Student Well-Being

Medicaid Money Goes Untapped By Many Schools

By Lisa Fine — May 08, 2002 14 min read
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Schools are missing out on what could be more than a billion dollars a year in Medicaid reimbursements for coordinating and providing medical services to special education students from low-income families, school advocates say.

Using a series of assumptions in the absence of hard data on the subject, those advocates estimate that if the nation’s schools collected all the money they were entitled to, it would mean another $1.5 billion to $2.4 billion a year in funding. Instead, the money for those medical services comes from local and state school revenue, leaving less available for all other programs.

Fourteen years after federal law was changed to allow schools to collect Medicaid for serving needy special education students, only 44 percent of school districts are participating, according to a study released in March that was commissioned by the Department of Education.

Most major cities are among that 44 percent, school advocates say, meaning that the remaining, non-participating districts probably contain fewer than half the Medicaid-eligible special education students. Exact numbers are not known because, while the federal agency that runs Medicaid keeps track of total claims from schools, it does not separately track data on special education students whose medical costs are reimbursed to their schools.

Federal officials say they are in the process of starting to collect such data, however, because the issue has begun to draw heat.

The participating schools collected $648 million from Medicaid in 1999-2000, the last year for which data were available, according to the Center for Special Education Finance in Palo Alto, Calif., which did the study for the Education Department. But those schools submitted claims for much more that year, about $1.5 billion in Medicaid-eligible costs, advocates say.

That means that even the participating schools are collecting less than half what they could, the advocates say, possibly because educators have such difficulty navigating the complex shoals of Medicaid’s reimbursement-documentation standards. Of course, that line of thinking assumes all of those claims were legitimate.

Pocket Change

Then there are the millions of dollars collectible by schools not currently participating.

Looking at the cost of just one service common to all Medicaid-eligible special education students helps put the potential dollar amounts in perspective.

Schools routinely do not collect money for the cost of drawing up plans for providing Medicaid services to special education students, a process that advocates contend is eligible for reimbursement. The cost of developing those individualized education plans, or IEPs, is about $1,000 per student, which includes personnel time and other costs, according to the Center for Special Education Finance. That means that if all schools billed Medicaid for the cost of devising IEPs for the 1.5 million Medicaid-eligible special education students in the nation, they could get $1.5 billion more a year.

However, that calculation assumes what amounts to a best-case numerical scenario, at least from the advocates’ point of view. Not all Medicaid-eligible students require medical services. And even for those who do, some might quarrel with the idea of reimbursement for the entire cost of creating an IEP given that the plan is, after all, an “education plan” rather than a medical plan.

Using those kinds of calculations, advocates say schools nationwide could in theory be getting a total of at least $3 billion a year from Medicaid for eligible special education students, said Bruce Hunter, a lobbyist for the American Association of School Administrators in Arlington, Va. That amount, he says, is pocket change in the context of the $177 billion Medicaid program, the federal and state health coverage initiative for the poor.

But such aid could mean tremendous fiscal relief for schools and states that foot the overwhelming majority of the special education costs for students. About 7 percent of national spending on special education comes through federal education money, according to the special education finance center.

“We’re barely a blip to Medicaid,” Mr. Hunter said. “We’re not going to break the bank. But $3 billion targeted at 1.5 million kids is a boatload of dough to us. It is worth the fight for us.”

An official at the Centers for Medicare and Medicaid Services, the federal agency that administers those two programs, said the money is there, but that it is up to schools to follow the necessary procedures to get it. The official, who asked not to be named, said it isn’t the CMS’s job to chase down those eligible and urge them to take the money.

But Washington officials with a number of education organizations say school officials run up against huge barriers when they try to collect that money. Those difficulties—including, they say, confusing and inconsistent policies, a lack of federal guidance, and a lack of time and resources to pursue billing for reimbursement—in fact deter some educators from even seeking the aid. So advocates are mobilizing to ask Congress to force the CMS to come up with consistent policies that apply to all schools in all states, instead of the patchwork of different rules now in effect.

“There’s a cliché out in the field: When you’ve seen one Medicaid state plan, you’ve seen one Medicaid state plan,” said Jeff Simering, a lobbyist for the Council of the Great City Schools, a Washington group that represents large urban districts. “Things that would be eligible in one region may not be in another region.”

Advocates say as well that they want Congress to resolve conflicting language in Medicaid and education laws. As Congress begins focusing on funding levels in this year’s scheduled reauthorization of the main federal special education law, the Individuals with Disabilities Education Act, or IDEA, the issue of Medicaid reimbursement will loom large, lobbyists for school groups say.

Medical Managers

Schools’ role in helping children get medical services can be crucial. The school nurse may be the first health professional a needy student sees with regularity. Schools often identify health problems of such students, and provide or connect them with care.

Schools take part in various health initiatives, such as the recently expanded children’s health-insurance program known as CHIP. Schools bring in health-care providers, or run their own school- based clinics. And schools that provide such services can get Medicaid reimbursement for a disadvantaged student, whether or not the child has a disability.

For students with disabilities, educators often become, in effect, the children’s medical case managers. Schools have been providing medical and therapeutic services needed by students with disabilities since the IDEA in 1975 first guaranteed students with disabilities the right to a “free and appropriate public education” and “related services.”

Depending on the nature of a student’s disability, services such as speech, physical, or occupational therapy, as well as evaluations and diagnostic tests, could fall under the category of related services and be eligible for Medicaid reimbursement.

Transportation is also a related service, under the IDEA’s terms, and schools can bill transportation costs to Medicaid for times when eligible children with disabilities receive medical care at school.

Until 1988, Medicaid funding for school-based services mostly covered routine screenings and treatments. But that year, Congress moved to clear up what many educators regarded as ambiguity in the law about what services were covered.

The Medicare Catastrophic Coverage Act passed that year stipulated that Medicaid would pay for school-based care for Medicaid-eligible children who had IEPs. Though the law for the most part was repealed a year later, the portion that covered Medicaid and special education was retained in law as an amendment to the Social Security Act.

Despite the law, and the considerable costs of providing such services, some schools do not even bother to file for reimbursement because the process is too complicated, said Dan Fuller, a lobbyist for the National School Boards Association.

Mr. Fuller said schools have the most difficulty getting reimbursed for administrative costs. Because schools do not have medical-billing departments, as hospitals do, some school districts have resorted to hiring consulting firms to do the work for them. But those services don’t come cheap: Some companies keep 10 percent to 20 percent of what they recover, Mr. Fuller said.

Some school districts in and around Hillsborough County, Fla., have formed a consortium to share the cost of a Medicaid-billing consultant, a strategy that is growing more popular, he said.

Now, Florida’s state Medicaid office, in partnership with consultants at the University of South Florida, is in the process of training district officials to file claims for administrative costs on their own, so they won’t have to hire a private company to do the work.

“It’s an additional workload for [educators],” said Kim Corsmeier, the deputy director of the Florida Agency for Health Care Administration. “The level of documentation is difficult for them to reach.”

But even those districts that bother with the red tape sometimes get the wrong shade of red.

Claims for administrative costs under Medicaid have to be filed with federal regulators in an acceptable format. Get it wrong, and you don’t get your money.

The Centers for Medicare and Medicaid Services at least tries to help. If a state submits a plan for filing such claims, the agency will review the plan and offer tips on what the state is doing right—and wrong. To date, 21 states have programs that have either been cleared by the CMS or, in effect, grandfathered in. And seven other states have plans under CMS review, agency officials said.

But outside the borders of those 28 states, state officials are operating without a compass. The net result: rejected claims.

“CMS is not approving these plans, and schools are missing out on half the money they could be getting,” Mr. Fuller of the school boards’ association said. “We need to change it so that schools can collect this money.”

In Maryland, education department officials are still awaiting approval of the state administrative-claims guide by the CMS. The state spent the past three years working on the plan.

“Every local district has a different way of operating,” said Carol Ann Baglin, the assistant superintendent for special education and rehabilitative services for the Maryland Department of Education. “Some hire therapists; some have employed their own on staff. Sometimes, it makes that trail of paperwork a little more difficult.”

“This is not easy stuff, but it is certainly worth the effort,” Ms. Baglin said. “I know how badly [local administrators] complain. It’s very burdensome. But it is a significant revenue source that is very important to school systems.”

States had come up with a strategy to make it somewhat less burdensome: “bundling.” But that technique had fallen out of favor.

Most states, in the wake of the 1988 law specifically allowing Medicaid reimbursement, eventually began to estimate each student’s costs (both administrative costs tied to the student and the cost of specific medical services) for a given period, rather than document every routine service provided. That so-called bundling, however, had too much of a back-of-the- envelope feel for regulators.

A 2000 report by the General Accounting Office, Congress’ investigative arm, criticized the practice, saying it invited fraud. School advocates defended it as efficient. In response, the CMS banned the practice.

Well, almost. Eight states that, in the opinion of the federal centers, used bundling procedures deemed more acceptable were allowed to continue the practice.

Waiting for Guidance

As school-based Medicaid programs became more heavily used over the past few years, Medicaid officials promised to put out guidelines to help educators translate their policies for making claims.

But after a draft of those guidelines was released for public comment in February 2000, the document drew such withering scorn from school groups that Medicaid officials shelved it.

The CMS has taken a second shot at providing such guidance; the agency has produced another draft that so far has not been made available to the public.

Mary Kahn, a CMS spokeswoman, said the revised draft—same substance, but with more clarity, officials maintain—is now being circulated among federal agencies, including the Education Department and the Department of Health and Human Services, the CMS’s parent agency. She did not know when the new and theoretically improved guide would be available for public review.

School groups, given what they’ve been told, are pessimistic about the new draft. Advocates say the first version did not achieve its goal of clarifying existing Medicaid policy, but instead would have created complicated new rules for schools. And, more important, it excluded from Medicaid reimbursement a significant chunk of schools’ special education enrollments.

The draft said that students covered under Section 504 of the Rehabilitative Services Act were not entitled to Medicaid. Those students, who have attention deficit hyperactivity disorder and other disabilities not covered under the IDEA, still need special services and, under federal law, are likewise entitled to a free and appropriate education.

“We are leery because we provided thousands of comments that they apparently didn’t read,” said Mr. Simering of the Council of the Great City Schools. “We want CMS to start being responsive to schools.”

Who Pays First?

School lobbyists also say Uncle Sam’s left hand and right hand need to have a conversation about Medicaid. Special education law and Medicaid guidelines are in conflict, they say, over the federal government’s responsibility for covering medical costs related to special education. School administrators, caught in the middle, often aren’t sure how to proceed.

The U.S. Supreme Court, in its 1999 decision in Cedar Rapids Community School District v. Garret F., ruled that under the IDEA, a school must pay for nursing services a student with a disability requires during school hours. The decision didn’t specifically address Medicaid as a funding source for such services, but many of the medical services provided under the IDEA are covered by Medicaid.

The 1997 revision of the IDEA includes language advising schools to set up a “network of support” among various federal agencies to provide for the care of special education students’ health needs. Medicaid is one of those agencies, according to the law. Schools, according to the IDEA, would have to cover only those costs left after other agencies kicked in their appropriate shares.

Yet regulations written by the Medicaid agency that attempt to flesh out the law passed by Congress say Medicaid should be the “payer of last resort.” This means, at least according to Medicaid officials, that the child’s private insurance or federal funds dispensed under the IDEA would be first in line to cover medical costs. Medicaid, under those regulations, would pay only for what other primary sources failed to pay.

For school officials, who by law cannot charge parents of children with disabilities for the students’ education or related services, turning to parents’ insurers is not an option, education lobbyists say. Schools, they say, may not ask parents for a co- payment or any other sort of financial contribution.

“IDEA says Medicaid should pay. Medicaid says they shouldn’t pay,” Mr. Fuller said. “We want this resolved.”

Meanwhile, simply identifying the Medicaid-eligible students is a challenge, taking up employee hours and running up administrative costs, district officials say.

“Obtaining consent to bill for services and verifying eligibility is the most difficult part of getting reimbursed,” said Linda Terry, the program manager for the Fairfax County, Va., district’s Medicaid- reimbursement office.

“We are mandated by laws which say we must obtain consent from parents to release student information,” she said. “It would be nice if CMS could provide eligibility verification information to school divisions in electronic format.”

And it would be nice, from schools’ point of view, if a patchwork system could be smoothed into something consistent and user-friendly.

School districts typically submit claims through their states. States set plans for Medicaid reimbursement. Policies on how to file a claim and what services are covered differ from state to state. What costs are reimbursed in one state are not covered in another.

“It’s a bit frustrating for people whose main business is not health care,” Mr. Simering said. “Educators have been forced into the health-care business.”

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A version of this article appeared in the May 08, 2002 edition of Education Week as Medicaid Money Goes Untapped By Many Schools


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