loss of funds would mean cuts in electives, after-school activities, and music programs.

“Constrained local and state funding for education is not the basis for deciding whether a cost is properly claimed under Medicaid,” the agency said in its comments accompanying the final rule. “We believe the final rule is necessary to maintain the financial integrity of the Medicaid program.”

The CMS has a “complete misunderstanding” of how school districts operate, said Mary Kusler, the assistant director of government relations for the American Association of School Administrators, based in Arlington, Va.

The Medicaid agency forgets that its money is reimbursing school districts for dollars that have already been spent, and will continue to be spent, on Medicaid-eligible services, Ms. Kusler said. The reimbursement is then used to pay for other school services.

“We are using their money to plug the hole,” she said.

The fact that the six-month moratorium was included in a larger bill relating to Medicaid is a sign of legislative support for allowing schools to claim certain reimbursements, Ms. Kusler said.

“We’re not going to give up,” said Ms. Merry, the Michigan official. “I look at this as an absolute entitlement.”

Vol. 27, Issue 17, Page 17

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