Chairman Roth, Senator Moynihan, distinguished Committee members, thank you for
inviting us to discuss Medicaid funding for school-based services. I want to emphasize the
important role school-based services play in assuring that children receive needed health
care. School-based programs can also play a powerful role in identifying and enrolling
children who are eligible for Medicaid, as well as the new State Children's Health Insurance Programs. We strongly support
Medicaid funding for school-based health services to children enrolled in Medicaid.
I have had the privilege of working closely with your Committee to understand the
recent growth of Medicaid reimbursement in the schools. We recently sponsored a site visit
for key Committee staff to see first hand the essential role school-based services play in
ensuring that Medicaid-eligible children receive needed care while minimizing disruption
to the education process.
However, your Committee, our staff, and now the General Accounting Office have
identified serious concerns with Medicaid payments for school-based care in a handful of
States. These include:
- "bundled" payment for groups of
services to disabled children without documentation of the actual delivery of services or
their costs;
- billing for transportation costs that Medicaid does not cover; and
- billing for administrative activities that Medicaid does not cover.
We believe we must act now to clarify issues, eliminate any inappropriate practices
that exist, and protect the integrity of Medicaid funding for school-based services. We,
therefore, sent State Medicaid Directors a letter May 21, 1999 that modifies and clarifies
policy in these areas. Specifically:
- we will no longer approve federal Medicaid matching funds for bundled payments for
school-based services;
- we will only pay transportation costs for children with special transportation needs;
and
- we will issue guidance this Summer on Medicaid covered administrative costs.
We also will continue to work with Congress and the States to ensure that school-based
services covered by Medicaid are billed appropriately and provided efficiently and
effectively.
BACKGROUND
Many school-based health programs provide a broad range of services that are covered by
Medicaid, affording access to care for children who otherwise might well go without needed
services. And, as mentioned above, school-based programs also can play a powerful role in
identifying and enrolling children who are eligible for Medicaid, as well as the new State
Children's Health Insurance Programs. For
Medicaid to cover school-based services, they must be primarily medical and not
educational in nature. They must be provided by a qualified Medicaid provider to children
in families that meet Medicaid income eligibility requirements. And they must be
considered medically necessary for the child. The services can include:
- routine and preventive screenings and examinations;
- diagnosis and treatment of acute, uncomplicated problems;
- monitoring and treatment of chronic medical conditions; and
- provision of medical services to children with special needs under the Individuals with
Disabilities Education Act.
Medicaid funding for school-based services was limited to coverage for routine
screenings and treatment of acute, uncomplicated problems until 1988. Then Medicaid's role in supporting school-based health care was
greatly expanded under the Medicare Catastrophic Coverage Act. It stipulates that Medicaid
-- not the Department of Education -- pays for medical services provided to
Medicaid-eligible children with special health care needs. Each child must have an
Individualized Education Plan, in accordance with the Individuals with Disabilities
Education Act, in order for Medicaid to pay for their school-based care.
There has been a surge of State interest in Medicaid reimbursement for school-based
health services, mostly for Medicaid-eligible children with special needs under the
Individuals with Disabilities Education Act. We have encouraged this because of the
potential for school-based services to support "mainstreaming"children with disabilities into regular schools
while continuing to ensure that they get the care they need.
As mentioned above, however, three major areas of concern have begun to emerge. We
strongly believe we must address these issues now to make sure that taxpayer funds are
spent appropriately, to protect the integrity of school-based health care programs, and to
ensure that the potential of school-based services to maximize opportunities for children
with disabilities is not compromised.
Bundling
Bundled payment for school-based services creates a real potential for Medicaid to pay
too much or to pay for care which has not been provided. We have, therefore, told States
in a May 21, 1999 letter that we will stop providing federal Medicaid matching funds for
bundled payments.
Several Medicaid programs have been paying for school-based services with a bundled
rate. This means that States make weekly or monthly payments to schools based on a package
of services that are needed by children within various categories of disabilities, rather
than paying separately for each individual service. Many services may be included in the
bundled rate, such as physical therapy, speech therapy, and vision services. The cost for
the bundled rate is based on the average historical cost of services for children in each
disability category. The payment is the same regardless of the number of services actually
furnished or the specific costs of services involved.
However, in most States that make bundled payments to schools, school-based providers
are not maintaining adequate documentation for bundled payments. In fact, most do not have
the administrative structure for maintaining such documentation. Also, State Medicaid
agencies are not conducting periodic reviews to reconcile claims to services delivered and
plan approved costs. Without proper documentation of services included in bundled rates,
there is no reliable basis for determining whether the needed service was delivered at a
reasonable rate. This creates the potential for States to obtain Federal matching funds
for care which has not been provided.
That is why our May 21, 1999 letter to State Medicaid Directors made clear that we will
no longer recognize bundled rates for school-based health services. States that currently
pay bundled rates for school-based services must develop and prospectively implement an
alternative reimbursement methodology. We will meet with a workgroup of States, the
Department of Education, and other interested parties to discuss ways to pay for
school-based services that provide full accountability and administrative efficiency. In
the meantime, our regional offices also will actively work with States to assist in the
development and implementation of non-bundled rates.
We recognize that changing payment methods may require authorization or action by the
legislature in some States, and that the work may have to compete with State efforts to
make information systems Year 2000 compliant. We will not ask States that have been using
bundled rates to give back federal matching funds for school-based payments made before
our May 21 letter. However, we expect States to make necessary changes within a reasonable
time frame. If they do not, we will take appropriate enforcement actions allowed under the
law.
Transportation
Some school-based health care programs have inappropriately billed Medicaid for
transportation costs that are not related to medical care. Medicaid covers the cost of
transportation to and from school for children with specialized transportation needs
identified in their Individualized Education Plan on days when they receive a medical
service in school. In addition, if a child with special health care needs requires
specialized transportation to and from school for a medical service but lives in an area
that does not have routine school bus service, that transportation also may be billed to
Medicaid.
In all situations, Medicaid funding is reserved for specialized transportation to
school on a day when a child is receiving a medical service. However, several States have
been claiming federal Medicaid matching funds for transportation costs not covered by this
policy.
Therefore, our May 21 letter to State Medicaid Directors says explicitly that children
who ride the regular school bus to school with other non-disabled children in the
neighborhood should not have transportation listed in their Individualized Education Plan,
and the cost of that bus ride should not be billed to Medicaid.
The letter also makes clear that:
- States must describe the methodology used to establish the transportation rate in the
State's Medicaid plan;
- States must require documentation of each transportation service, usually in the form of
a trip log maintained by the provider of the specialized transportation service, when
claiming these costs as a direct service; and
- States must develop a cost allocation methodology to ensure that Medicaid only pays for
transportation-related administrative costs attributable to Medicaid beneficiaries when
claiming these costs as an administrative service.
Our regional offices also will provide technical assistance to help States in properly
claiming Federal matching dollars for Medicaid-covered school-related transportation
costs.
Administrative Claiming
Some school-based health programs may have billed Medicaid for administrative expenses
that Medicaid does not cover. Medicaid covers administrative expenses incurred by schools
in providing Medicaid services, such as outreach and case management. However, we again
have identified important concerns about how these expenses are being accounted for and
claimed. Specifically:
- some school-based providers are not adequately documenting Medicaid administrative
claims;
- some school-based providers are including administrative activities related to services
that Medicaid does not cover or for services to children who are not eligible for
Medicaid; and
- some school-based providers may have claimed the same administrative costs twice by
including activities that have already been paid for as part of the Medicaid service
itself or by the State or local school district under the Individuals with Disabilities
Education Act.
We are working diligently with States to foster a better understanding of when
school-based administrative activities are eligible for Medicaid coverage. We plan to
issue a written guide related to the requirements for school-based administrative
activities this Summer.
CONCLUSION
We are committed to supporting school-based health care services and promoting their
potential to afford access to children who otherwise might go without needed care. We
must, however, make sure that Medicaid payments for school-based services are appropriate.
Thanks to the support and cooperation we have received from this Committee, we have
identified and are addressing the concerns that have emerged. Our joint work on this issue
is an example of how the Administration and Congress can work together to identify a
potential problem, develop an understanding of the practice, and establish sound policy to
protect the long-term interests of both taxpayers and beneficiaries.
We will, of course, continue to closely monitor the situation. However, the actions we
are taking should halt inappropriate billing and protect the integrity Medicaid funding
for school-based health care. I thank you for holding this hearing, and I am happy to
answer your questions.