HHS ISSUES FINAL RULES TO PROTECT MEDICAID FROM IMPROPER PAYMENTS FOR SCHOOL-BASED CLAIMING

HHS ISSUES FINAL RULES TO PROTECT MEDICAID

FROM IMPROPER PAYMENTS FOR SCHOOL-BASED CLAIMING

 

Background

 

The federal government has had long-standing concerns about improper billing by school districts for administrative costs and transportation services under the shared federal/state Medicaid program.  Both the HHS Inspector General (OIG) and the Government Accountability Office (GAO) have identified these categories of expenses as susceptible to fraud, waste, and abuse. 

 

In some states, schools have claimed more federal dollars for administrative costs than for the services themselves.  Most states bill Medicaid for relatively low costs associated with school-based administration, and some states do not bill Medicaid at all for such expenditures.  But some schools have been found to bill Medicaid for capital costs, transportation of children to and from school even when the child received no medical services; and in some instances it was found that school officials’ salaries and fringe benefits were counted twice; in some cases the costs for food paid by other sources were also billed to Medicaid.

 

After reviewing the claiming procedures used to generate these claims, CMS determined that school-based administration activities and transportation from home to school were not performed for the benefit of the Medical program, but were performed as part of the school’s educational functions. As a result, CMS proposed to eliminate Medicaid payment for the costs of school-based administration and transportation from home to school.

 

Provisions of Final Rule

 

To protect the fiscal integrity of the Medicaid program and its ability to assure coverage and access to care for children and other beneficiaries, the Centers for Medicare & Medicaid Services (CMS) has issued a final regulation aimed at eliminating such fraud, waste and abuse. 

 

The final rule, published in the December 28, 2007 Federal Register, was issued after the proposed rule underwent a 60-day public comment period which closed on November 6, 2007.

 

In the final regulation, CMS maintained the proposed prohibition on federal Medicaid reimbursement for administrative activities performed by school employees or contractors, and for transportation of students from home to school. However, under recently passed legislation, there will be a six-month delay in implementing these changes so school budgets in the 2007-2008 school year will not be affected.

 

The final rule, however, does not affect federal Medicaid reimbursement for direct medical services provided by schools for children on Medicaid such as physical therapy, speech therapy or transportation to medical services during the school day.

 

To view the regulation, visit the CMS web site at

http://www.cms.hhs.gov/MedicaidGenInfo/Downloads/CMS2287F.pdf

 

 

History of Problems

 

Some examples of inappropriate claiming for school-based administrative expenditures and costs related to transportation of school-age children between home and school are drawn from various OIG and GAO reports:

 

School-Based Administration

 

• In December 2006, the HHS Office of Inspector General (OIG) recommended a state return $5.8 million in federal funds out of $12.5 million claimed (46 percent) for administrative costs.  Unallowable costs included expenditures for capital, debt service, activities already fully reimbursed by sources other than Medicaid, and costs that were not related to Medicaid school-based administration.

 

• In September 2006, the HHS OIG recommended a state return $9.7 million out of $13 million claimed (72 percent) for administrative costs.  Among other things, school districts had inappropriately included adults in their proportional Medicaid share ratios that were to represent children only.

 

• In January 2006, the HHS OIG found that “at least $2.4 million” was unallowable for one school district in a state because the school had allocated costs to Medicaid for school employees who did not perform Medicaid administrative activities, expenditures for which the district did not provide support, and education-related expenditures.  The OIG also found the school district did not maintain activity logs, included inappropriate personnel, and did not offset administrative costs that had been received under School Health and Related Services.  In interviews of time study participants, 14 of 69 reported they did not participate in any Medicaid work.  Fifty-two percent of the time studies showed that 90 to 100 percent of the participants’ time was spent performing general administrative duties.

 

IDEA-Related Transportation

 

• In April 2003, the OIG identified $1,223,426 as the fiscal impact of unallowable transportation services made to special service school districts under the State’s Medicaid program.  The OIG concluded that improper payments were primarily caused by a lack of effective administrative or prepayment controls to prevent special service school districts from being reimbursed for transportation services. 

 

• In August 2004, the OIG found that 97 of 110 transportation claims made on behalf of 695 school and preschool providers in another State were not in compliance with Federal and State requirements beginning in 1993 and ending in 2001.  As a result, the OIG estimated that $17.2 million in Federal Medicaid funding was unallowable.

 

• In September 2005, the OIG also reviewed whether Federal Medicaid payments for transportation services claimed by a City’s Department of Education were in compliance with Federal and State requirements.  The OIG found that none of the 120 transportation claims in their sample complied with all Federal and State requirements.  Based on OIG’s sample, they estimated that $96,110,877 in Federal Medicaid funding was unallowable.