Pursuant to a congressional request, GAO discussed the rise in claims for administrative costs associated with school-based health services, focusing on: (1) trends in Medicaid's spending for administrative costs; (2) the distribution of Medicaid payments for administrative claims to schools and other entities; and (3) the adequacy of federal oversight in approving school districts' claims for reimbursement.

GAO noted that: (1) over the past 4 years, school districts' claims for administrative costs associated with school-based health services have increased fivefold--from $82 million to $469 million--in 10 states for which GAO could readily obtain data; (2) two of these states--Michigan and Illinois--accounted for most of the increases in administrative cost claims over this time period; (3) more school districts and additional states have expressed interest in seeking Medicaid reimbursement for health-related administrative activities in schools, suggesting that claims will continue to rise; (4) the share of Medicaid payments for school-based administrative activities received by the schools--as opposed to other entities--varies by state; (5) at least four states retain a portion of the federal funds obtained, whereas other states return the entire federal share directly to the school districts; (6) school districts often contract with private firms to perform the claims development and reporting activities, and they pay these firms fees ranging from 3 to 25 percent of the total amount of the federal Medicaid reimbursement; (7) in one state GAO visited, some school districts, after the state takes its share and the private firm is paid, receive only $4 of every $10 that the federal government pays to reimburse schools' Medicaid-allowable administrative costs; (8) federal oversight of school districts' claims for administrative expense reimbursements has been weak; (9) Health Care Financing Administration (HCFA) guidance has been insufficient and its reviews of districts' claims activities uneven; (10) as a result, what is submitted by states is approved by some HCFA regional offices as an allowable administrative claim and is denied by others as questionable or unallowable; and (11) these weak controls permit an environment for opportunism in which inappropriate claims could generate excessive Medicaid payments.