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School districts in New York state must temporarily stop submitting reimbursement claims to Medicaid in the wake of a record-setting settlement between the state and the U.S. Department of Justice, which claimed over a billion dollars in claims were false.
Districts nationwide are allowed to request reimbursement from Medicaid, the main federal health-insurance program for the poor, for certain therapies provided to students. The Justice Department claimed that New York billed the federal government for services that are not covered by Medicaid or that were not properly documented.
As part of the July 20 settlement, the state and New York City will repay some $540 million to the federal government, partly in cash and partly by releasing claims to reimbursements that had been withheld.
In a press release announcing the settlement, New York Gov. David A. Paterson said that the state has tightened up its procedures for submitting Medicaid-reimbursement claims.
The state estimated that its ultimate liability for questionable claims might have approached $1.5 billion.
“While it is unfortunate that state and city funds have to be repaid to the federal government, we believe that this settlement requires payment of approximately $1 billion less than we could potentially have had to pay if the matter had gone to litigation,” Gov. Paterson, a Democrat, said in a statement.
Under the settlement, New York state’s share amounts to $331 million paid out over five years, and the release of about $108 million in Medicaid claims. New York City will pay $100 million, also over time.
Until the state enters into a new agreement that will provide oversight of the program, school districts will not be able to submit claims for any services that were provided after July 1, the state department said in a memo.
Jane Briggs, a spokeswoman for the state education department, said that the state health department would submit a “state plan amendment” to the federal government. That amendment would govern future management of the Medicaid-reimbursement program for school-based health services and help prevent fraud.
If the new plan is approved by the government, the billing process can be reopened and may be retroactive to July 1st, Ms. Briggs said.
In 1988, 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 provided to students in special education as part of their individualized education programs. Districts are also able to seek reimbursement for transportation of children to school if they receive therapy there.
But reports from government-watchdog agencies have suggested that the school-reimbursement process nationwide has been poorly overseen by the Centers for Medicare and Medicaid Services, which is a part of the U.S. Department of Health and Human Services.
In December 2007, the Bush administration attempted to eliminate reimbursement for school-based administrative services, and for transportation to and from school. (“U.S. Proposes to Trim School Medicaid Funding,” Sept. 12, 2007.) However, that rule was rescinded by the Obama administration in June, allowing such payments to continue.
New York has been one of the most aggressive states in seeking reimbursements from Medicaid. In 2000, a report by the Government Accountability Office, the investigative arm of Congress, noted that three states—Illinois, Michigan, and New York—accounted for more than 60 percent of the school-based claims filed that year. New York accounted for 44 percent of the health-services payments made under the program that year.The New York investigation began as a whistleblower lawsuit filed in 1998 by speech therapist Hedy Cirrincione, said her lawyer, David A. Koenigsberg. Ms. Cirrincione was providing speech education to young students in Watertown, N.Y., at the time, but her services were not Medicaid-eligible.
Ms. Cirrincione told school and local officials repeatedly that they were incorrectly billing the government for her work, but did not see any changes, Mr. Koenigsberg said in an interview.
Ms. Cirrincione sued on behalf of the federal government under provisions of the False Claims Act, which allows private citizens with knowledge of fraud to help the federal government recover money.
In 2001, the federal Justice Department, as well as the inspector general of the federal health department, started an investigation of three upstate New York school districts and a preschool program, according to a history of the case provided by the state.
The findings prompted a complete audit, particularly focused on claims originating from New York City schools.
Among some of the findings made in various reports in 2004 and 2005: In New York state, 88 percent of the transportation claims presented for payment did not comply with federal and state requirements, 56 percent of speech-services payments claimed were not allowable, and 86 percent of speech claims made specifically by New York City schools were out of compliance.
Eventually, the audits grew to include the years 1990 to 2001, and recommended that Medicaid disallow $1.078 billion in claims, not including interest. The False Claims Act would have allowed the government to collect up to three times the amount of which it was defrauded, as well as civil penalties.
Under the False Claims Act, whistleblowers can receive a share of the settlement. Ms. Cirrincione was awarded $10 million for her actions.
A version of this article appeared in the August 12, 2009 edition of Education Week