Medicaid funds to schools at risk

The Baltimore Sun

Maryland school systems stand to lose millions of dollars under new regulations curbing what they can request in federal reimbursement for health services provided to low-income, special-education students.

The state and federal governments are embroiled in a dispute over how much systems can request in Medicaid reimbursement for health services provided in school. Those services include speech, physical and occupational therapy, and psychological counseling.

Federal authorities are seeking to reclaim nearly $33 million from the state after a recent audit concluded that it allowed systems to overbill for services between 2002 and 2004. State officials vigorously dispute the methodology that the auditors used, arguing that systems spent far more than they applied for in reimbursement.

If similar audits elsewhere in the country are any indication, it could take years for the dispute to play out, and the state won't need to repay any money until the two sides reach a resolution. Even then, state officials say, they likely will not have to repay anything close to the full amount the federal government is seeking.

In the meantime, state officials have instructed school systems to cut their reimbursement requests nearly in half, in an attempt to prevent more disputes.

In Baltimore, which files the state's biggest share of Medicaid claims because it has the most poor children, the loss next school year likely would be about $5 million. Officials project that some of the state's rural counties will also take heavy hits because the reimbursement money represents a greater share of their overall budgets.

"I'm sure this will be a long process before there's any resolution," said John G. Folkemer, Medicaid director for the Maryland Department of Health and Mental Hygiene. "In some states, it's gone on for years and years and years."

Medicaid is a federal-state program that pays the medical bills of low-income people who meet eligibility requirements. School systems receive Medicaid reimbursement to cover part of the cost of medical services provided to special-education students from low-income families, as well as the cost of students' transportation to school on days they receive those services.

As the result of a previous review, covering one year of records in eight Maryland school systems, auditors determined in 2005 that six systems and the state had to repay about $19.9 million in reimbursement. The bulk of that, $12.2 million, would be paid by Baltimore. An appeal of that decision is continuing, though one part of the appeal was decided in the systems' favor, saving Baltimore $4.3 million.

In summer 2005, the federal government announced plans to conduct a major audit of Medicaid billing records in Maryland. State officials initially thought that 20 of Maryland's 24 school systems would be affected, but the audit came to include all 24.

The audit looked at the amount that systems billed for health services. Since 1994, Maryland's school systems had used the same Medicaid billing rate: $82 for each session of speech therapy, counseling or other services. The federal government reimburses only a portion of the billed $82, often 50 percent, and the state matches the reimbursement.

But while many services cost school systems far more than $82 - a psychological evaluation could cost thousands of dollars - sometimes a service costs less.

Medicaid has indicated that it will reimburse only for actual costs of services. Auditors, reviewing records from 2001 to 2004, determined that the state's billing rate included extra costs associated with educating children beyond the specific cost of their health services. The auditors concluded that Maryland schools overbilled by $32.8 million during the time they reviewed.

During the 2001-2002 school year, they determined, the billing rate should have been only $42.40 per service. In 2002-2003, it should have been $45.23; in 2003-2004, $48.64.

The state's Folkemer argues that the auditors committed a significant mistake when they made those calculations. He said they were counting all financially eligible special education students into the equation - without taking into account whether they received health services in school. Had the auditors based their calculations on the actual - and smaller - number of students, the cost per service would have turned out far higher.

The audit was calculated assuming that there were 110,000 students receiving health services, when the real number is about 60,000. "We don't think we owe anything back," Folkemer said.

A spokesman for the U.S. Department of Health and Human Services' Office of Inspector General, which conducted the audit, declined to respond to the state's contention.

The Office of Inspector General sends its findings to the Centers for Medicare and Medicaid Services, which administers the Medicaid program and will hear the appeal of the audit findings.

A spokeswoman for the Centers for Medicare and Medicaid did not respond to a question asking why it took until now for the federal government to disallow a billing rate that Maryland has been using since 1994.

In January 2006, while the audit was being conducted, the Maryland State Department of Education lowered the amounts it directed school systems to bill for Medicaid services. For example, the billing rate for speech therapy went from $82 to $76 for an individual session and to $67 for a group session.

Then this spring, after receiving the audit findings, the education department lowered the rates further: to $45 per service across the board. In Baltimore, that means the school system will be able to bill only for between $6 million and $8 million of reimbursement next academic year, compared with about $12 million in the year that just ended.

Many states are in the same predicament as Maryland, with school Medicaid audits coming up with similar findings. "There has been a great unhappiness between the national Medicaid folks and education people at state and local levels for quite some time," said Greg Morris, a California attorney who consults on Medicaid programs in schools.

Congress has never fully funded its special education mandates to schools. Responding to complaints about that, it began in the late 1980s allowing schools to apply for Medicaid reimbursement for the health care they provide to poor, special education students.

But because Medicaid is supposed to cover only services where there is a demonstrated medical necessity, and schools are concerned with children's education, not just their health, the two sides have never seen eye to eye, Morris said. Many school advocates seek federal legislation to clarify the billing regulations.

"It is difficult for states to let school districts know how to do this right, and it's difficult for states to know how to do this right," he said, "because there's ... little instruction from the federal government."

sara.neufeld@baltsun.com

Read The Sun education blog at www.baltimoresun.com/classroom.

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