Medicaid in Schools:

Improper Payments Demand Improvements in HCFA Oversight

HEHS/OSI-00-69: Published: Apr 5, 2000. Publicly Released: Apr 5, 2000.

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Pursuant to a congressional request, GAO provided information on states' practices regarding Medicaid reimbursement of school-based administrative activities, focusing on: (1) the extent to which school districts and states claim Medicaid reimbursement for school-based health services and administrative activities; (2) the appropriateness of methods states use to establish bundled rates for school-based health services and to assess the costs of administrative activities that their schools may claim as reimbursable; (3) states' retention of federal Medicaid reimbursement for services provided by schools and schools' practice of paying contingency fees to private firms; and (4) the adequacy of the Health Care Financing Administration's (HCFA) oversight of state practices regarding school-based claims, including safeguards employed to ensure appropriate billing for health services and administrative activities.

GAO noted that: (1) nearly all states reported Medicaid expenditures for school-based activities, which totalled $2.3 billion for the latest year of available state data; (2) the majority of payments--about $1.6 billion--were for health services provided by schools in 45 states and the District of Columbia, and about $712 million was for administrative activities billed by schools in 17 states; (3) three states--Illinois, Michigan, and New York--accounted for over 60 percent of total school-based claims; (4) New York accounted for 44 percent of all health services payments, while Illinois and Michigan together accounted for 74 percent of all administrative activity payments; (5) Medicaid payments to schools ranged from a high of nearly $820 per Medicaid-eligible child in Maryland to less than 5 cents per child in Mississippi, reflecting in part variation in the proportion of states' school districts that submitted claims for Medicaid services and activities; (6) some of the methods used by school districts and states to claim reimbursement for school-based services do not ensure that health services are provided, or that administrative activities are properly identified and reimbursed; (7) bundled rate methods used by school districts to claim Medicaid reimbursement for school-based health services have failed in some cases to take into account variations in service needs among children and have often lacked assurances that services paid for were provided; (8) in two states, monthly payments ranging from $141 to $636 per child were made to schools solely on the basis of at least 1 day's attendance in school, rather than on documentation of any actual service delivery; (9) with regard to administrative activities, poor controls have resulted in improper payments in at least two states, and there are indications that improprieties could be occurring in several other states; (10) Medicaid costs shared by the federal government and the states could fall under one of the two following categories: (a) medical assistance; and (b) administrative duties; (11) each state program's federal and state funding shares of health services payments are determined through a statutory matching formula; (12) this formula results in federal shares that range from 50 to 83 percent, depending on a state's per capita income in relationship to the national average; and (13) over 95 percent of Medicaid's $177 billion in total expenditures in FY 1998 was spent on health services.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: CMS convened a workgroup which developed a prototype bundling methodology. The methodology and the issues surrounding the use of bundling are under review by staff of the new Administration. No additional action has been taken on these policies since the issuance of GAO's report in 2000.

    Recommendation: In order to improve the development and application of policies for Medicaid reimbursement of claims for allowable school-based health services and administrative activities, the Administrator, HCFA, should allow the use of bundled rates as one of several alternative payment approaches, provided that HCFA establishes consistent principles for bundling that effectively address: (1) provisions for rates that reflect or recognize varying levels of services to accommodate children; and (2) assurances that children receive appropriate and needed services.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  2. Status: Closed - Implemented

    Comments: CMS issued a final Guide, "Medicaid School-Based Administrative Claiming Guide," in May 2003, effective for all states on October 2003. This guide outlines methods for performing time studies, addressing the administrative time of skilled professionals, and tightening the definition and application of activity codes--the three major concerns that GAO cited in its report (GAO/HEHS/OSI-00-69).

    Recommendation: In order to improve the development and application of policies for Medicaid reimbursement of claims for allowable school-based health services and administrative activities, the Administrator, HCFA, should develop a methodology to approve and monitor state practices regarding allowable costs for administrative activities in schools that establishes consistent federal requirements for methods of allocating costs to Medicaid and accounting for professionals' time.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  3. Status: Closed - Not Implemented

    Comments: CMS has developed a second State Medicaid Director's letter that specifically identifies the types of transportation eligible for Medicaid reimbursement. The letter is under review by staff of the new Administration. However, the letter has not been signed.

    Recommendation: In order to improve the development and application of policies for Medicaid reimbursement of claims for allowable school-based health services and administrative activities, the Administrator, HCFA, should clarify the agency's policy on specialized transportation, with the goal of establishing policies that offer equitable treatment for children with different types of disabilities.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

 

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