October 18, 2000

Schools Fret Over Freeze
In Medicaid

By Jessica Portner
Education Week

Hundreds of school districts are not getting reimbursed for millions of dollars in health services, because federal officials say they have systematically overcharged the Medicaid program intended to serve poor and disabled schoolchildren.

The U.S. Department of Health and Human Services has frozen or flatly denied hefty payments to several states, leaving many schools scrambling for ways to pay for diagnostic exams and nursing services this fall.

"We have health aides, nurses, social workers, and they are providing services now," said Geri Romero-Roybal, an associate superintendent of the 14,000-student Santa Fe , N.M. , district. "But if we don't get full reimbursement from Medicaid, we may not have the budget to cover their salaries."

The federal Health Care Financing Administration, or HCFA, which administers the Medicaid program, decided to withhold the schools' money this fall after a scathing General Accounting Office report earlier in the year claimed that districts and consulting firms had engaged in "creative billing practices" to inflate their federal payments.

In Kansas , for example, the GAO found that some schools had received $476 a month for an autistic child even if the child attended school for a single day in a given month. The congressional watchdog agency also cited an unidentified state that had billed group-therapy sessions as individual therapy for every student who participated, thus multiplying the charges.

"Our concern is that Medicaid funds are being misused," Sen. William V. Roth Jr., R-Del., who requested the GAO investigation, said in a statement last week. "Disabled students may not be getting the services they need and deserve because federal dollars are being inappropriately used to pay consultants' fees or fill holes in state budgets," said Mr. Roth, the chairman of the Senate Finance Committee.

Some 13 million children are enrolled in the federal program that pays for school-based health services for children who come from poor families or have disabilities. Medicaid claims for administrative services delivered at schools increased five-fold between 1995 and 1998. Schools in 47 states received a total of $2.3 billion from Medicaid in the 1999 fiscal year.

Federal law allows schools to charge for a wide array of services, ranging from diagnostic tests and speech therapy to aides who accompany medically fragile students from class to class. To get their money, districts typically submit invoices to state health departments, which then dispatch the claims to HCFA. In turn, the federal agency reimburses the states, and they are then supposed to reimburse school systems.

Hiring Consultants

To turn on that financial tap, districts often retain private consultants to decipher the federal regulations and submit claims on the districts' behalf. Many of those firms charge fees as high as 25 percent of the federal return—an arrangement that gives districts incentives to pad their bills, the GAO said.

Federal officials currently are investigating whether school officials in Michigan colluded with private consulting firms to defraud the federal government out of hundreds of thousands of dollars intended for Medicaid services in schools.

U.S. Department of Justice officials maintain that the Deerfield, Ill. , office of Deloitte Consulting Inc. provided $170,000 in entertainment perks, including meals and tickets to sporting events, to curry favor with school officials responsible for awarding Medicaid contracts. Such inducements would be a violation of federal law. No charges arising from the Michigan probe had been filed as of last week.

HCFA has meanwhile frozen $103 million in Medicaid reimbursements to schools in Michigan for a range of administrative charges related to staffing and other nonmedical services..

Michigan state and Deloitte officials said they would not comment on the details of the allegations while the investigation was ongoing. But Mark Berman, the global director of public relations for Deloitte Consulting in New York , defended his company's fees in general, which school officials say have been as high as 25 percent. "Deloitte provides districts with a valuable, cost- effective service," he said. "We have an excellent track record of helping districts obtain the reimbursements they are entitled to by law."

States Holding Money

In many states, though, schools don't get all the money they are entitled to, according to the GAO report.

Nationally, four of every 10 Medicaid dollars intended for hearing tests, speech therapy, and other school-health services end up in states' coffers, not in school health clinics, according to the GAO. In New Jersey , schools get back as little as $7.50 for every $100 they spend on health care for poor children, the GAO found.

Ed Rogan, a spokesman for the New Jersey Department of Human Services, said that while the federal Medicaid money does flow directly into the state treasury, schools' Medicaid checks are just poured out of a different pot—the education budget. "It's an accounting process," he said. "The bottom line is that districts are getting their money."

All 18 states identified by the GAO as keeping some of the Medicaid dollars generally pay the districts at some point, though through another source. But Carol Yocom, who wrote the GAO report, said that such tangled accounting practices make it hard to verify that schools get what they ask for. Ms. Yocom also expressed concern that when federal payments seem so disconnected from local services, districts may be more likely to cheat the system. Districts, she suggested, may say: " 'If I'm going to provide the service, I'm going to charge more to make sure I get the money from the state back that I need.' "

One frequently used scheme has been for districts to bill for bus transportation even when the students shuttled to and from school are not eligible for Medicaid, said Ms. Yocom, an assistant director in the health-financing division of the GAO.

Complex System

But education leaders contend that school districts are being unfairly branded for the questionable billing practices of a few, and that districts on the whole get stiffed far more often than they steal.

"There have never been claims that fraud has been rampant," said Jeff Simering, the legislative director of the Council of the Great City Schools, a Washington-based organization of big-city districts. "Schools are interested in maximizing the financial side of things, but they are not trying to bilk the system."

The reason many districts employ private consultants in the first place is that the billing system is so bafflingly complex, he added.

In fact, many districts have never bothered with the system. Others bailed out rather than navigate its complexities.

In its report, the GAO chastised HCFA for failing to issue clear guidelines on how the Medicaid dollars should be spent. Federal law allows each state to issue its own Medicaid plan, as any health insurer would, spelling out what services are covered, based on individual states' interpretations of the federal rules. With so much variation, the federal government routinely authorizes services in one state while denying the same service in another.

"There is no clear map here," Ms. Yocom said. "The oversight is weak."

The definition of administrative claims, for example, can get fuzzy.

Without clear direction, districts too often veer away from traditional health-care claims and bill for costly administrative overhead, such as staff salaries, Ms. Yocom said.

Educators, however, say such claims are necessary to enable school administrators to comb through classrooms and identify students who are eligible for free health services.

"Schools are not like an emergency room," said Jeremy Hughes, the superintendent of the 18,000-student Dearborn , Mich. , schools. "Kids don't come to us if they need help; we have to search them out."

Negotiating details of specific charges has been maddening for many state officials as well.

"Very frankly, this has been a frustrating situation. For over five years, we have been asking HCFA for guidance and never received any," said Geralyn Lasher, a spokeswoman for the Michigan Department of Community Health, which is trying to win back the state's $103 million in disputed Medicaid payments.

HCFA officials earlier this month said they were writing a new guide to be published in January to help schools better understand how to submit claims for Medicaid-financed services.

"We are working on a comprehensive guide to help standardize the process to avoid confusion," said Mary Cahn, a HCFA spokeswoman.

But Julia Lear argues that the Medicaid system is complex by design. Ms. Lear, the director of Making the Grade, a Washington-based policy group that promotes school-based health services, said the federal government has made Medicaid complicated to discourage billing that would drive up the costs of an already massive program that some Republican lawmakers want to see scaled down.

"If districts are uncertain about what they can bill for, they don't bill," Ms. Lear said. "The [federal government] made it hard for schools, and it wasn't an accident," she charged.

Tackling Administration

A few enterprising school systems, meanwhile, have eschewed consultants and mastered the complicated regulations with in-house know-how.

The 106,000-student Baltimore district, for example, generated $25 million last year in Medicaid reimbursements without any outside help and is considered a model for other districts.

"Some [outside] consultants charge exorbitant fees for work my 14-year-old can do," said Lin Leslie, the head of Baltimore's Medicaid-billing system.

Minnesota officials streamlined their state Medicaid plan and gave schools the go-ahead in July to start billing for Medicaid services again, after withdrawing from the program in the late 1980s.

"If we can make this workable, why wouldn't we want to access this revenue?" said Robert J. Wedl, the director of special education services for the 46,000-student Minneapolis public schools. He estimates his district loses out on $10 million every year it doesn't bill for Medicaid-covered costs.

Many poor, small, and rural districts with large numbers of impoverished or disabled children—the very children the program was designed to serve—are the ones that most often cannot afford an extra staff person to weed through complex billing procedures, much less hire independent consultants.

The technology alone is prohibitively expensive for some school systems. Though it uses consultants, the 431,000-student Chicago district had to purchase 1,500 laptop computers for its school clinicians just to gather the initial data for claims.

Lately, with the federal investigations creating a chilling effect on services, needy districts have even less incentive now to jump into the fray, school groups say.

"What it comes down to for small, poor districts," said Gordon Wrobel, the health-care coordinator for the National Association of School Psychologists, "is that reimbursement doesn't warrant the amount you'd spend trying to obtain it."

State health officials continued to lobby HCFA last week to unlock some of the Medicaid funds, and the Council of the Great City Schools plans to convene a group of educators to discuss the quandary next month.

Last week, Ms. Romero-Roybal of Santa Fe said that she may soon be forced to reduce the number of health aides and nurses who provide medical assistance to poor and disabled children, if the district doesn't receive the $70,000 she says it is owed. "We feel we made those claims in good faith," she said, "and they should be honored."

On the Web

Read the GAO report, "Medicaid in Schools: Poor Oversight and Improper Payments Compromise Potential Benefit," April 2000, and a follow-up report, "Medicaid: State Financing Schemes Again Drive Up Federal Payments," September 2000. (Both reports require Adobe's Acrobat Reader.)

The Health Care Financing Administration offers a "Technical Assistance Guide on Medicaid and School Health."

George Washington University's Graduate School of Education and Human Development offers "Health and Health Care in Schools," a report on policies of health programming in schools.

© 2000 Editorial Projects in Education Vol. 20, number 07, page 1,12-13