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The Ickes & Enright Group
Suite 600
Phone: 202-887-6726
1300 Connecticut Ave., N.W.
Fax: 202-223-0358
Washington, D.C. 20036-1703
[email protected]
31AUGUST 2000
MEMORANDUM TO
CHRIS JENNINGS
FROM
JANICE ENRIGHT
RE
REVISED DRAFT GUIDELINES FOR
MEDICAID'S ADMINISTRATIVE
OUTREACH CLAIMING PROGRAM
Chris, as discussed, enclosed is a revised, "red lined", copy of the draft guidelines.
These guidelines reflect changes as a result of the various school-based associations'
comments.
Since today's meeting did not go forward, our hope is that you will be able to use
this revised draft, as a vehicle to work from, combined with whatever work product
HCFA and others are developing.
In addition, since there is a fair amount of discussion going on among government
representatives, and others, perhaps you would be willing to set aside some time to have a
conference call, prior to the rescheduling of today's meeting, to brief you on how this
draft guide has worked through the process, and, for the most part, garnered the support
of many, to, at least for the purposes of moving the process, be a reasonable document to
work from.
Please let me know if that is a possibility, and we can discuss a possible time to
arrange such a call.
Sent by hand
http://frwebgate.access.gpo.gov/cg.txt&directory=/diskb/wais/data/gao
Medicaid in Schools: Improper Payments Demand Improvements in HCFA
Oversight (Letter Report, 04/05/2000, GAO/HEHS/OSI-00-69).
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 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 $4820 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 soley 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.
Indexing Terms
REPORTNUM:
HEHS/OSI-00-69
TITLE:
Medicaid in Schools: Improper Payments Demand Improvements
in HCFA Oversight
DATE:
04/05/2000
SUBJECT:
Children
Allowable costs
Program abuses
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Health insurance
School health services
Administrative costs
State-administered programs
Cost sharing (finance)
School districts
Internal controls
IDENTIFIER:
Medicaid Program
Illinois
Massachusetts
Michigan
Early and Periodic Screening, Diagnosis, and Treatment
Program
HHS Individuals With Disabilities Education Act Program
New York
** This file contains an ASCII representation of the text of a
**
**
GAO Testimony.
**
No attempt has been made to display graphic images, although
**
**
figure captions are reproduced. Tables are included, but
**
may not resemble those in the printed version.
**
** Please see the PDF (Portable Document Format) file, when
**
available, for a complete electronic file of the printed
** document's contents.
GAO/HEHS/OSI-00-69
Appendix I: Health Care Financing Administration Letter
Dated May 21, 1999
46
Appendix II: Comments From the Health Care Financing
Administration
50
Appendix III: GAO Contacts and Staff Acknowledgments
57
Table 1: States' Annual School-Based Claims, Ranked by Average
Claim per Medicaid-Eligible Child Aged 6 to 20 14
Table 2: Positions on Reimbursement for Medicaid School-Based Administrative
Activities of Those States That Do Not
Currently Pay Claims 19
Table 3: States' Medicaid School-Based Administrative Claims as a Percentage
of Total Medicaid Administrative Expenditures 20
Table 4: Incentives Affecting Volume and Cost of Services, by
Payment Approach 23
Table 5: Approaches to School-Based Payments in Seven States
Using Bundled Rates 24
Table 6: Amount and Percentage of Federal Medicaid
Reimbursement for Health Services and Administrative
Activities Retained by States 32
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Table 7: Variations in Schools' Receipt of Medicaid Reimbursement
for Health Services 36
Figure 1: States Reporting Medicaid Claims for School-Based
Services, December 1999 13
Figure 2: Medicaid School-Based Administrative Claims for 10
States, Fiscal Years 1995-98 18
EPSDT Early and Periodic Screening, Diagnostic, and Treatment
HCFA Health Care Financing Administration
IDEA Individuals With Disabilities Education Act
OMB Office of Management and Budget
OSI Office of Special Investigations
SPMP skilled professional medical provider
Health, Education, and
Human Services Division
B-283378
April 5, 2000
The Honorable William V. Roth, Jr.
Chairman
The Honorable Daniel Patrick Moynihan
Ranking Minority Member
Committee on Finance
United States Senate
Schools can be appropriate locations in which to identify low-income
children who are eligible for Medicaid, assist them to enroll, and provide
them Medicaid-covered services. Under Medicaid, a joint federal-state
program that spent about $177 billion in fiscal year 1998, the federal
government pays a share of costs incurred by the states in providing health
care to 41 million low-income beneficiaries, including 13 million
school-aged children. States may use their Medicaid programs to pay for
certain health services provided to eligible children by schools, including
diagnostic screening and ongoing treatment, such as physical therapy. States
may also obtain reimbursement from the federal government for the costs of
administrative activities associated with providing Medicaid services in
schools, such as conducting outreach activities to assist with enrolling
children in Medicaid; providing eligibility determination assistance,
program information, and referrals; and coordinating and monitoring
Medicaid-covered health services.
In June 1999, we testified before your Committee about multimillion-dollar
increases in Medicaid reimbursements for administrative activities in
schools in 10 states and the need for more federal and state oversight of
these growing expenditures. 1 In particular, we found that weak and
inconsistent controls over the review and approval of claims for
school-based administrative activities created an environment in which
inappropriate claims could generate excessive Medicaid reimbursements. We
also found that some school districts receive only $4 of every $10 that the
federal government pays to reimburse them for Medicaid-allowable
administrative costs, after the state takes a share of the federal payment
and private firms are paid. Private firms are often engaged by school
districts to design the methods used to claim Medicaid reimbursement, train
school personnel to apply these methods, and submit the claims to state
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Medicaid agencies to obtain federal reimbursement.
Since our initial review was limited to administrative cost claims, you
requested that we expand our analysis of state practices regarding Medicaid
reimbursement of school-based administrative activities and address as well
the use of "bundled" rates for school-based services. Bundled rates are
single payments for a package of various services that eligible special
education children may need over a specified period of time; a fixed amount
is paid per child on the basis of the services the child is expected to
require, not on the basis of the services the child actually receives. This
report addresses (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.
To examine these issues, we surveyed the 50 states and the District of
Columbia, focusing on their Medicaid policies and practices related to
school-based health services and administrative activities. We visited six
states in various regions of the country--Florida, Illinois, Massachusetts,
Michigan, New Jersey, and Vermont--that allow schools to bill Medicaid for
providing health services and carrying out administrative activities and
that represent a mixture of methodologies for submitting claims for
administrative activities, transportation to and from services, and bundled
rate payments. 2 We also interviewed officials in 7 of HCFA's 10 regional
offices, the 17 states that allow claims for Medicaid-related administrative
activities, and the 8 states and the District of Columbia that HCFA
identified as using bundled rate payments for health services. In addition,
our Office of Special Investigations (OSI) began ongoing investigative work
in July 1999 to determine whether fraudulent or abusive practices are
occurring. OSI conducts its investigations in accordance with the standards
of the President's Council on Integrity and Efficiency. We performed our
work between July 1999 and March 2000 in accordance with generally accepted
government auditing standards.
Nearly all states reported Medicaid expenditures for school-based
activities, which totaled $2.3 billion for the latest year of available
state data. 3 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. Three states--Illinois, Michigan, and New York--accounted for over
60 percent of total school-based claims. 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. 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.
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. 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. 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. With regard to administrative
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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. Examples follow.
The HCFA Chicago regional office questioned $30 million in administrative
claims submitted by the state of Michigan for the quarter ending September
1998 for school activities that were not related to Medicaid. Among other
issues, school staff interviewed by HCFA revealed that activities they
performed that were related to general health screenings, family
communications, or staff-related training had no Medicaid component or
benefit, although a portion of their staff time was claimed and reimbursed
as such. The HCFA regional office deferred Michigan's claim for $33 million
in federal payment for the quarter ending September 1999, asking again that
the state better document that school-based claims for administrative
activities were clearly linked to Medicaid.
Our investigation and HCFA scrutiny of claims have also found that
Michigan and Illinois claimed reimbursement for services such as health
evaluations performed for the benefit of non-Medicaid-eligible children. The
resulting improper payments for non-Medicaid-eligible children accounted for
$12.5 million of the $56 million in federal reimbursement that was reviewed
in Michigan for the quarter ending September 1998 and $7.7 million in
Illinois for the quarter ending March 1999. Our investigation in Michigan
identified approximately $28 million in improper federal reimbursement for 2
years.
In some states, funding arrangements among schools, states, and private
firms can create adverse incentives for program oversight and cause schools
to receive a small portion--as little as $7.50 for every $100 in Medicaid
claims--of Medicaid reimbursement for school-based claims. We found that 18
states retained a total of $324 million, or 34 percent, of federal funds
intended to reimburse schools for their Medicaid-related costs; for 7 of
these states, this amounted to 50 to 85 percent of federal Medicaid
reimbursement for school-based claims. In addition, contingency fees, which
some school districts pay to private firms for their assistance in preparing
and submitting Medicaid claims, ranged from 3 to 25 percent of the federal
Medicaid reimbursement, further reducing the net amount that schools
receive. While school districts can--and do--pay private firms for
assistance with Medicaid claims, these fees are not allowable for federal
reimbursement. Yet, our investigation determined that in one state a school
district inappropriately included contingency fees on a Medicaid
administrative cost claim.
Finally, HCFA's overall weak direction and oversight have contributed to the
problems we identified. Although at least one HCFA regional office has
identified cases of improper payments, to date no consistent attempt has
been made to determine how pervasive these practices may be in other regions
and states or to halt them as quickly as possible. Moreover, problems we
identified in last June's testimony--ambiguous policies and inconsistent
oversight--continue and, in fact, have been exacerbated. For example, HCFA's
attempt to clarify transportation policies for school-based services has
been interpreted differently among regional offices, resulting in
inequitable treatment of school district claims for special transportation
needs. Recognizing that schools can be effective sites in which to identify
low-income children eligible for Medicaid, assist them to enroll, and
provide them Medicaid services, we are making recommendations to the
Administrator of HCFA that are aimed at improving the development and
consistent application of clear policies and appropriate oversight for
school-based Medicaid services. Additionally, we are referring evidence of
certain improprieties and other matters to the cognizant U.S. Attorney's
Offices for appropriate action.
Medicaid is a joint federal-state program that in fiscal year 1998 spent
about $177 billion to finance health coverage for 41 million low-income
individuals, 13 million of whom are school-aged children. States operate
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their programs within broad federal requirements and can elect to cover a
range of optional populations and benefits. As a result, Medicaid
essentially operates as 56 separate programs: 1 in each of the 50 states,
the District of Columbia, Puerto Rico, and the U.S. territories. Medicaid is
an entitlement program under which the states and the federal government are
obligated to pay for all covered services provided to an eligible
individual.
Medicaid costs shared by the federal government and the states fall under
one of the following two categories: medical assistance (called "health
services" in this report) and administrative activities. Each state
program's federal and state funding shares of health services payments are
determined through a statutory matching formula. 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. For administrative
activities claims, the federal share varies by the type of costs incurred.
Most administrative expenditures are shared equally between the federal
government and the individual state. However, certain administrative
expenditures are eligible for higher federal matching funds. 4 Over 95
percent of Medicaid's $177 billion in total expenditures in fiscal year 1998
was spent on health services.
Schools can help identify eligible low-income children, assist them to
enroll, and provide them Medicaid-covered services, and states are
authorized to use their Medicaid programs to help pay for certain health
care services delivered to these children in schools. In addition, Medicaid
is authorized to cover health services provided to children under the
Individuals With Disabilities Education Act (IDEA) .5
Children who qualify for IDEA have access to a wide array of services, and
Medicaid may cover the costs of health-related services provided to eligible
children. In particular, IDEA obligates schools to provide the "related
services" that are required to help a child with a disability benefit from
special education, including transportation, speech-language pathology, and
physical and occupational therapy. Because many services required by the
individualized plan developed to address the specific needs of a child with
a disability are health-related, Medicaid is an attractive option for
funding many IDEA services. Children who qualify for IDEA are frequently
eligible for Medicaid services, and although Medicaid is generally the payer
of last resort for health care services, it is required to pay for
IDEA-related medically necessary services for Medicaid-eligible children
before IDEA funds are used.
IDEA requires that states have in effect policies and procedures to ensure
the identification, location, and evaluation of all children with
disabilities who are in need of special education and related services, a
concept termed "child find. Some activities under Medicaid, such as
outreach in support of Medicaid's Early and Periodic Screening, Diagnostic,
and Treatment (EPSDT) benefit, can be coordinated with IDEA activities.6
While related, these two programs still have distinguishing goals: IDEA's
child-find activities are focused on identifying and meeting the educational
needs of children with disabilities, while EPSDT outreach is directed at
informing children who are potentially eligible for Medicaid about benefits
available under the EPSDT program and facilitating the Medicaid application
process.
School-Based Health Services
Commonly provided school-based health services that qualify for Medicaid
reimbursement include physical, occupational, and speech therapy as well as
diagnostic, preventive, and rehabilitative services. Schools that submit
claims to their state Medicaid agency for reimbursement for health services
must meet Medicaid provider qualifications established by their state and
must have a provider agreement with the state Medicaid agency. 7
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In addition, states must develop a methodology for determining payment rates
for school-based health services. Payment rates are established by the state
Medicaid agency, described in a state plan, and approved by HCFA. Although
states have broad discretion in establishing payment rates, they must be
reasonable and sufficient to ensure the provision of quality services and
access to care. Within these general payment principles, however,
considerable variation can exist. For example, states may set a payment rate
for each individual service provided or base Medicaid reimbursement on the
actual costs providers incur in supplying services.
Until recently, states have been allowed to develop methods to bundle
payments for a specified group of services. However, in a May 21, 1999,
letter to state Medicaid directors, HCFA prohibited states' use of this
approach because HCFA had concluded that bundled rate methodologies do not
produce sufficient documentation of accurate and reasonable payments. HCFA
informed states that it would not be considering further proposals by states
to use a bundled rate payment system. HCFA directed states with bundled
rates to develop and prospectively implement an alternate reimbursement
methodology. HCFA expected states to come into compliance with its May 21,
1999, letter within a reasonable time frame and stated it would consider
taking action if this did not occur. While HCFA expects to issue further
clarification on bundled rates some time this year, states with previously
approved bundled rates continue to use them.
School-Based Administrative Activities
Schools may also receive reimbursement for the costs of performing
administrative activities related to Medicaid. Administrative activities
performed by school districts and schools may include Medicaid outreach,
application assistance, and coordination and monitoring of health services.
Unlike the requirements for health services claims, a school does not need
to become a qualified Medicaid provider to submit administrative activity
claims. However, there must be (1) either an interagency agreement or a
contract that defines the relationship between the state Medicaid agency and
other parties and (2) an acceptable reimbursement methodology for
calculating payments for administrative activities.
Cost allocation plans are expected to be supported by a system that has the
capability to properly identify and isolate the costs that are directly
related to the support of the Medicaid program. States must also abide by
the cost allocation principles described in Office of Management and Budget
(OMB) Circular A-87, which requires, among other things, that costs be
"necessary and reasonable" and "allocable" to the Medicaid program. 8
Services
In August 1997, HCFA issued a technical assistance guide for Medicaid claims
for school-based services. 9 This guide provides general information and
guidelines regarding the specific Medicaid requirements associated with
federal reimbursement for the costs of school health services and
administrative activities. HCFA requires states to provide and maintain
appropriate documentation and assurances that claims for administrative
activities do not duplicate other claims or payments.
HCFA's May 21, 1999, letter to state Medicaid directors, in addition to
prohibiting bundling payments, attempted to clarify HCFA's policy on
transportation and stated that HCFA was in the process of updating its
guiding principles related to claims for school-based administrative
activities costs. (See app. I for the full text of the May 21, 1999,
letter.) In February 2000, HCFA released for public comment a draft of its
revised technical assistance guide on submitting school-based administrative
activity claims. 10
Practices; Expenditures Continue to Grow
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While nearly all the states had Medicaid expenditures for school-based
activities, the extent of participation varied widely, with the volume of
Medicaid administrative expenditures having grown significantly in recent
years. Total Medicaid claims for the most recent year of available state
data range from $8,000 in Mississippi to $682 million in New York; average
claims per Medicaid-eligible child range from less than 5 cents in
Mississippi to nearly $820 in Maryland. This variation can be partially
explained by the proportion of school districts within a state that choose
to file claims. Recent payments for school-based administrative activities
reflect the growing number of school districts making claims for Medicaid
reimbursement for these activities. Moreover, in addition to the 17 states
that currently allow their schools to bill Medicaid for school-based
administrative activities, 12 states have indicated that they may do so in
the future. As a percentage of total Medicaid administrative expenses,
payments for school-based administrative activities range from less than 1
percent in 1 of the 17 states allowing such claims to over 45 percent in
Michigan and Illinois.
While nearly all states allow schools to submit claims to their state
Medicaid agencies for school-based health services, administrative
activities, or both, the extent to which school districts choose to do so
varies. Our survey of the 50 states and the District of Columbia found that
schools in 47 states and the District of Columbia obtain Medicaid payment
for school-based health services, administrative activities, or both. While
15 states allow claims for both health services and administrative
activities, 30 states and the District of Columbia allow Medicaid payment
for health services only. Two states--Alaska and Arizona--limit their
school-based Medicaid payments to administrative activities, and schools in
three states--Hawaii, Tennessee, and Wyoming--do not claim Medicaid
reimbursement for either type of school-based service. (See fig. 1.)
Figure 1: States Reporting Medicaid Claims for School-Based Services,
December 1999
Source: GAO survey of states.
States also vary substantially in the amount of their Medicaid payments for
school-based activities. Medicaid payments to schools ranged from less than
5 cents per Medicaid-eligible child in Mississippi to nearly $820 per child
in Maryland. Three states--Illinois, Michigan, and New York--accounted for
over 60 percent of total school-based claims. New York comprised 44 percent
of all health services payments, while Illinois and Michigan accounted for
74 percent of all administrative activity payments. (See table 1.) Among the
45 states and the District of Columbia that provide Medicaid reimbursement
for school-based health services, such claims have been allowed for periods
ranging from 2 to 28 years. For the 17 states that provide Medicaid
reimbursement for school-based administrative activities, such claims have
been allowed for between 1 and 8 years.
Table 1: States' Annual School-Based Claims, Ranked by Average Claim per
Medicaid-Eligible Child Aged 6 to 20
Continued
Average claim per
School-based claims (in thousands)
State
Medicaid-eligible
Total
Health
Administrative
child
claims
claims
claims
Maryland
$818
$93,824
$93,824
a
New York
703
682,000
682,000
a
Illinois
674
385,633
82,946
$302,687
Michigan
674
317,701
93,534
224,167
New Hampshire
658
24,894
24,894
a
Rhode Island
600
27,482
27,482
a
Delaware
394
13,900
13,900
a
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Maine
350
22,000
22,000
a
Vermont
309
12,798
11,041
1,757
Kansas
291
25,741
25,741
a
Massachusettsb
284
65,250
45,750
19,500
Alaska
265
7,780
a
7,780
District of
Columbia
265
12,100
12,100
a
Wisconsinc
249
45,904
44,312
1,591
New Jersey
248
66,328
60,671
5,657
Connecticut
174
22,216
22,216
a
Pennsylvania
121
68,507
54,555
13,952
Arizona
115
25,795
a
25,795
Utah
114
7,279
7,279
a
Minnesota
105
23,766
271
23,495
Texas
88
78,030
66,368
11,662
Washington
87
30,367
11,973
18,394
Oregon
85
12,441
12,441
a
South Carolina
79
14,247
14,247
a
New Mexico
72
10,348
5,439
4,909
Ohio
66
31,953
31,953
a
Florida
59
41,518
3,067
38,451
Nebraska
58
3,916
3,916
a
Missouri
55
15,381
4,277
11,104
Iowa
52
5,255
4,171
1,084
Nevada
48
1,900
1,900
a
Arkansas
45
5,428
5,428
a
Coloradod
44
4,885
4,885
a
North Dakota
41
826
826
a
South Dakota
31
906
906
a
Montana
29
892
892
a
Louisiana
26
6,269
6,269
a
West Virginia
24
3,044
3,044
a
Georgia
21
9,167
9,167
a
Idahod
20
781
781
a
California
19
42,308
42,020
288
Oklahoma
10
1,311
1,311
a
Kentucky
6
1,228
1,228
a
Virginia
5
1,201
1,201
a
North Carolina
2
722
722
a
Alabama
1
132
132
a
Indiana
e
60
60
a
Mississippi
e
8
8
a
Hawaii
a
a
a
a
Tennessee
a
a
a
a
Wyoming
a
a
a
a
Total
$2,275,423
$1,563,150
$712,273
Note: States provided school-based claims data for the most recent fiscal
year for which they were available, which for approximately half the states
was state fiscal year 1999. Most of the remaining states provided data for
state fiscal year 1998, federal fiscal year 1998, or calendar year 1998;
three states provided data for periods before July 1997. The average claim
per Medicaid-eligible child was calculated by dividing the total
school-based claims by the number of school-aged Medicaid-eligible children.
aThis state did not report school-based claims in this category.
bMassachusetts provided 6 months of administrative claims data, which we
extrapolated to reflect a full year of claims.
cWisconsin's school-based health claims and administrative claims do not
equal its total school-based claims because of rounding.
dColorado and Idaho provided 11 months of health services claims data, which
we extrapolated to reflect a full year of claims.
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eThe average claim per Medicaid-eligible child was less than $1.
Source: GAO analysis of state-reported claims data and HCFA's fiscal year
1997 eligibility data (2082 report).
Some of the variation in Medicaid payments for school-based services and
cost per Medicaid-eligible child is explained by differences in the
proportion of school districts submitting Medicaid claims for school-based
activities. For some states, schools are part of the state Medicaid health
services delivery system, while in other states, schools may not generally
provide direct health services. For example, two states that spent
relatively little per Medicaid-eligible child--Indiana, at less than $1 per
child, and Alabama, at $1 per child--both indicated low percentages of
school district participation, with an Indiana official estimating
approximately 3-percent participation. A state official in California, which
spent less per Medicaid-eligible child than 40 other states, estimated that
in state fiscal year 1998 about 75 percent of the school districts in the
state submitted claims for health services, while only 2 school districts
submitted claims for administrative activities.
States also varied in whether they considered certain activities to be
health services or administrative activities, which could have affected
federal reimbursement because the federal match rate for health services is
higher than the rate for administrative activities in many states. According
to HCFA's technical assistance guide, Medicaid currently allows states to
reimburse transportation and case management as health services,
administrative activities, or both. For example, schools in Maryland and
Nevada claim school-based transportation as a health service, while those in
Massachusetts classify transportation as an administrative activity.
Similarly, Illinois schools claim case management as an administrative
activity, while those in New York claim it as a health service. 11 A Michigan
official reported that schools submit claims for case management as a health
service once the individualized plan for a child with a disability has been
developed and written, while case management that takes place before such a
plan is developed is claimed as an administrative activity.
School-Based Administrative Activities
In June 1999, we testified that a growing number of states pay for
reimbursement of school-based administrative activities, and our recent
survey suggests that this growth will continue. From fiscal year 1995
through fiscal year 1998, Medicaid claims for administrative activities
increased fivefold, from $82 million to $469 million (see fig. 2) 12 These
increased Medicaid expenditures for school-based administrative activities
reflect growth in the number of states participating, the number of schools
participating, and the size of claims submitted by individual school
districts. For example, from 1996 to 1997, Michigan's Medicaid
administrative claims for schools increased almost threefold, from $79
million to $227 million, which state and school officials indicated was
primarily the result of an increase in the number of school districts
submitting claims.
Figure 2: Medicaid School-Based Administrative Claims for 10 States, Fiscal
Years 1995-98
Note: States that appear in bold lettering began claiming school-based
administrative expenditures in the year listed.
Source: State-reported claims.
Interest in submitting claims to Medicaid for administrative activities
performed in the schools was evident in our recent survey of the 50 states
and the District of Columbia. In addition to the 17 states that currently
allow Medicaid reimbursement for school-based administrative activities,
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officials in 12 other states reported that they are considering allowing
school-based claims for these activities in the future. Seven other states
reported that they were "not sure" if they would allow schools to submit
Medicaid claims for administrative activities. 13 (See table 2.) Of those
states considering Medicaid reimbursement for school-based administrative
costs, eight identified some possible activities for which they would pay,
including eligibility facilitation, outreach, transportation, program
planning and monitoring, case management, referral, and coordination.
Table 2: Positions on Reimbursement for Medicaid School-Based Administrative
Activities of Those States That Do Not Currently Pay Claims
Considering reimbursement Uncertain
Not considering
reimbursement
Colorado
Connecticut
Alabama
Delaware
Arkansas
Kentucky
Georgia
District of Columbia Louisiana
Idaho
Hawaii
Maine
Kansas
Indiana
New Hampshire
Nebraska
Maryland
New York
Nevada
Mississippi
North Dakota
North Carolina
Montana
Rhode Island
Ohio
Virginia
South Carolina
Oklahoma
(7)
South Dakota
Oregon
Tennessee
Utah
West Virginia
(12)
Wyoming
(15)
Source: GAO survey of states.
a Few States' Total Medicaid Administrative Costs
The school-based administrative claims of a few states constitute a
significant share of their total Medicaid administrative activity. For
example, these claims represented 47 percent and 46 percent, respectively,
of Michigan's and Illinois' total Medicaid administrative claims. Other
states--Alaska, Arizona, and Washington--had school-based claims as high as
19 to 20 percent of their total Medicaid administrative expenditures. (See
table 3.) A significant portion of the growth in the administrative costs of
four states resulted from reimbursing for school-based activities: Alaska,
Illinois, Michigan, and Minnesota all showed average annual growth rates for
school-based administrative expenditures that were at least twice as high as
the growth rate of all their other Medicaid administrative expenditures
combined. 14
Table 3: States' Medicaid School-Based Administrative Claims as a Percentage
of Total Medicaid Administrative Expenditures
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Continued
School-based
Total Medicaid
Medicaid
administrative
Percentage of total
State
administrative
expenditures
administrative
claims (in
expenditures
thousands)
(in thousands) a
Michigan
$224,167
$477,138
47
Illinois
302,687
661,188
46
Arizona
25,795
131,577
20
Washingtonb
18,394
91,745
20
Alaska
7,780
40,662
19
New Mexico
4,909
32,078
15
Florida
38,451
289,625
13
Minnesota
23,495
209,412
11
Massachusettsc
19,500
190,669
10
Missouri
11,104
131,024
8
Vermont
1,757
35,659
5
Pennsylvania
13,952
387,262
4
New Jersey
5,657
253,991
2
Texas
11,662
576,952
2
Iowa
1,084
70,125
2
Wisconsin
1,591
138,555
1
California
288
1,227,657
Less than .02
Note: States were asked to provide administrative claims data for
school-based services from the most recent fiscal year. Although most states
provided data from the year ending June 30, 1999, two states provided data
from calendar year 1998, two states provided federal fiscal year 1998 data,
and three states provided data from state fiscal year 1998 (July 1,
1997− June 30, 1998).
aStates provided total Medicaid administrative expenditures for the same
period as for the school-based administrative claims data.
bAlthough Washington provided school-based administrative claims data for
the year ending August 31, 1999, total Medicaid administrative expenditures
were provided for the closest year of data available, federal fiscal year
1999 (October 1, 1998− September 30, 1999).
cMassachusetts provided 6 months of school-based administrative claims data,
which we extrapolated to reflect a full year of claims.
Source: State-reported claims data.
Provided or Administrative Activities Are Properly Identified and Reimbursed
Some methods used to claim Medicaid reimbursement do not adequately ensure
that health services are provided or that administrative activities are
properly identified and reimbursed. Paying bundled rates for health services
can simplify requirements for schools that participate in the Medicaid
program; however, bundled rates can also create an incentive to stint on
services, or to change what services children receive or where they receive
them to increase payment. To counteract these incentives, bundled rate
methods should differentiate payments among children with varying levels of
need and provide assurances that necessary services are provided. However,
not all states using a bundled payment approach differentiate levels of need
among children or ensure that services paid for are provided. In addition,
poor controls over what constitutes an allowable administrative activity
cost claim have resulted in improper Medicaid reimbursements. In some cases,
Medicaid claims were inappropriately reimbursed because they represented
administrative activities that were not Medicaid-related. In other cases,
claims for administrative activities performed by skilled medical
professionals, which can be eligible for reimbursement at a higher matching
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rate of 75 percent, were submitted and paid without adequate documentation
to justify the higher rate.
Incentives
HCFA began to allow states to develop bundled payment approaches in an
attempt to simplify schools' reporting requirements under Medicaid. We
reviewed the payment approaches of seven states that currently use bundled
rates. 15 Bundled payments are somewhat comparable to capitation payments
made to managed care organizations. A school district receives a single
payment for all the covered services a child needs during a specified
period, such as a day or month. 16 Bundled payments have the advantage of
simplifying schools' submission of claims. One state official told us that
the less complicated paperwork involved with bundled rates has made it
easier for smaller schools to submit claims for Medicaid reimbursement. 17
Bundled rates can also reduce the negative incentives that may exist under
other payment approaches. For example, reimbursing schools on the basis of
their actual costs may undermine interest in delivering services
efficiently. In addition, a fee-for-service approach, which is used by the
majority of states, does not provide schools with an incentive to control
the volume of services provided because schools in these states receive more
revenue for providing more services. (See table 4.) Counteracting the
adverse incentives that may exist under these other payment approaches is
challenging. Reviewing utilization or cost reports to establish that costs
are allowable or services are necessary is expensive. In contrast, bundled
rates can help limit the costs of delivering services by creating the
incentive to provide needed services more efficiently. Under a bundled
approach,
however, costs can also be limited by neglecting to provide all needed
services or by compromising the quality of individual services provided.
These undesirable effects can be reduced by modifying how bundled rates are
paid and exercising additional oversight of the services delivered.
Table 4: Incentives Affecting Volume and Cost of Services, by Payment
Approach
Do incentives exist for providers to increase
Payment approach
Volume of services to an individual? Unit cost?
Cost-based reimbursement Yes
Yes
Fee-for-service rates
Yes
Noa
Bundling rates
Nob
Noa
aUnder this payment approach, incentives to increase the unit cost do not
exist, provided the unit costs are based on reasonable and appropriate
costs.
bBundled rate payments can, however, provide an incentive to inappropriately
decrease the volume of services provided.
Source: GAO analysis of payment incentives.
In order for bundled rate methods to result in appropriate payments, the
amount paid should be appropriately aligned with the expected cost of
services. For schools, bundled payments that take into account the variation
in service needs among children and ensure that services are provided help
ensure that Medicaid funds are appropriately spent and children's needs met.
However, the methods currently employed by some of the seven states using
bundled rates do not satisfy these criteria (see table 5).
Table 5: Approaches to School-Based Payments in Seven States Using Bundled
Rates
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What event
Does the bundled
triggers
State
rate vary depending
What is the unit of
submitting a
on the needs of the
payment for services?b
claim to
child?a
Medicaid for
reimbursement?
Connecticut
No--one statewide
Monthly rate $336 per
Receipt of one
rate
child
service
Yes--14 statewide
Monthly
School
Kansas
rates; vary by
$151− $636
attendance 1
primary disability
per child
day a month
Yes--13 statewide
Monthly
School
Maine
rates; vary by
$442
attendance 1
primary disability
per child
day a month
Yes--seven
Six daily
statewide rates;
$11− $48 per
Massachusettsvary by time spent
child;
School
in a regular
attendance
classroom
one weekly rate $106
per child
Yes four statewide
Daily
New Jersey
rates; vary by type
− $172 per
Receipt of one
of school
child
service
Daily
Utah
No--school-specific
$21− $60 per
School
rates
attendance
child
Yes--four statewide
Receipt of a
Monthly
Vermont
rates; vary by
rate--$162−$1,598
specified
number of services
number of
actually provided
per child
services
aStates may exclude certain services, such as development and evaluation of
the individualized plan of a child with a disability, EPSDT diagnosis and
treatment, and provision of medical equipment, from their bundled rates and
separately claim Medicaid reimbursement for these services.
bFor all but one state, the rates are current and are rounded to the nearest
dollar. The rates listed for Vermont are from the 1998-99 school year.
Vermont's rates have historically been adjusted annually for salary
increases.
Source: State Medicaid agencies.
As table 5 indicates, states' bundled rates vary in the extent to which they
adjust payments among children with different medical needs. For example,
the bundled rates of two states--Connecticut and Utah--do not recognize that
the costs for providing services to children with different medical needs
may vary considerably. Participating schools in Connecticut receive a
monthly payment of about $336 for each eligible child, regardless of whether
that child has a mild learning disability or has multiple physical and
cognitive disabilities. This statewide rate may not cover the full costs
incurred by schools that have a disproportionate number of children whose
services cost more, which may affect schools' ability to provide necessary
services. Conversely, other schools may be paid an amount higher than their
actual costs. In two other states, Massachusetts and New Jersey, the payment
level is based on the location of the child, and not necessarily on the
number or scope of services that he or she receives. Specifically,
Massachusetts' schools are paid on the basis of the percentage of time an
eligible child spends in a regular classroom, whereas New Jersey has four
statewide rates that vary depending on where the child attends school 18
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Bundled payment rates in other states, such as Kansas, Maine, and Vermont,
are more aligned with the expected cost of services for specified groups of
children. For example, schools in Kansas and Maine receive the same payment
amount for all children with specified disabilities, such as autism or
mental retardation. While these rates do not recognize differences in the
number and intensity of services provided to children within each disability
category, they do recognize that schools can incur significantly higher
costs for children with certain disabilities. Vermont does not distinguish
among types of disabilities but does have four different levels of
reimbursement, which vary depending on the number of services a child
actually receives in a given week, as well as on who provides those
services. 19
In addition, states' bundled approaches should ensure that services paid for
are actually provided. However, payments currently made in four of the seven
states--Kansas, Massachusetts, Maine, and Utah--are not specifically linked
to the receipt of services because reimbursement is triggered simply by
school attendance. Participating schools in these states are reimbursed the
bundled rate for each eligible child, irrespective of whether the child has
received any services. For example, schools in Kansas are reimbursed about
$476 a month for each child whose primary disability listed on the
individualized plan is autism, as long as the child attended school at least
1 day in a given month. In such an arrangement, there is little
accountability for providing needed services because attendance--not the
receipt of services--triggers reimbursement.
Varying levels of assurances exist in Connecticut, New Jersey, and Vermont
that services are actually provided to eligible children. For example,
schools in Connecticut must document on a monthly service information form
the number and type of services provided to each child. However, schools
have to provide a child with only one service during the month to be
eligible for the full payment. Similarly, New Jersey schools can claim the
per diem reimbursement for each day an eligible child receives at least one
service that is documented by the school. In Vermont, case managers complete
for each child a level-of-care form that categorizes the hours of service,
type of provider, and setting (one-on-one or group). Using these data, a
clerk computes the total units of service each child receives to justify the
payment for one of four levels of care.
Administrative Claims
Poor controls on the part of states and school districts have resulted in
improper reimbursements for Medicaid administrative claims. The methods
states allow school districts to use to determine administrative costs
strongly influence the amount of Medicaid reimbursement school districts
receive. Determining allowable Medicaid-related administrative costs
involves identifying direct costs, such as for personnel and supplies, and
allocating them between Medicaid and non-Medicaid activities, as well as
allocating an appropriate share of indirect (overhead) costs to Medicaid. 20
In most cases, school personnel involved in special education can serve both
Medicaid and educational functions; thus, the costs of administrative
activities must be allocated to each function. 21 Two aspects of the methods
for determining administrative cost allocations are vulnerable to
contributing to overstated Medicaid costs: (1) time study methodologies,
which are used to identify the portion of staff time spent on
Medicaid-related activities, and (2) activity codes, which are used to
identify functions performed by school staff in these time studies. In
addition, some school districts have received reimbursement for
administrative activities at the enhanced 75-percent federal matching rate
for skilled professional medical providers, such as physical therapists,
without providing adequate documentation that their professional
capabilities were needed for such activities, as required by Medicaid
regulations.
Different Time Study Methods Have Led to Considerable Variation in
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Reimbursement
Some time study methods that states allow schools and school districts to
use in determining Medicaid-related school-based administrative costs are
questionable and could be used to inappropriately increase Medicaid
payments. Differences in time study methodologies can--and do--affect the
level of states' reimbursements. States vary in the extent to which they
instruct school districts on the type of time study methodology permitted.
We identified three basic methods used to allocate the time of school
personnel to Medicaid-related administrative activities: the representative
period, random moment, and continuous log methods. 22 The representative
period method is the one most vulnerable to manipulation. In contrast to the
random moment time study, for example, which always randomly selects a
period of time to be studied, representative periods may not always be
randomly selected. This method is also the one most frequently used. Of the
17 states with schools that file administrative cost claims, 15 allow the
use of representative period time studies for determining cost
allocations. 23 Moreover, 9 of the 15 states that specify the use of a
representative period study either specify the use of a nonrandom
representative period or allow the school districts or private firms
involved in the time studies to make this decision. 24
How the selection of the sample period can affect study results is
illustrated by an example from Florida. When a private firm representing
nine Florida school districts changed the time study method they used from a
sampling period of 1 week per quarter to a random sample of moments
throughout the quarter, the amount of federal reimbursement claimed
decreased by 50 percent.
Loosely Defined Activity Code Categories Have Overstated Costs Related to
Medicaid
Loosely defined activity code categories used by time study participants to
record time spent on administrative activities have resulted in overstated
Medicaid costs. 25 While typical activity code categories may include
outreach related to the Medicaid program, coordinating and monitoring of
health services, and facilitating Medicaid eligibility determinations, these
categories and their codes vary among and within states, particularly when
multiple private firms contract with school districts within a state to
submit administrative cost claims.
While staff from HCFA's central office and several regional offices
emphasized the importance of developing clearly defined activity codes, some
states' methods allow certain activities to be inappropriately claimed as
Medicaid administrative costs. For example, HCFA's Chicago regional office
questioned activities for which $30 million in federal reimbursement had
been claimed and paid for one quarter for participating schools in Michigan.
The activity codes in question included general health screenings,
communication with families, and staff training as Medicaid administrative
activities. However, HCFA regional office interviews with a sample of staff
who allocated their time to these activity codes revealed no direct
connection between staff activities and Medicaid; these staff did not know
what Medicaid covers, where or how to apply for Medicaid, or who might
qualify for coverage. Moreover, the only Medicaid-related training activity
identified in HCFA's review was for purposes of completing the time study;
interviewed school staff indicated that Medicaid was not mentioned during
other identified training sessions. The activity codes in question
constituted 53 percent of the $56 million in federal reimbursement claimed
for administrative activities by Michigan's school districts for the quarter
ending September 1998. HCFA recommended that Michigan revise its time
study's activity code definitions to more accurately identify activities
related to the Medicaid program or recipients. The HCFA regional office
deferred Michigan's claim for $33 million in federal reimbursements for the
quarter ending September 1999, asking again that the state better document
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that school-based claims for administrative activities were clearly linked
to Medicaid.
Our investigation and HCFA scrutiny of claims in Michigan and Illinois also
disclosed federal reimbursements for health reviews and evaluations
performed for the benefit of non-Medicaid-eligible children. These improper
claims for non-Medicaid-eligible children in schools accounted for $12.5
million of the $56 million in federal reimbursement that was reviewed in
Michigan for the quarter ending September 1998 and a $7.7 million
reimbursement to Illinois--$2.4 million for one school district consortium
for the quarter ending December 1998 and $5.3 million for the quarter ending
March 1999 for the remaining school districts that claim reimbursement. Our
investigation in Michigan identified approximately $28 million in improper
federal reimbursement for 2 years.
Our review of the 17 states that allow schools to file administrative claims
showed that some of the questionable activity code definitions used in
Illinois and Michigan are also being used for activity codes in 9 other
states. Of these nine states, four do not specifically mention Medicaid in
descriptions of relevant activities 26 In contrast, at least one state
preferred to develop its own activity codes, rather than adopt those already
in use in other states, because the other state codes were "too loose to be
appropriate" and did not differentiate Medicaid-related activities from
those relating to non-Medicaid-eligible children.
Claims Based on Professional Credentials Have Resulted in Questionable
Payments
Claims for administrative activities performed by skilled professional
medical providers (SPMP) at the 75-percent enhanced matching rate have also
resulted in questionable payments. Of the 17 states submitting claims for
administrative costs, 11 states allow the use of the SPMP enhanced rate for
school-based administrative claims. In general, the SPMP rate can be
legitimately used only when the person (1) has the appropriate credential,
such as a nurse, occupational therapist, or physical therapist, and (2)
performs an administrative activity that requires professional medical
knowledge and skills. For example, a nurse who meets with a child and
notices a condition that needs medical attention could submit a claim for
this activity at the SPMP enhanced matching rate of 75 percent. However, a
nurse who only arranges a medical appointment for a child would not need his
or her credentials to make an appointment and thus would not be eligible for
the 75-percent enhanced matching rate. The enhanced matching rate of 75
percent for SPMP administrative activities can be a strong incentive for
those preparing and submitting claims, as it increases by 50 percent the
amount of federal reimbursement that can be received.
In two states--Illinois and Michigan--we found that, on the advice of
private firms, school districts have submitted claims that inadequately
document the need for professional credentials for purposes of submitting an
SPMP claim. For example, we found that one private firm told the SPMPs in
its client school districts to claim the enhanced rate for every
administrative activity they perform, rather than document in each case
whether their skill was required. Another private firm told SPMPs that, when
tracking their time, they had only to check a box to indicate that their
medical credential was necessary for a particular activity, and that no
further documentation or proof was needed for the enhanced Medicaid
reimbursement. 27 Recent SPMP claims in Illinois totaled $16.6 million, or 37
percent of its total claims, for one quarter for participating school
districts. 28 In Michigan, SPMP claims totaled $14 million, or 25 percent of
the state's total administrative activity for all participating school
districts for the quarter ending September 1998.29
Paid to Private Firms--Reduce the Federal Dollars Schools Receive
Funding arrangements among states, schools, and private firms create adverse
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incentives for program oversight and significantly reduce the amount of
federal dollars that schools receive for Medicaid-related services and
activities. Of the 47 states and the District of Columbia that submit claims
on behalf of schools for health services, administrative activities, or
both, 18 retain some portion of federal Medicaid reimbursements rather than
fully reimbursing schools for their Medicaid-related costs. Because states
can benefit directly in this way from higher federal payments, states'
incentives to exercise strong oversight over the propriety of school-based
claims can be diminished. In addition, many school districts have
contingency arrangements with private firms that pay them a share of
Medicaid reimbursement, in some cases, a percentage of the federal share of
reimbursement received from a claim. Embedded in both of these practices are
incentives for states and private firms to experiment with "creative"
billing practices, some of which we have found to be improper. Moreover, the
result of these actions is that, in some states, schools could receive as
little as $7.50 in federal Medicaid reimbursements for every $100 spent to
pay for services and activities performed in support of Medicaid-eligible
children.
Oversight
Eighteen states retain a portion of the federal Medicaid reimbursement
resulting from school districts' claims. According to several state
officials, because state budgets fund a portion of school activities,
Medicaid services provided by schools are partially funded by the state.
According to this reasoning, some states believe they should receive a share
of the federal reimbursements claimed by school districts. However, it is
not clear that state, rather than local, funds support the
Medicaid-reimbursable services, as opposed to other educational activities
for which states provide funds. Moreover, we believe that such a practice
severs the direct link between Medicaid payment and the services delivered
and increases the potential for the diversion of Medicaid funds to purposes
other than those intended.
We found that seven states retain from 50 percent to 85 percent of the
federal Medicaid reimbursement for health services, while another nine
states retain between 1 and 40 percent of federal payments. Among the states
that claim Medicaid reimbursement for administrative activities, three
retain 50 percent or more of the federal reimbursement, while another seven
keep between 1 and 40 percent. (See table 6.)
Table 6: Amount and Percentage of Federal Medicaid Reimbursement for Health
Services and Administrative Activities Retained by States
Percentage of
federal
Percentage of federal
Amount retained
State
reimbursement for
reimbursement for
by state (in
health services
administrative
thousands)a
retained
activities retained
New Jersey
85
85
$25,815
Iowa
75
O
1,984
Delaware
70
b
4,865
Vermont
60
15
4,266
Alaska
b
52
2,023
New York
50
b
170,500
Pennsylvania
50
50
18,079
Washingtonc
50
0
3,122
Connecticut
40
b
4,443
Michigan
40
40
69,156
Wisconsin
40
40
10,749
Illinoisd
10
10
6,391
New Mexico
5
5
314
Ohio
4
b
741
Utah
2
b
105
Colorado
2
b
50
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Massachusetts 1
1
326
Minnesota
0
5
587
Total
$323,516
aStates provided school-based claims data for the most recent fiscal year
for which they were available, which for approximately half the states was
state fiscal year 1999. Most of the remaining states provided data for state
fiscal year 1998, federal fiscal year 1998, or calendar year 1998; three
states provided data from before July 1, 1997.
bThis state does not claim reimbursement for this type of school-based
activity.
cWashington retains at least 50 percent of federally reimbursed funds but
can retain a higher percentage depending on whether the school district is
"fully participating" in billing Medicaid for school-based services.
dWhen total Medicaid payments to an Illinois school district exceed $1
million in a year, 10 percent of the portion exceeding $1 million is
retained for the state's general revenue fund. According to the state, 22 of
its 900 school districts received more than $1 million.
Source: State-reported data.
When a state benefits directly from federal reimbursements for schools,
questions arise concerning its incentives to exercise appropriate oversight
of Medicaid program operations for school-based claims. The improper
activities cited in this report--particularly those for administrative cost
claims--are symptomatic of the lack of sufficient oversight, such as
state-level reviews of school-based claims for their appropriateness. For
example, one auditor from the Department of Health and Human Services'
Office of Inspector General told us that Medicaid program oversight in one
state is geared toward ensuring adequate documentation of claims and not
toward examining claims for appropriateness. Our contacts with the auditors'
offices of six states revealed that these states conducted no state-level
reviews of Medicaid school-based claims.
Moreover, we identified similar concerns about states' oversight in our
investigation of improper practices in making school-based fee-for-service
claims for health services. For example, our investigation of
fee-for-service payments for health services in one state revealed that
schools were submitting, and the state was paying, transportation claims for
all Medicaid children who had received a Medicaid health service at school
without verifying that the child had used school bus transportation. Our
investigation further identified instances in which the transportation
services for which the state submitted claims were not provided, resulting
in improper Medicaid reimbursements. In another investigation, we uncovered
practices under which Medicaid was inappropriately billed for health
services in one state, and other investigators identified similar practices
in another state. Specifically, in both states, some group therapy sessions
were billed as individual therapy sessions, which resulted in a higher
payment for the school.
Claims
Some school districts paid private firms fees ranging from 3 percent to 25
percent of the federal reimbursement amount claimed; fees most commonly
ranged from 9 to 12 percent. These firms are usually hired to assist with
administrative cost claims, generally designing the methods used to make
these claims, training school personnel to apply these methods, and
submitting administrative claims to state Medicaid agencies to obtain the
federal reimbursement that provides the basis for their fees. 30 By receiving
a percentage of reimbursement rather than a fixed fee, these firms have an
incentive to maximize the amount of reimbursements claimed.
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Private sector interest in working with states and school districts to seek
Medicaid reimbursement for administrative activities is high. In addition to
the 17 states that currently submit administrative claims, officials from at
least 7 other states told us that private firms interested in developing
administrative claims methodologies had recently contacted them or schools
in their state.
Marketing materials from two private firms explain one of the reasons
concerns have been expressed that school districts' administrative claims
may exceed reasonable or allowable costs. In these materials, the firms
assert that their objectives are to maximize Medicaid revenues for schools
and that they can maximize a school's claim potential by training school
personnel to follow their methods for claiming costs. One firm emphasized
that, on average, its clients annually receive over 30 percent more per
student than schools contracting with a competitor.
While schools can--and do--pay private firms on a contingency basis for
Medicaid-related services, these contingency fees do not qualify for federal
Medicaid reimbursement 31 OMB Circular A-87, which establishes the
principles and standards for determining "reasonable" and "allocable" costs
for federal programs such as Medicaid, states that the costs of professional
and consultant services rendered are allowable when reasonable and when not
contingent upon the recovery of costs from the federal government. 32 In one
state, our investigation determined that contingency fees were improperly
included in one school district's Medicaid administrative cost claim. We
estimate that the resulting unallowable costs claimed for reimbursement may
approximate $1 million for a 5-year period.
Reimbursement
In some states, schools can receive a small portion of Medicaid
reimbursement for performing covered health services and administrative
activities on behalf of eligible children. In addition to states' policies
to retain a portion of federal Medicaid reimbursement and school districts'
contractual arrangements to pay private firms a share of their federal
reimbursements, the school districts' budgets often serve as the local funds
that are used to supply the state's share of Medicaid funding for
school-based claims. When school funds provide the state share of Medicaid
reimbursement, the maximum additional funding that a school district can
receive for delivering services or performing administrative activities is
what the federal government contributes. This is substantially less than
what a private sector Medicaid provider would receive for delivering and
submitting a claim for similar services. 33 For example, a physician who
submits a claim with an allowable amount of $100 will receive $100: $50 in
state funds and $50 in federal funds 34 In contrast, when a school district
submits a claim for $100, and the school district pays the state's share of
this claim, the maximum the school district can receive is the $50 federal
share. Of the 47 states that allow Medicaid claims for school-based
activities, 38 use local funds for the state match to federal dollars. 35
Table 7 shows the variation in the amounts different schools might receive
in Medicaid reimbursement for the claims they submit, given the source of
the states' share of funding, states' policies to retain portions of the
federal reimbursement, and contingency fee arrangements with private firms.
Table 7: Variations in Schools' Receipt of Medicaid Reimbursement for Health
Services
State
New
Florida
Illinois
Vermont
Michigan
Minnesota
Jersey
Amount claimed
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
Local funds
useda
(44.18)
(50.00)
(38.03)
(47.28)
(50.00)
0
Amount retained
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by stateb
0
(5.00) C
(37.18) di
(21.09)
(42.50)
0
Total Medicaid
funds received
by school
55.82
45.00
24.79
31.63
7.50
100.00
district
Amount paid to
private firm by (10.05) f
(8.25)
0
(10.54)
g
h
school districte
Net amount to
school district $45.77
$36.75
$24.79
$21.09
$7.50
$100.00
aThis amount reflects the state's share of Medicaid funding for health
services for fiscal year 1999. For administrative activities, states' shares
would generally be 50 percent.
bThe amount retained by the state is deducted from the federal
reimbursement.
cWhen total Medicaid payments to an Illinois school district exceed $1
million in a year, 10 percent of the portion exceeding $1 million is
retained for the state's general revenue fund. According to the state, 22 of
its 900 school districts received more than $1 million.
dThe percentage retained by Vermont varies from year to year. The amount
noted reflects the percentage retained for Vermont's 1999 school year.
ePrivate firms' contingency fees vary across school districts and states;
thus, the dollars reported in this table are estimates of typical
contingency fees paid by school districts.
fEffective February 14, 2000, contingency fee reimbursement contracts are
prohibited for school districts in Florida.
gThe state of New Jersey pays the firm $2.55 from the $42.50 it retains.
hMinnesota state officials were not aware of any contingency fee
arrangements being used by school districts; thus, we did not report dollars
in this example.
Source: GAO analysis of state data.
Claims
HCFA oversight practices--past and present have not ensured the
appropriateness of school-based practices for claiming Medicaid
reimbursement. As we testified in June 1999, HCFA's guidance in the past has
generally left much to regional office discretion, resulting in
inconsistencies in the oversight and review of claims. Written guidance has
consisted primarily of a technical assistance guide and a direction for
states to follow the federal requirements for administrative cost
allocations found in OMB Circular A-87. Despite HCFA's May 21, 1999, letter,
which was partially intended to provide clarification in areas concerning
bundling and submitting claims for administrative activities and special
transportation services, HCFA regional offices continue to interpret
policies inconsistently. 36 This lack of adequate direction and oversight has
permitted the development of an environment of opportunism and has led to
improper Medicaid claims for administrative activities and limited
assurances that children are receiving appropriate services.
Methods Have Not Been Developed
In its May 21, 1999, letter, HCFA instructed states with bundled rates to
develop and implement an alternative reimbursement methodology but did not
provide a time frame in which to do so.37 To assist states in this effort,
the agency also announced that it would create a work group of officials
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from states using bundled approaches, the Department of Education, and other
federal agencies to discuss alternative arrangements.
However, since HCFA issued this letter, the seven states that were using a
bundled approach continue to do SO. In fact, officials in some of these
states told us that they intend to continue to use their bundled approaches
until HCFA clarifies its position or issues additional guidance.
Furthermore, the work group that was established as a result of the HCFA
letter is currently inactive. While the group initially met weekly via
telephone, its members neither made any formal decisions about the future of
bundling nor developed alternative payment approaches. In October 1999, HCFA
officials announced that the group would not reconvene until sometime in
2000, because it needed time to discuss issues concerning bundling. As of
March 1, 2000, the work group had not yet reconvened.
HCFA has made some efforts to improve oversight of school-based
administrative claims. It has conducted individual reviews of practices
identified in this report in a few states and is working with a few states
to revise their activity codes to more accurately capture the costs
associated with Medicaid-related activities in schools. Finally, the
additional guidance that HCFA testified in June 1999 would be forthcoming
was released for public comment in February 2000.
Despite these efforts, the lack of clear guidance on how to develop methods
for submitting administrative claims continues to result in significant
inconsistencies among regions. For example, while some HCFA regional offices
have scrutinized the details of states' methodologies for developing
administrative claims, other regional offices have had little or no
involvement in the development of their states' methodologies. The area of
enhanced rates for skilled providers is a specific example of the
contradictory policies of regional offices. The Chicago regional office
allows Illinois and Michigan school districts to claim administrative
activities provided by SPMPs at a 75-percent match rate as opposed to the
general administrative match rate of 50 percent. In contrast, the school
districts in Massachusetts are not allowed to claim this enhanced rate
because HCFA's Boston regional office does not allow the higher rate.
According to officials in the Boston office, "there was no way in the world"
to document that certain activities required a skilled level of performance.
Still other HCFA regional offices, such as San Francisco, have adopted a
different approach, allowing the use of the enhanced rate under certain
circumstances.
More Questions Than It Answers
HCFA's attempt to clarify its policy on school districts' practices in
claiming Medicaid reimbursement for special transportation related to
school-based services has added to the uncertainty surrounding this issue
rather than clarifying the matter. The HCFA letter indicated that school
districts should not bill to Medicaid the transportation costs of a child
who qualifies for special education under IDEA and who rides the regular
school bus with children without disabilities. According to HCFA central
office officials, the general intention was to discontinue the practice of
allowing Medicaid reimbursement for children who needed no additional
assistance and could ride the regular school bus by themselves without any
special equipment or the assistance of an aide.
However, regional offices and states have conflicting interpretations of
what an appropriate special transportation claim is, with the likely result
that Medicaid reimbursement will continue to be inconsistent across states.
Officials in one of the seven regional offices that we spoke with
correctly believed that Medicaid would cover transportation costs if a child
was able to ride on a regular school bus but required the assistance of an
aide; two other regional offices incorrectly asserted that transportation
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costs could not be reimbursed because the child would not be riding a
specially adapted vehicle; and officials in the remaining four regional
offices did not know whether reimbursement would be allowed.
Officials in two of the states we visited told us they will now allow
school districts to claim Medicaid reimbursement only for the use of
vehicles that have a wheelchair lift or some adaptation that would meet the
needs of children with physical disabilities--a policy that is inconsistent
with the intent that HCFA officials described to us.
At least two states are awaiting further clarification from HCFA and
continue to have school districts that claim transportation costs for
children with special education needs who receive a Medicaid service at
-including costs for those riding regular school buses with an aide.
The inconsistent interpretations cited above raise concerns of unequal
consideration of children with different types of disabilities. In
particular, state and school districts are unclear regarding HCFA's policy
for submitting claims for children who have behavioral needs or
developmental disabilities, but no physical disability. In many cases, these
children have the physical capability to ride the regular school bus but may
need the assistance of an aide to ride the bus because of cognitive
impairments or behavioral concerns. Further, some contend that requiring a
physically adapted bus in order to receive reimbursement--a is currently
interpreted by some states and HCFA regional offices--may conflict with the
concept of "least restrictive environment"; thus, children may be
unnecessarily segregated into specialized transportation.38
Almost one-third of Medicaid-eligible individuals are school-aged children,
which makes schools an important service delivery and outreach point for
Medicaid. Even when schools do not directly provide Medicaid-covered health
services, schools can undertake administrative activities that help
identify, refer, screen, and assist in the enrollment of Medicaid-eligible
children. Outreach and identification activities help ensure that the most
vulnerable children receive routine preventive health care and ongoing
primary care and treatment. Most states are seeking Medicaid funds to assist
them in providing medically related services to children with disabilities
and to link children to appropriate health services.
Given the broad range of school and state practices, to date there have been
poor controls on the varied approaches to submitting claims for Medicaid
reimbursement for school-based health services and administrative
activities. Such controls must achieve an appropriate balance between the
states' needs for flexible, administratively simple systems and the
assurance that federal funds are being used for their intended purposes.
HCFA's current oversight practices have failed to provide that assurance,
resulting in confusing and inconsistent guidance across the regions and
failure to prevent improper practices and claims in some states. Without
adequate controls and consistent oversight, Medicaid is vulnerable to paying
for unneeded activities and services or for activities and services that
have not been provided. Examples of such concerns follow.
Bundled payment systems have the potential to reduce adverse incentives
that are created by other payment systems, such as fee-for-service and
cost-based reimbursement. Although additional safeguards can strengthen the
benefits associated with bundled rates, we believe that prohibiting the use
of bundled rates altogether, as HCFA recently did, is not warranted.
Bundling rates can be an acceptable payment mechanism, provided that (1)
rates account for children's different levels of need and (2) rates are
developed in such a way as to provide assurances that they are not
vulnerable to manipulation or resulting in inadequate services.
With regard to administrative cost claims, poor controls have resulted in
improper payments for Medicaid reimbursement in several states. As a result,
Medicaid has reimbursed either for activities that were not covered or for
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children who were not eligible for Medicaid. Furthermore, claims submitted
for administrative activities performed by skilled professionals have been
reimbursed at a higher matching rate than available documentation could
support.
Specialized transportation, for which HCFA provided policy clarification
in May 1999, continues to be overseen and approved haphazardly, resulting in
potentially inequitable practices for children with different types of
disabilities across different regions.
Finally, inadequate HCFA oversight has created an environment ripe for
opportunism and vulnerable to fraud.
Contingency fees paid to private firms by school districts have created
the incentive to inappropriately maximize claims for Medicaid reimbursement.
Improprieties in claims identified by our investigations and those of HCFA
demonstrate how weaknesses in federal and state efforts to curtail this
incentive can result in improper costs.
When states stand to benefit financially by retaining a substantial share
of schools' federal Medicaid reimbursements, the potential exists for a
conflict of interest in ensuring that adequate oversight and controls are in
place to ensure the appropriate use of Medicaid funds.
In order to improve the development and application of policies for Medicaid
reimbursement of claims for allowable school-based health services and
administrative activities, we recommend that the Administrator of HCFA
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;
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; and
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.
We provided HCFA and the state Medicaid agencies we visited an opportunity
to comment on a draft of this report. With respect to bundled rates for
health services, HCFA commented that its May 1999 position emanated from its
concern that the existing methodologies did not meet statutory requirements
for payments consistent with efficiency, economy, and quality care. In
considering future requests for bundled rate payments, HCFA indicated it
would address such issues as reasonable payment levels, adequate
documentation that covered services are provided only to Medicaid-eligible
children, and sampling methodologies to verify the accuracy of
documentation. This approach should provide better assurances that payment
rates reflect children's varying needs and that services paid for were
provided, but we would caution that new requirements not create a de facto
fee-for-service environment and thus undermine the intended benefits
associated with a bundled payment approach.
HCFA concurred with our recommendations on administrative cost claims and
specialized transportation. With respect to administrative claiming, HCFA
listed a number of steps it said it would take to address our
recommendations. Among other things, this list included revising and
finalizing a Medicaid school-based administrative claiming guide that it
released for public comment in February 2000, providing training and
technical assistance to states and school districts to facilitate their
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efforts, and developing processes for monitoring existing school-based
claiming activities and approving states' changes in this activity. HCFA
expressed its commitment to working with its various partners--including the
Department of Education, states, and schools--to better ensure the proper
and efficient operation of Medicaid school-based programs. (See app. II for
HCFA's comments.)
Most of the states that responded commented that our analysis of Medicaid
reimbursement received by schools, as shown in table 7, did not reflect the
portion of local school funding provided by the states. In addition, some
states continue to assert that their retention of a share of federal
Medicaid reimbursement is justified as reimbursement for their own level of
funding support to schools. We continue to believe that it is not clear that
state, rather than local, funds support the Medicaid-reimbursable services
as opposed to other educational activities for which states provide funds.
Moreover, we believe that such practices sever the direct link between
Medicaid payment and services delivered, increase the potential for federal
funds to be diverted to purposes other than those intended, and are
inconsistent with the program's fundamental tenet that federal dollars are
provided to match state or local dollars for Medicaid services delivered to
eligible individuals. Finally, a few of the states said that additional
guidance is needed for how states should claim federal reimbursement for
administrative costs and specialized transportation.
HCFA and the state Medicaid agencies also provided technical comments, which
we incorporated as appropriate.
We are providing copies of this report to the Honorable Donna E. Shalala,
Secretary of Health and Human Services; the Honorable Nancy-Ann Min DeParle,
Administrator of HCFA; appropriate congressional committees; and other
interested parties.
If you or your staff have any questions about this report, please call
Kathryn G. Allen at (202) 512-7118. For questions regarding our
investigation, contact Robert H. Hast at (202) 512-7455. Other staff who
made major contributions to this report are listed in appendix III.
Kathryn G. Allen
Associate Director, Health Financing and
Public Health Issues
Robert H. Hast
Acting Assistant Comptroller General
Office of Special Investigations
Health Care Financing Administration Letter Dated May 21, 1999
Comments From the Health Care Financing Administration
GAO Contacts and Staff Acknowledgments
Carolyn Yocom, HEHS (202) 512-4931
William Hamel, OSI (202) 512-7433
Susan Anthony (Chicago)
Connie Peebles Barrow
Laura Sutton Elsberg
Andrew A. O'Connell
Ray Bush
Paul D. Shoemaker
Daniel Schwimer
Richard Burkard
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15:48 No . 003 P.02
United States General Accounting Office
GAO
Testimony
Before the Committee on Finance, U.S. Senate
For Release on Delivery
Expected at 2:00 p.m.
MEDICAID
Thursday, June 17, 1999
Questionable Practices
Boost Federal Payments
for School-Based Services
Statement of William J. Scanlon, Director
Health Financing and Public Health Issues
Health, Education, and Human Services Division
UNITED
STATES
GENERAL ACCOUNTING UFFICE
GAO
Accountability * Integrity Reliability
GAO/T-HEHS-99-148
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15:48 No 003 P.03
Mr. Chairman and Members of the Committee:
We are pleased to be here today as you explore potential improprieties involving Medicaid
claims for school-based health services. Because Medicaid is a federal-state program, the federal
government is responsible for paying a share of costs incurred by the states to serve Medicaid's
40 million low-income beneficiaries, including 19.7 million children. For eligible children who
receive certain health services through their schools, states can use their Medicaid programs to
help pay for these services, which include diagnostic screening and ongoing treatment. Medicaid
is also authorized to reimburse schools' costs for performing administrative activities associated
with Medicaid's coverage of health services, such as conducting outreach activities to enroll
children in Medicaid; providing eligibility determination assistance, program information, and
referrals; and coordinating and monitoring the Medicaid-covered health services.
Recently, concerns have been raised about the appropriateness of states' efforts to claim
Medicaid reimbursement for school-based services. Emerging practices appear to have some
disturbing similarities to other "creative" financing mechanisms that began to be used in the
mid-1980s. Some states used such mechanisms to increase the federal Medicaid contributions
they received without increasing their own contribution. As the nature and magnitude of such
mechanisms became apparent, the Congress acted on several occasions to halt them.¹
Recent multimillion-dollar increases in Medicaid reimbursement for school-based health services
have triggered questions about the state and federal procedures in approving and overseeing
these growing expenditures. Specifically, your Committee asked that we examine the rise in
claims for administrative costs associated with school-based health services.² Accordingly, my
remarks will focus 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. My
comments are based on information collected over the past 2 months, at this Committee's
request, when we interviewed the 18 states identified as currently claiming administrative costs.
We also visited three of these states-Illinois, Massachusetts, and Michigan-where we
contacted officials at federal and state agencies, school districts, and private firms; analyzed data;
and reviewed relevant documents. We also contacted officials of the Health Care Financing
'See Medicaid: States Use Illusory Approaches to Shift Program Costs to Federal Government
(GAO/HEHS-94-133, Aug. 1, 1994), Medicaid: Disproportionate Share Payments to State
Psychiatric Hospitals (GAO/HEHS-98-52, Jan. 23, 1998), and Michigan Financing
Arrangements (GAO/HEHS-94-146R, May 5, 1995). See also the list of related GAO products at
the end of this statement.
²Concerns have also been raised about (1) using a bundled rate to pay for medical services
provided to Medicaid-eligible children in schools and (2) claims for school health-related
transportation services for children with disabilities. On May 21, 1999, the Health Care
Financing Administration sent a letter to state Medicaid directors to clarify policy on these two
issues. We do not address those issues in this testimony.
I
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Administration (HCFA), the agency within the Department of Health and Hunan Services
(HHS) responsible for administering Medicaid at the federal level.
In summary, over the past 4 years, school districts' claims for administrative costs associated
with school-based health services have increased fivefold-from $82 million $469 million-
in 10 states for which we could readily obtain data. Two of these states-Midigan and
Illinois-accounted for most of the increases in administrative cost claims over this time period.
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.
The share of Medicaid payments for school-based administrative activities received by the
schools-as opposed to other entities-varies by state. At least four states reain a portion of the
federal funds obtained, whereas other states return the entire federal share directly to the school
districts. 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 parcent of the total
amount of the federal Medicaid reimbursement. In one state we 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.
Federal oversight of school districts' claims for administrative expense reimbursements has been
weak. HCFA guidance has been insufficient and its reviews of districts' claims activities
uneven. 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 mallowable. These
weak controls permit an environment for opportunism in which inappropriateclaims could
generate excessive Medicaid payments.
BACKGROUND
Under Medicaid's federal-state partnership, states operate their Medicaid programs within broad
federal requirements and can elect to cover a range of optional populations and benefits. As a
result, Medicaid is essentially 56 separate programs (including the 50 states. the District of
Columbia, Puerto Rico, and the U.S. territories). Each program's respectivederal and state
funding shares are determined through a statutory matching formula.
As part of its responsibilities for Medicaid, HCFA reviews each state's program for conformity
with federal requirements. HCFA's 10 regional offices are responsible for the direct oversight of
the respective state Medicaid programs within their jurisdiction, whereas HCIA's central office
sets federal Medicaid policy and works with the regional offices on issues reparding state
Medicaid policy and administration.
States submit claims to HCFA for Medicaid reimbursement generally under tvo categories:
medical assistance payments and administration. Most Medicaid expenditures are for medical
assistance payments; the federal share of medical assistance payments variestly state and ranges
from 50 percent to 83 percent based on each state's per capita income in relationship to the
2
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national average. Nationally, the federal share of medical assistance expenditures averaged
about 57 percent in fiscal year 1998. Of Medicaid's $177 billion in total expenditures in fiscal
year 1998, administrative costs were approximately $8 billion, or 4.5 percent. For administrative
activities, the federal share varies by the type of costs incurred. Most administrative
expenditures are matched at a fixed rate of 50 percent, making the federal government's
contribution equal to that of a state. However, certain administrative activities are matched
above 50 percent; for example, the development of automated systems is federally matched at a
90-percent rate. In fiscal year 1998, the federal share of payments for Medicaid's administrative
costs averaged about 55 percent nationwide.
Medicaid is authorized to reimburse schools as qualified providers for covered medical
assistance services provided through (1) school personnel, (2) other qualified practitioners with
whom the school contracts, or (3) a combination of these approaches. School-based Medicaid-
covered services that qualify for federal funds include physical, occupational, and speech
therapy, as well as diagnostic, preventive, and rehabilitative services. Some services are
provided in conjunction with the Individuals With Disabilities Education Act (IDEA) program;³
others are included through a state's Medicaid plan and are available through Medicaid's Early
and Periodic Screening, Diagnostic, and Treatment (EPSDT) program.4
Medicaid's Reimbursement of
School-Based Administrative Services
Medicaid is also authorized to reimburse schools for certain administrative costs, even if the
school has not provided any medical assistance services. Examples of such allowable
administrative activities include conducting outreach for Medicaid, helping applicants complete
Medicaid enrollment forms, and arranging appointments with various providers of medical and
screening services. Both IDEA and EPSDT have requirements to conduct activities that would
inform and encourage individuals to participate in their benefits and services, and schools are
considered a good location for identifying Medicaid-eligible children, including those with
special needs.
"IDEA, 20 U.S.C. 1400, was first enacted in 1975. It covers children with disabilities in public
schools and emphasizes special education; it also covers such related services as transportation,
speech pathology and audiology, psychological services, physical and occupational therapy, and
counseling. Medicaid has been authorized to cover health services provided to children under
IDEA through a child's Individualized Education Plan or Individualized Family Services Plan,
provided the services are covered in the state's Medicaid plan, or if medically necessary, through
EPSDT. Medicaid funds have been available for IDEA services since the enactment of the
Medicare Catastrophic Coverage Act of 1988 (P.L. 100-360).
"EPSDT is Medicaid's set of comprehensive and preventive health care services to Medicaid-
eligible children under age 21. The EPSDT program provides Medicaid coverage for any
medically necessary service, regardless of whether the service is covered in a state's Medicaid
plan.
3
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HCFA guidance states that, to claim reimbursement for administrative costs, the schools must
first identify the administrative activities associated with providing the Medicaid-covered health
services and then determine their direct and indirect costs.⁵ Different types of administrative
activities can be totally, partially, or not eligible for Medicaid reimbursement. For some
administrative activities related to Medicaid eligible and noneligible children, the share of
Medicaid eligibles among all children is applied to the activities' costs, which are claimed as
Medicaid administrative costs. In addition, time studies, which track staff activities during a set
period, are often used to determine the allocation between Medicaid and non-Medicaid
administrative activities.
For administrative costs to be claimed under Medicaid, they must be specified in an approved
cost allocation plan.6 According to HCFA guidance, a school district should develop its cost
allocation plan in concert with the state Medicaid agency, which in turn forwards the plan to the
responsible HCFA region for approval. Subsequently, the school district uses the approved plan
as the basis for the cost report it forwards to the state, which then forwards claims to HCFA for
Medicaid reimbursement.
Previous Financing Mechanisms
Used by States and Later Prohibited in Law
The creative financing mechanisms that states began using in the mid-1980s to maximize federal
Medicaid contributions, without effectively committing their own share of matching funds, took
various forms. Onc involved using provider-specific tax revenues or provider donations paid to
the state being returned to the providers with federal matching funds added. Another mechanism
involved states' generating federal matching funds by increasing payment rates for a particular
group of public providers, such as nursing homes or public hospitals. However, these providers,
through the use of intergovernmental transfers, returned all or the majority of federal and state
funds to state treasuries. Those practices that involved hospitals contributed to an explosive
increase in disproportionate share hospital (DSH) payments made to hospitals that serve larger
proportions of low-income and Medicaid beneficiaries--from $1 billion in 1990 to $17 billion in
1992. Federal legislation in 1991 and 1993 banned certain of these practices and placed limits
on allowable reimbursable expenditures. However, the legislation did not restrict states' use of
intergovernmental transfers.
While these legislative actions significantly reduced the states' use of these financing
mechanisms, states continued to find innovative ways to obtain additional federal funds. More
recently, some state Medicaid programs were found to be making DSH payments to state
psychiatric hospitals that were far larger on average than payments made to other types of local
⁵Direct costs are activities that can be identified with a specific final cost objective, such as
Medicaid administrative functions. Indirect costs are those incurred for a common or joint
purpose that cannot be readily assigned to a single cost objective.
Cost allocation plans must abide by the cost allocation principles described in the Office of
Management and Budget Circular A-87, which requires, among other things, that costs be
"necessary and reasonable" and "allocable" to the Medicaid program.
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public and private hospitals. Overall, DSH payments to state psychiatric hospitals in six states
we reviewed averaged about $29 million per hospital compared with $1.75 million for private
hospitals. Such payments enabled the states to obtain federal matching funds to indirectly cover
costs of services that federal law prohibits Medicaid programs from covering. in response to this
practice, the Balanced Budget Act of 1997 limited the proportion of a state's DSH payments that
can be paid to state psychiatric hospitals.
MEDICAID CLAIMS FOR ADMINISTRATIVE
EXPENDITURES HAVE INCREASED
DRAMATICALLY IN SOME STATES
A growing number of school districts are making claims for Medicaid's reimbursement of
school-based administrative services. From 1995 to 1998, Medicaid expenditures claimed for
administrative activities increased fivefold in the 10 states for which we could readily obtain
data.' (See fig.1.) Two of these states-Michigan and Illinois-comprised the majority of the
$387 million increase in administrative expenditures from 1995 through 1998.
"HCFA identified 18 states that make claims for the administrative costs associated with school-
based services. Because Medicaid has no separate benefit category for school-based services,
not all states were readily able to provide information on their administrative expenditures for
schools or school districts.
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Figure 1: Growth in Medicaid School-Based Administrative Claims for 10 States. FY 1995-98
500
Expenditures In Millions
400
300
200
100
0
1995
1996
1997
1998
California
Alaska
Alaska
Alaska
Minois
California
California
California
Minnesota
Illinois
Illinois
Florida
Missouri
Michigan
Michigan
Illinois
Pennsylvania
Minnesota
Minnesota
Massachusetts
Texas
Missouri
Missouri
Michigan
Pennsylvania
Pennsylvania
Minnesota
Texas
Texas
Missouri
Pennsylvania
Texas
Note: State names in bold are those that began claiming school-based administrative
expenditures in the year listed.
Source: State-reported claims.
Increases in Medicaid administrative expenditures claimed reflect a growth in both the number
of schools participating and the size of claims submitted by individual school districts. For
example, from 1996 to 1997, Michigan's Medicaid administrative claims for schools increased
almost threefold, from $79 million to $227 million, which state and school officials indicated
was due primarily to an increasing number of school districts submitting claims. In contrast,
Illinois school districts, which have been claiming Medicaid reimbursement since 1992, continue
*Administrative activities vary considerably in their content and purpose, accounting, in part, for
the differences in expenditures across states. For example, some states report than the
administrative activities claimed in schools primarily reflect outreach efforts on behalf of EPSDT
and other Medicaid benefits. Other states with school-based medical assistance services file
administrative costs related to the provision of medical services, such as coordination and
monitoring of health services and interagency coordination.
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to identify additional activities that they believe are appropriate for Medicaid reimbursement.
Thus, increases in Illinois' expenditures between 1997 and 1998-from $89 million to $145
million-largely reflect increased cost claims from school districts.¹⁰
Barring any policy change, growth in Medicaid administrative cost claims from schoolsis likely
to continue. Federal and state officials reported to us that other states and school districts not
now making claims have expressed interest in obtaining Medicaid reimbursement for health-
related administrative activities in schools. Some state officials noted that they expect to expand
their claiming of costs in the near future and that they are now beginning to develop procedures
and methodologies to support such an expansion. Additionally, HCFA officials commented that
several states are interested in claiming Medicaid-related administrative costs but are "waiting in
the wings" to ascertain whether HCFA will continue to approve certain practices for claiming
administrative costs.
IN SOME STATES. MEDICAID FUNDS
TO REIMBURSE SCHOOLS GO TO STATE
TREASURIES AND PRIVATE FIRMS
Medicaid funds to reimburse schools for administrative activities are distributed differently,
depending on the state. (See fig. 2.)
9Chicago public schools attributed increased Medicaid revenues to additional staff training and
development, legal assistance, and claims reporting assistance.
"Among the 10 states, Pennsylvania was the only state to have steadily lowered its
administrative claims expenditures; Missouri and Texas expenditures remained relatively stable.
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Figure 2: Two Approaches to School-Based Administrative Claiming
School District Receives
School District Receives
Full Federal Match
Partial Federal Match
School
School
District
District
Files Claim
Files Claim
for $200
for $200
Flies Claim
Files Claim
for $200
for $200
*****************
**************
Missouri
Matches
Federal
Matches
Federal
$100
Government
Michigan
$100
Government
Pays
Pays
$100
$60
School
School
District
District
Pays
Private
$20
Firm
Note: Examples assume a federal share of 50 percent.
For example, Arizona, Missouri, and Rhode Island provide all federal funds to the schools,
whereas at least four other states allocate a portion of the federal reimbursement to their general
revenue funds. Officials in two of these states said that, because state budgets fund a portion of
school activities, a school district's share of federal reimbursement for administrative claims is,
in principle, partially funded by the state. Under this reasoning, states believe they are entitled to
some share of the federal reimbursements claimed by school districts. The three states we visited
kept some portion of the federal share, ranging from 3 percent in Massachusetts to 40 percent in
Michigan. Federal dollars contributed about $1.5 million, $8 million, and $47 million to the
fiscal year 1998 revenues of Massachusetts, Illinois, and Michigan, respectively. Since
Michigan schools began claiming for administrative reimbursement in fiscal year 1996, the state
has retained close to $106 million of the federal share.
Some school districts employ private firms to facilitate their efforts to claim Medicaid
reimbursement. These firms typically receive as compensation a share of the revenues generated
by the claims. By receiving a percentage rather than a fixed fee, these firms have an incentive to
maximize the amount of reimbursements claimed. Some school districts in the states we visited
paid these firms fees ranging from 3 percent to 25 percent of the federal reimbursement amount,
although most commonly, the fee paid was between 9 and 12 percent. One private firm is
proposing to charge a flat fee that is based on the fees it has charged historically-which were
originally set as a percentage of a school district's federal reimbursement received.
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Marketing materials from two private firms suggest why concerns have been expressed that
school districts' administrative claims may exceed reasonable or allowable costs. In these
materials, the private firms note that their objectives are to maximize Medicaid revenues for
schools and assert that they can maximine a school's sclaim potential by training school personnel
to follow their methods for claiming costs. One firm emphasizes that, on average, its clients
annually receive over 30 percent more per student than a competitor's.
INSUFFICIENT HCFA GUIDANCE. UNEVEN
OVERSIGHT HAVE LED TO QUESTIONABLE
PRACTICES FOR CLAIMING REIMBURSEMENT
Insufficient guidance, combined with uneven oversight across HCFA regions, has led to
questionable billing practices by states and inconsistent federal review of states' administrative
claims for school-based services. HCFA has not provided clear or consistent guidance to its
regional offices regarding criteria for determining reasonable costs or appropriate method's for
claiming administrative costs.
What are submitted by states and approved or denied by HCFA regions as allowable
administrative costs vary widely. In the absence of specific direction from the HCFA central
office, regional offices interpreted and applied the available guidance inconsistently. Practices
that HCFA has allowed in one state it has not allowed in others, resulting in confusion for
claimants and creating an environment in which claimants are not discouraged from testing
questionable billing practices.
Broad HCFA Guidance Leaves
Payment Determinations Largely
to Regional Discretion
HCFA's guidance on how school districts should allocate costs to Medicaid is general to enable
federal requirements to accommodate the features of 56 individual Medicaid programs. The
burden of oversight necessary to ensure that administrative costs are reasonable and
appropriately allocable to the Medicaid program falls to HCFA's 10 regional offices. However,
guidance to the regional offices has been limned, leaving interpretation of policy and procedures
up to each office. As a result, HCFA oversight of school-based administrative cost claims has
been uneven, resulting in case-by-case determinations.
Generally, HCFA directs states to follow federal requirements for administrative cost allocation
found in Office of Management and Budget (OMB) Circular A-87, which establishes the
principles and standards for determining "reasonable" and "allocable" costs for federal awards
such as Medicaid. In addition, the Medicaid statute says that Medicaid methods of
administration should be 'found to be necessary by the Secretary [of Health and Human
Services] for proper and efficient administration" of a state's Medicaid program.¹¹
"Section 1902(a)(4)(A) of the Social Security Act.
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HCFA developed a technical assistance guide for states and school districts to provide more
detailed guidance on Medicaid requirements associated with seeking payment for covered:
services (including administrative claims) in school-based settings." Essentially, the guide™
echoes the requirements in OMB Circular A-87 and Medicaid regulations while providing a few
illustrations. However, the guide does not specify criteria that would permit the systematic
determination of what is reasonable and allocable to Medicaid.
The HCFA regional offices have been unsuccessful in obtaining decisive and consistent guidance
from the agency's central office. For example, in 1997, a regional office requested assistance in
determining what was allowable for one state's administrative claims. Multiple discussions
between the two HCFA offices did not produce definitive answers. In another instance, an
regional office consulted with the central office about deferring payment of a state's
administrative claims until the state provided additional supporting documentation." Instead, the
regional office was told to pay the state but perform a postpayment review of the claims.¹⁴ In a
similar instance, another regional office deferred paying a state's questionable claims at its own
initiative because it did not believe consultation was needed.
HCFA Oversight Fails to
Discourage Suspect Billing Practices
Without specific guidance, federal determinations of the appropriateness of administrative
claiming practices are inconsistent, permitting the approval of claims that in some cases may be
suspect. Some regions have conducted very prescriptive approaches to administrative cost:
claiming; others have been more "hands-off." In those regions that have been "hands off,"
some states have tested the limits of reasonable and allowable standards, potentially maximizing
Medicaid reimbursement inappropriately.
In our discussions with five regional offices, we found that their approval varied regarding
states' approaches to allocating administrative costs to Medicaid. We found only one instance in
which a HCFA region had been involved in the initial design of a state's cost allocation method.
In other cases, state Medicaid agencies met with the regional offices for a "courtesy visit" to
present their finalized cost allocation methods. In still other cases, the regional offices had no
knowledge of a cost allocation plan in advance of a state's submission of administrative claims.
In these cases, some regional offices deferred payments, others consulted with the centralioffice
about deferment, and still others paid the claims without further review.
"See HCFA, Center for Medicaid and State Operations, Medicaid and School Health: A
Technical Assistance Guide (Washington, D.C.: HCFA, Aug. 1997).
"According to federal Medicaid regulations at 42 C.F.R. 430.40 (b), HCFA may defer a claim
when it is unable to determine, on the basis of available documentation, whether a claim should
be allowed.
"In contrast to a deferral, a postpayment review retroactively reviews practices to emsure:that the
claims paid were allowable.
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We found that regional offices varied in their response to the use of various cost allocation
practices that some school districts employ to enhance the amounts of Medicaid reimbursement
claimed. The following are examples:
Two regional offices found instances in which school personnel charged to Medicaid 100
percent of their activities, only a portion of which were health-related. In response, one of
the regional offices identified and deferred over $33 million in inappropriate claims, while
the other has proposed a deferral to HCFA's central office. In contrast, another regional
office found similar instances of inappropriately billed activities but reported to us taking no
action that resulted in changes on the part of the claimants.
In two instances within one region, private firms designed activity code definitions for
outreach activities that claimed 100-percent reimbursement from Medicaid, even though the
activities were performed for services associated with other programs, such as WIC¹⁵ and
Food Stamps. Other HCFA regions disapproved these same outreach activities when
claimed by states in their jurisdiction.
The HCFA regional offices vary in their treatment of administrative activities performed by
skilled professional medical personnel, which under certain conditions, can be matched at a
75-percent rate. 16 Where an enhanced matching rate was allowed, claims may have been
overstated because, counter to Medicaid regulations, no distinction was made between skilled
and unskilled activities. Two HCFA regions disallowed an enhanced matching rate
altogether, with one stating that "there was no way in the world" to document that certain
activities required a skilled level of performance.
In one instance, a consortium of school districts used a sampling methodology for identifying
Medicaid-cligible children that did not include sampling data from all the school districts in
the consortium. To the extent that lower-income school districts were overrepresented using
this method, the inflated estimate of the proportion of Medicaid-eligible children increases
the amount of Medicaid reimbursement for the consortium's administrative claims.
"WIC, or the Special Supplemental Nutrition Program for Women, Infants, and Children is a
federally funded nutrition assistance program that provides lower-income pregnant and
postpartum women, infants, and children up to age 5 with supplemental foods, nutrition
counseling, and access to heath care services.
16An enhanced matching rate of 75 percent is available for administrative activities performed by
skilled professionals only if, among other things, they (1) have the appropriate credentials and
(2) perform an activity that requires professional medical knowledge and skills. Hypothetically,
a physical therapist would be eligible for the enhanced rate for time spent coordinating medical
services but would be expected to claim at the 50 percent matching rate for time spent
photocopying.
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CONCLUDING OBSERVATIONS
Close to one-half of Medicaid-eligible individuals are children, making schools an important:
arena for Medicaid services. Even for schools that do not directly provide Medicaid services,
administrative activities can help identify, refer, screen, and enroll eligible children fen
appropriate, covered services. Outreach and identification activities-in many and variedi
settings-help ensure that the nation's most vulnerable children receive routine preventive:Health
care or ongoing primary care and treatment.
In stepping into this arena, however, some school district and state practices appear intent on
maximizing their receipt of Medicaid funds through suspect financing mechanisms. Vithout
additional guidance and consistent oversight by HCFA, many school districts with mnimal
knowledge of Medicaid and its billing requirements have chosen to contract with private firms.
This places these firms "in the driver's seat," where they design the methods to claim
administrative costs, train school personnel to apply these methods, and submit administrative
claims to the state Medicaid agencies to obtain the federal reimbursement that provides the:basis
for their fees.
Embedded in this process are incentives for both the states and private firms to maximize
Medicaid reimbursements. By being able to capture a share of the school district's federal
payments, states and private firms are motivated to experiment with "creative" billing practices.
At the same time, the treatment of these practices by some of HCFA's regional offices fails to
adequately safeguard Medicaid dollars.
Striking a balance between the stewardship of Medicaid funds and the need for flexible
approaches to ensure the coverage and treatment of eligible children is difficult. HCFA issima
position to explore policies and practices in partnership with states-and both have afiduciary
responsibility to administer Medicaid efficiently and effectively. Growing claims forschool-
based administrative services call for prompt attention hv the federal government andthe states.
MEDICAID AND SCHOOL-BASED HEALTH SERVICES (SBHS)
An informational Briefing for the HCFA Administrator
2/17/99
Materials Included In This Briefing Package
Briefing Outline
Page 2
Summary Reading Material
Background
Page 3
Definitions
Page 4
Major issues
Pages 5-6
HCFA Activities
Pages 7-8
Next Steps
Page 9
Attachment 1
Strategy and Timeline
Pages 10-12
Attachment 2
School-Based Health
Pages 13-16
Services Survey
Attachment 3
Draft memo to ARAs
Pages 17-19
clarifying policies on
transportation and bundling
of services
Attachment 4
Oversight: State Plan
Pages 20-23
Process and Financial
Management Reviews
2/17/99, HCFA/CMSO
MEDICAID AND SCHOOL-BASED HEALTH SERVICES (SBHS)
An informational Briefing for the HCFA Administrator
BRIEFING OUTLINE
-
Background, Definition and Basic Medicaid Coverage Requirements for SBHSs
-
Major Problems/Issues
-
Administrative Claiming
-
Reimbursement
1.
Fee-for-Service
2.
Bundling
3.
Capitation
-
Transportation
-
HCFA Activities to Address these Problems/Issues
-
Strategy and Timeline
-
School-Based Guide
-
Regional Office Memo
-
Addendum to the Guide
-
Survey the ROs on Major Issues
-
State Specific Issues
-
Florida
-
Michigan
-
Hill Strategy
-
Next Steps
-
Taskforce
-
Administrative Claiming Review
-
Monitoring State Plans
-
Site Visits
-
Training
-
Keeping the Hill Informed
Background
School-based health services (SBHSs) can play an important role in assuring that
adolescents and children receive needed health care in a setting that is appropriate,
while assuring that there is minimum disruption in the process of educating the
child. Medicaid can play an important role by covering SBHSs for
Medicaid-eligible children and assuring that these services are medically necessary
and are provided effectively and efficiently. The school setting also offers the
unique advantage and opportunity to reach out to children and families to inform
and encourage them to enroll in the Medicaid or CHIP programs.
Before the Medicare Catastrophic Coverage Act (MCCA) of 1988, some State
Medicaid programs were covering and reimbursing for "routine" EPSDT
screenings, examinations and treatment of acute, uncomplicated medical problems
in school-based/school-linked clinics. HCFA's policy was to encourage more of
this type of activity as a way to more effectively reach Medicaid-eligible children.
With enactment of the MCCA of 1988, Medicaid, rather than the Department of
Education, became the primary payor for the medical services provided to
Medicaid-eligible children with special needs under the Individuals with
Disabilities Education Act (IDEA) who have Individualized Education Plans
(IEPs). This dramatically broadened the landscape for Medicaid coverage and
reimbursement of school-based health services.
During the last couple of years we have seen a surge of State interest in claiming
for Medicaid reimbursement for school-based health services. Most of this recent
activity is related to medical services and associated administrative costs for
Medicaid-eligible children with special needs under the Individuals with
Disabilities Education Act (IDEA).
Over the past 15 months, HCFA has been engaged in a number of activities to develop
and clarify policies related to Medicaid and School-Based Health Services in hopes of
preventing abuse and assuring accountability in this area. Attached is a summary of our
policies, areas of concern that have arisen, and HCFA's action plan for resolving these
issues.
Definition and Basic Medicaid Coverage Requirements for SBHSs
o
School-based health services (SBHSs) are those medical services provided to
school-aged children on-site at the school or at school-linked clinics. The medical
services may include: routine/preventive medical screenings and examinations;
diagnosis and treatment of acute, uncomplicated problems (e.g., eye, ear or upper
respiratory problems); monitoring and treatment of chronic medical conditions
(e.g., seizure disorders and other conditions for which medication is taken
regularly); and the provision of medical services to children with special needs
under the Individuals with Disabilities Act (IDEA).
o
School-based health services are not specifically mentioned in the Social Security
Act's 1905(a) listing of coverable Medicaid services. Nevertheless, they may be
covered by State Medicaid agencies under a variety of 1905(a) service categories
such as: physician services; services of non-physician licensed practitioners (e.g.,
nurse practitioners, psychologists); physical therapy, occupational therapy and
services for individuals with speech, hearing and language disorders; rehabilitative
services. In addition to meeting 1905(a) requirements as a listed service category,
in order to be covered by Medicaid, school-based health services must meet other
basic federal requirements: the services must be considered primarily medical (not
educational) in nature; be provided by a Medicaid enrolled and qualified provider;
be considered medically necessary for the individual receiving the service.
Major Problems/Issues
Three major areas/issues of concern have begun to emerge during the past year as States
have proposed to cover SBHSs. These areas/issues all deal with providing services to
Medicaid-eligible children under IDEA. The areas are: administrative claiming; the
reimbursement methodology used to pay for SBHSs (fee-for-service VS bundling vs
capitated rate); and transportation.
Administrative Claiming
In addition to the direct provision of medical services, schools (or school districts,
local education agencies (LEAs)) may also receive Medicaid reimbursement for
the cost of performing administrative activities which are necessary for the proper
and efficient administration of the Medicaid program. HCFA has developed and
approved a series of allowable administrative activity claiming codes which have
been used by some regional offices in their review of State claiming plans.
Allowable administrative activities for which Medicaid FFP is available include:
outreach to inform potential beneficiaries how to apply for Medicaid and access
Medicaid services; arranging, either directly or through referral to appropriate
agencies, covered Medicaid services; and conducting follow-up to ensure children
receive needed services.
Our concerns about administrative claiming involve the methodology used by
some states to document their administrative claims, the fact that some states have
expanded the definition of approved administrative activities beyond those
approved by HCFA and/or some States may have double claimed administrative
costs by claiming for activities that have already been claimed as part of the
Medicaid service or been paid by DOE.
Reimbursement
There are basically three different ways that Medicaid can reimburse for SBHSs.
Fee-for-Service. The traditional way is to pay for each medical service
(e.g., physical therapy session, etc.) on a fee-for-service basis, with each
service provided to a Medicaid-eligible beneficiary generating a claim
which is submitted to the State Medicaid agency.
Bundling. More recently, schools have developed and submitted proposals
to bundle a package of medical services that would be expected to be
provided to IEP Medicaid-eligible children, who are stratified into various
disability categories, into a single payment rate that is submitted on a
weekly or monthly basis to the State Medicaid agency. As many as seven
or eight services might be included in the bundled rate (e.g., physical
therapy, speech therapy, vision services, etc.) depending on the degree of
disability and stratification category of the child. The cost for the bundled
rate is calculated by looking at the services received by and average costs of
a statistically valid sample of children in each stratification category. In
order to apply the bundled rate methodology, the same documentation must
be kept as in fee-for-service reimbursement and there must be periodic
reviews done by the State to reconcile claims to services and costs.
Capitation. The capitated rate is a per student rate that the State Medicaid
agency pays the school to cover the same services as the bundled package
of services, but is determined after undergoing a process of competitive
bidding and negotiation.
The major problem in this area stems from the desire of schools to receive
a bundled rate payment from Medicaid but to not have to keep the required
documentation or to periodically review and reconcile claims. In other
words, the schools want to receive a capitated payment rate for each
Medicaid child they serve under IDEA without going through a competitive
bidding process, without documenting the services actually provided and
without undergoing the review and reconciliation process.
*
Transportation
Medicaid is required to ensure that the transportation needs of beneficiaries to and
from necessary medical care are met and that when several modes of transportation
are available the least costly appropriate to the medical needs of the beneficiary is
used. A number of States are receiving payments for the cost of transporting
children with an IEP to and from school in regular (yellow) school buses. HCFA
policy has not been entirely clear whether such costs can be reimbursed by
Medicaid when it is the responsibility of the State educational system to provide
regular school bus transportation. Medicaid policy states that reimbursement is
available when the child receives a medical service in school on that day and when
transportation is listed as a needed service in the IEP. Department of Education
policy is that children who ride to school in the regular bus should not have
transportation listed in their IEP's. However, a number of States are including
transportation in the IEP's of all children so that they can claim FFP. It is
Medicaid policy to pay for the costs of transporting Medicaid children with an IEP
in specialized buses (i.e., buses where special equipment is needed for
transportation) to and from school.
HCFA Activities to Address these Problems/Issues
HCFA has responded to this recent surge of State interest and activity in Medicaid
funding of SBHSs and to these perceived problems in the following ways:
Strategy and Timeline. Developing a "Strategy and Time-Line" which describes
the various activities underway by HCFA and the schedule for their completion.
The activities are divided into three major areas: those directed at the compilation
of basic federal policy for SBHSs; ongoing efforts to manage the Medicaid SBHS
program; and those directed at a Hill strategy. (Attachment 1)
School-Based Guide. In August 1997 we published the "Medicaid and School
Health" technical guide. The Guide was sent to the regional offices, states and
others. It is also available on the HCFA Web. The Guide describes the basic
federal requirements that must be met by States in covering and claiming for
school-based health services for IEP and non-IEP Medicaid children.
Regional Office Memo. In July 1998 we sent a memo to the ROs requesting that
they (continue) sending us copies of all school-based health services state plan
amendments (SPAs), as a way for us to become more informed about what was
happening in this area.
Addendum to the Guide. Based on our discussions with States, ROs and the SPAs
that were sent us, we developed a Draft Addendum to the Guide which was sent
to the ROs on October 5, 1998 for their review and comments. The Addendum
included proposed policy about the key issues and problems that were beginning to
emerge from our work in this area such as administrative claiming, bundling vs
capitation payment rates for services and transportation. We also asked the ROs to
identify any other issues that were of concern to them and for which clarifying
policies might be needed. We have now received comments from all the ROs and
will be analyzing the comments with our RO counterparts to develop detailed
policies in these areas. When completed the Addendum along with the SBHS
Guide will constitute our basic federal policies pertaining to Medicaid and SBHSs
and will need to be published and released widely.
Survey the ROs on Major Issues. Several weeks ago, a survey was sent to the ROs
to identify the States that are: claiming for SBHSs; using a fee-for-service, bundled
rate or capitated rate methodology; claiming administrative costs; and claiming
transportation costs for IEP children transported to and from school in a regular
(yellow) school bus. (Attachment 2 is a summary of the survey findings.)
State Specific Issues. Recently, the CMSO made decisions regarding two
school-based issues in a particular State (i.e., Florida). The decisions clarify
HCFA's policies regarding several basic federal Medicaid requirements
concerning the use of the bundled vs. the capitated rate methodology (i.e.,
documentation requirements for bundling of services, requirement to competitively
bid contracts for capitated rate, and periodic review and reconciling claims for
bundled rate methodology) and transportation of Medicaid children with an IEP by
regular (yellow) school buses to and from school. Because policies in these two
areas are urgently needed to manage the SBHS program in one state and will have
an impact on the SBHS program in a number of other states, we will be sending a
policy memo on these issues to the regional offices very soon. (See Attachment
3). A State Medicaid Director's letter on these issues will follow.
In another State (Michigan) HCFA regional office with central office support has
been investigating SBHS administrative claims that appear to be inappropriate.
The regional office is beginning a financial management review of Michigan's
administrative claiming procedures which may ultimately result in a deferral.
Hill Strategy. On November 24, 1998, the CMSO Director and HCFA staff
briefed several staff of the House Commerce Committee and the Senate Finance
Committee. The Hill staff are very concerned about abuses in this area and the
involvement of consultants in developing and negotiating large SBHS plans.
Again on December 10, 1998 HCFA staff gave an oral briefing to OMB staff on
these same issues. During these briefings questions have been asked about the
process that takes place when State Medicaid agencies seek HCFA approval for a
program to claim FFP for SBHSs and the process for monitoring the program to
prevent abuses. Attachment 4 briefly describe these things and identifies some of
the successes the regional offices have had in conducting financial management
reviews of school based health services.
Next Steps
o
We will form a Taskgroup consisting of the Central Office SBHS Team and
selected Regional Office DMSO staff to review the RO comments on the Draft
Addendum and to propose SBHS policies to be incorporated in the Addendum.
o
We will continue our review of administrative claiming in Michigan. The RO has
conducted an initial meeting with the State to discuss the problems with the State's
claiming methodology. The State has indicated to the RO a willingness to work
with HCFA to bring its claiming into compliance with Medicaid requirements.
We will work with the Regions to realign their priorities to emphasize review and
monitoring of SBHS plans.
We will draft and obtain a approval for the memo to the Regions and a State
Medicaid Director's letter on two issues, transportation and requirements for using
a bundled vs capitated rate methodology, which are urgently needed to correct
problems/abuses occurring in these areas.
We will conduct site visits alone and with Hill staff to gain more real world
experience about the SBHS setting and services.
We will conduct training sessions with State and RO staff as decisions are
made on SBHS policies.
Much of our time will continue to be devoted to ongoing management of the
Medicaid SBHS program. This activity involves ongoing review, negotiation and
approval of SBHS state plan amendments.
We will provide Hill staff with the information they requested at our 11/24/98
briefing as well as additional information as it becomes available SO that they may
be fully informed about our activities to clarify and resolve SBHS issues.
Attachments:
1.
Strategy and Timeline
2.
SBHS Survey
3.
Draft ARA Memo to Clarify Transportation and Bundling Policies
4.
Oversight: State Plan Process and Financial Management Reviews
Attachment ISCHOOL BASED SERVICES -- STRATEGY AND TIMELINE
(Updated -- 1/21/99)
Project
Completion
Lead
Status
Dates
(in bold)
Compilation of Federal Policy Requirements
1)
Publication of "Medicaid and School Health: A
Completed
CMSO/SBHS Team
Completed.
Technical Guide"
August 1997
2)
Publication of the Addendum to the Guide
April 1999
CMSO/SBHS Team
Numerous fact finding activities
*
Submit Draft Addendum to RO for comment.
10/5/98
underway. Comments received from all
*
Form CO/RO Taskgroup to analyze RO comments and
Partner: RO/DMSO
RO's raising a variety of issues. CO
develop SBHS policies to be addressed in Addendum.
2/1/99
staff has completed review and
*
Survey States to determine fee-for-service vs. bundling
summary of RO comments. SMD letter
VS. capitated rates, as well as administrative claiming.
12/7/98
under development.
*
Issue ARA memorandum and SMD letter clarifying
2/1/99 (ARAs)
HCFA policies on transportation and payment
4/1/99 (SMDs)
methodologies for SBHS.
3)
Publication of Administrative Claiming Operational
June 1999
CMSO/QPMG staff
Under development.
Guidelines
Ongoing Efforts to Manage Medicaid SBHS Program
1)
Continue to Review and Approve SBHS State Plan
Ongoing
RO/DMSO Staff
This effort has been the most time
Amendments
consuming for CO staff thus far.
Partners: CO Staff
Conference calls, memos and letters will
continue to be required to help States
implement Medicaid policies for SBHS.
2) Specifically Review the "Administrative Claiming"
5/1/99
RO/DMSO
Meeting between the RO and Michigan
Activities in the State of Michigan
Medicaid Agency staff was held on
Partners: CMSO/SBHS
December 11th. The RO is now
Team
working with the state and CO to
identify acceptable administrative
claiming activities and to revise the
administrative codes accordingly. The
RO will defer the state's administrative
claims pending identification of
acceptable codes.
3) Conduct Site Visits at Nearby Schools That Can Provide
Spring/Summer
CMSO/SBHS Team
These visits were suggested at recent
Positive Examples
1999
Hill meetings as a means to identify
Partners: RO, Hill Staff
schools with good operating systems
and accountability, as well as to provide
more information to both the Hill and
HCFA about actual practices.
4) Training Meetings for RO Staff/States
Summer/Fall 1999
CMSO/SBHS Team
The training will give RO staff an
opportunity to learn about SBHS
Partners: RO/DMSO
policies related to transportation,
bundling, and administrative claiming in
order to provide additional technical
assistance to the States.
Hill Strategy
1) Respond to Hill Staff Requests from 11/24/98
2/99
CMSO/SBHS Team
Briefing materials under
Briefing
development for the Administrator.
*
Reimbursement Methodology
Partners: RO/DMSO
Further materials to be developed
*
Transportation Issues
for response to the Hill.
*
"Administrative" claiming Issues
2) Proactively Continue to Keep Hill Staff Informed
Ongoing
CMSO/SBHS Team
This will allow HCFA to be
About New Policy Developments
proactive with the Hill on these
issues and may assist us in clarifying
policies as well.
3) Joint Site Visits with Hill Staff to Neighboring
2/99
CMSO/SBHS Team
Visits are being scheduled for
States to Observe and Learn about Medicaid SBHS
February in Philadelphia. Will
Functions.
Partners: RO/DMSO
provide an opportunity for Hill staff
to gain more experience in this area.
Attachment 2
SCHOOL BASED HEALTH SERVICES SURVEY
I.A.
States that Enroll and Reimburse Schools as Providers of Medicaid School-Based
Services
Region I
Connecticut - reimburses using a bundled rate with an annual reconciliation
process.
Maine reimburses using a bundled rate. The State does not reconcile.
Massachusetts reimburses using a bundled rate. The State does not reconcile.
New Hampshire reimburses on a regular fee-for-service basis.
Rhode Island reimburses on a regular fee-for-service basis.
Vermont reimburses for select services on a regular fee-for-service basis and
reimburses for others using a bundled rate. The State does not reconcile.
Region II
New Jersey reimburses using a bundled rate which is adjusted annually based on
the MCPI. The State does not reconcile.
New York reimburses on a regular fee-for-service basis.
Region III
Delaware reimburses on a regular fee-for-service basis.
District of Columbia reimburses most schools on a regular fee-for-service basis.
However, 2 schools are reimbursed using a bundled per diem rate, which has
never been reconciled.
Maryland reimburses on a regular fee-for-service basis.
Pennsylvania reimburses on a regular fee-for-service basis.
Virginia reimburses on a regular fee-for-service basis.
West Virginia reimburses on a regular fee-for-service basis.
Region IV
Florida reimburses on a regular fee-for-service basis.
Georgia reimburses on a regular fee-for-service basis.
Kentucky reimburses on a regular fee-for-service basis.
North Carolina has a pending plan amendment to reimburse for services using
a bundled rate. They are currently paying that rate to schools which have
contracted with Public Consulting Group. The State proposes reconciling
the rate annually. Other schools are being paid on a regular
fee-for-service basis.
South Carolina reimburses on a regular fee-for-service basis.
Region V
Illinois reimburses on a regular fee-for-service basis.
Indiana reimburses on a regular fee-for-service basis.
Michigan reimburses on a regular fee-for-service basis.
Minnesota reimburses on a regular fee-for-service basis.
Ohio reimburses on a cost-based fee-for-service basis.
Wisconsin reimburses on a regular fee-for-service basis.
Region VI
Arkansas currently reimburses on a regular fee-for-service basis. However, the
State has a plan amendment pending to pay using a bundled rate. The
issue of reconciliation has not been resolved.
Louisiana reimburses on a regular fee-for-service basis.
New Mexico reimburses on a regular fee-for-service basis.
Oklahoma reimburses on a regular fee-for-service basis.
Texas reimburses on a regular fee-for-service basis.
Region VII
Iowa reimburses on a regular fee-for-service basis.
Nebraska reimburses on a regular fee-for-service basis.
Kansas reimburses using a bundled rate. The State does not reconcile.
Missouri reimburses on a regular fee-for-service basis.
Region VIII
Colorado reimburses on a regular fee-for-service basis.
South Dakota reimburses on a regular fee-for-service basis.
Utah uses a daily bundled rate. The State does not reconcile.
Region IX
California reimburses on a regular fee-for-service basis.
Nevada reimburses on a regular fee-for-service basis. The State has a plan
amendment pending to bundle services.
Region X
Idaho (no reimbursement information available).
Oregon (no reimbursement information available).
Washington (no reimbursement information available).
Total of States reimbursing fee-for-service: 30
Total of States reimbursing using a bundled rate: 6
Total of States using fee-for service and bundling: 3
Total of States which reconcile the bundled rate: 1
Total of States reimbursing using a capitated rate: 0
I.B.
States That Do Not Enroll Schools as Providers of Services
Alabama - Therapy services for special needs children are provided by Medicaid-enrolled
therapists employed by the Department of Education. The therapists bill Medicaid directly on a
fee-for-service basis and reassign the claims to the Department of Education. EPSDT services
are provided in schools by Department of Health personnel. The Department of Health bills
Medicaid for those services on a fee-for-service basis.
Alaska
Arizona
Hawaii
Mississippi
Montana
North Dakota
Tennessee
Wyoming
II.
States Which Claim Administrative Costs for School-Based Activities
Region I
Massachusetts
Rhode Island
New Hampshire does not claim for administrative costs. Connecticut, Maine
and Vermont do not claim for administrative costs at the administrative
rate; some administrative costs are included in the bundled rate.
Region II
New Jersey has made a claim which has been deferred and will be disallowed for
lack of documentation.
New York has made a claim which has been deferred for lack of documentation.
Region III
Delaware
Pennsylvania
West Virginia
Maryland, Virginia and the District do not claim for administrative costs.
Region IV
Florida
Alabama, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and
Tennessee do not currently claim for administrative costs.
Region V
Illinois
Michigan
Minnesota
Indiana, Ohio and Wisconsin do not currently claim for
administrative costs but are all in discussions with the RO to do so.
Region VI
Texas
Arkansas, Louisiana, New Mexico and Oklahoma do not currently claim for
administrative costs. (Oklahoma is working towards claiming).
Region VII
Missouri
Iowa, Kansas and Nebraska do not currently claim for administrative costs.
Region VIII
Colorado (although it is preparing to do so), Montana, North Dakota,
South Dakota, Utah and Wyoming do not currently claim for
administrative activities.
Region IX
Arizona
California
Hawaii and Nevada do not currently claim for administrative activities.
Region X
Alaska
Oregon
Washington
Idaho does not currently claim for administrative activities.
Total number of States claiming for school-based related administrative activities: 18
III.
States Claiming Transportation Costs to and From the School for Children Who
Receive an IEP Medical Service on that Day and Ride to School on the Regular
Yellow School Bus
Region I
Maine and Massachusetts
Region II
New Jersey and New York
Region III
Maryland and Delaware
Region IV
Florida
Region V
Ohio and Wisconsin claim as a service cost. Illinois, Michigan and Minnesota
claim as an administrative cost.
Region VI
New Mexico and Texas
Region VII
Missouri
Region VIII
None.
Region IX
Nevada
Region X
None.
Total Number of States claiming regular school bus transportation as an administrative or service
cost: 16
Attachment 3
Date:
DRAFT
From: Director
Center for Medicaid and State Operations
Subject: Medicaid Coverage of School-Based Services - Requirements for Bundling and
Transportation Payment--ACTION
To:
Associate Regional Administrators
Division of Medicaid and State Operations
Regions I-X
As you know, a number of issues have arisen recently concerning reimbursement for
school-based health services under Medicaid. We were recently asked to brief Congressional
and Office of Management and Budget (OMB) staff on HCFA's Medicaid school-based health
services policies and activities. Congressional and OMB staff were particularly concerned about
State claiming for school-related transportation services and State use of a bundled rate to pay for
medical services provided to Medicaid children in schools as well as other issues including
administrative claiming. We have had extensive discussions with the Department of Education
and the Office of the General Counsel (OGC) on the first two of these issues and believe it is
necessary to clarify HCFA policy in these two areas as quickly as possible via this memorandum.
At a later date, these policy clarifications will be formally incorporated into the 1997 Medicaid
and School Health Technical Assistance Guide as an addendum along with any other issues
identified by the central office/regional office school-based services workgroup as requiring
clarification. We will also have future clarifications on other areas of concern.
Transportation
The Medicaid and School Health Technical Assistance Guide indicates that transportation to and
from school may be claimed as a Medicaid service when the child receives a medical service in
school on a particular day and when transportation is specifically listed in the Individual
Education Plan (IEP) as a required service. The Department of Education, which has
responsibility for development of IEPs under the Individuals with Disabilities Act (IDEA), has
clarified that an IEP should include only specialized services that a child would not otherwise
receive in the course of attending school. Therefore, a child with special education needs under
IDEA who rides the regular school bus to school with the other non-special education children
in his neighborhood should not have transportation listed in his IEP and the cost of that bus ride
should not billed to Medicaid. However, if a child requires specialized transportation, such as a
special wheelchair adapted bus, that transportation may be billed to Medicaid if included in the
IEP. Transportation from the school to a provider in the community may also be billed to
Medicaid. This policy applies whether or not the State is claiming at the service or
administrative rate.
When a State claims for transportation services at the service rate, documentation of each service
must be maintained for purposes of an audit trail. This usually takes the form of a trip log
maintained by the provider of the specialized transportation service. As with any rate, the State
must also describe the methodology used to develop the transportation rate, whether it is claimed
as a service or administrative cost. This should include a description of the allocation
methodology used to ensure that Medicaid is only paying for that portion of the specialized mode
of transportation allocable to Medicaid beneficiaries.
Bundled Rate
A number of States have been claiming for school-based services using a "bundled rate"
methodology. This permits schools to minimize billing paperwork by billing on a fee-for-service
basis for a package of medical services, rather than for each individual service provided to each
child. However, this methodology has raised concerns that Medicaid is paying more than it
would on a fee-for-service basis for each individual service. We have had extensive discussions
with OGC and with our financial management staff and have identified the requirements that
must be met by a State in order to reimburse using a bundled rate.
If a State is providing a range of services to children with a wide variety of disabilities, the State
should develop more than one bundled rate, based on the type and level of disability of the child
and the services provided. This will help ensure that the payments most accurately reflect the
services utilized. For example, a State may have classifications for the mentally retarded,
hearing disabled, vision disabled, learning disabled, autistic, multi-handicapped, etc.. A rate
would be developed for each disability classification by looking at the services received by, and
average cost of, a statistically valid sample of children in each disability classification.
The regional office must review each of the bundled rates before the State begins paying them to
ensure that they are based on medical services provided to a statistically valid sample of
Medicaid-eligible children and that only those costs appropriately incurred by those children are
included in the rate. All services must be medical in nature. Medicaid will not pay for the
educational services included in an IEP.
Under Medicaid payment regulations, a bundled rate is considered to be a fee-for-service interim
payment rate. Therefore, on an annual basis the State must review all of the services provided to
its school-based population (i.e., utilization of each of the service components of the "bundle")
and must determine what the cost of those services would have been had they been billed
individually on a fee-for-service basis. If use of the bundled rate resulted in an overpayment
relative to the actual fee-for-service cost of the individual services, the State must adjust the
bundled rate accordingly for the subsequent payment period and may need to make an
adjustment in its claim for FFP. The same is true if use of the bundled rate resulted in an
underpayment. In order to do this, the State must ensure that documentation on the individual
services provided to each child is maintained. The IEP is not sufficient for purposes of
documenting services provided since it identifies only those services which a child should
receive, not those services that the child actually receives.
Results of Regional Office Survey
Based on the results of our recent regional office survey, we know that nine States are
reimbursing for services using some form of bundled rate and sixteen are claiming for
transporting IEP children to and from school on regular school buses. It is important that those
States be immediately notified of the requirements for Federal reimbursement in these two areas.
We expect the regional offices to work to bring their States into conformance with these policies
on a priority basis.
Administrative Claiming
We are aware that, in many regions, administrative claiming for school-based services is of great
concern due to the large amounts of FFP being claimed. Central Office financial management
staff have developed a series of allowable administrative activity claiming codes which have
been used by some regional offices in their review of State claiming plans. They plan to develop
administrative claiming operational guidelines by early summer. Questions related to activities
in States that are planning to claim or are already claiming at the administrative rate for
school-based activities should be directed to Bill Lasowski or Richard Strauss in the Quality and
Performance Management Group.
State Plan Amendments
We ask that you continue to send us copies of all school-based health services State plan
amendments. This process will enable central office staff to be as helpful as possible to your
staff and to the States and will help ensure that coverage and reimbursement policies pertaining
to school-based health services are consistent across the country.
Sally Richardson
Attachment 4
Oversight of School-Based Health Services:
State Plan Process and Financial Management Reviews
Introduction
In general, HCFA monitors Medicaid services through the State plan process. The regional
offices, with central office support when necessary, review the plan amendments as well as the
implementation of service programs to ensure compliance with Federal requirements. Where
questions or concerns are identified, the regional offices may conduct financial management
reviews to verify the acceptability of claims submitted. Financial management staff also review
State requests for Federal matching for administrative activities which are necessary for the
proper and efficient administration of the Medicaid program. The State plan process for
school-based health services is essentially the same as for other Medicaid services.
Background on State Plan Process
The State plan is a comprehensive statement submitted by the State Medicaid agency describing
the nature and scope of its program. The plan contains all information necessary for the
Department to determine whether the plan can be approved as a basis for Federal Financial
Participation (FFP) in the State program. This includes sections describing services covered and
any limitations on those services, eligibility groups, and financial requirements and
methodologies for reimbursing covered services. A plan amendment is submitted to the HCFA
regional office when relevant changes to the plan are required by new Federal statutes, rules,
regulations, interpretations, court decisions or by material changes in State law, organization,
policy, or in the State's operation of the Medicaid program.
A State plan amendment must be reviewed by HCFA within 90 days from its receipt in the
regional office. HCFA must within 90 days 1) approve the plan amendment; 2) send to the State
a written notice of disapproval; or 3) request additional information which must be provided
before a final determination is made. Once a request for additional information is sent to the
State agency, the 90-day clock stops. A new 90-day clock will commence once the State submits
the requested additional information. A final determination must be made after the State submits
the additional information. The 90-day clock cannot be stopped a second time.
The availability of FFP for plan amendments commences from the effective date of the plan
amendment, not with the date of approval. The effective date of a plan amendment may not be
earlier than the first day of the quarter in which a plan amendment is submitted to the regional
office and expenditures for medical assistance for the new provisions of the plan amendment
may not be made earlier than the first day on which the plan is in operation on a statewide basis.
A plan amendment need not be approved prior to the State claiming FFP for the revised or new
plan amendment provisions. A State may claim FFP for services beginning with the effective
date of the plan amendment whether or not the amendment has been formally approved by
HCFA. However, should the amendment ultimately be disapproved, the State would be subject
to a disallowance of the FFP claimed.
The regional offices are responsible for the review of State plans and amendments to ensure that
Federal requirements are met. State plan material about which the regional staff have questions
concerning the application of Federal policy is referred to the HCFA central office for technical
assistance. The central office staff provides policy guidance and offers comments and
suggestions to the regional staff during the course of their negotiations with the State agency.
The Regional Administrators have been delegated the authority to approve state plan
amendments. Only the HCFA Administrator has the authority to disapprove a state plan
amendment.
With regard to administrative claiming, the Medicaid statute and regulations do not contain any
explicit requirements for States to submit a State plan for claiming costs related to administrative
activities, including those related to school-based activities. In general, the Medicaid statute only
requires that State plans provide for "such methods of administration as are found by the
Secretary to be necessary for the proper and efficient administration of the plan." However,
States may request HCFA assistance in developing administrative claiming programs, including
those related to school-based services. Typically, States' claims for Federal financial
participation for administrative costs are submitted through the Medicaid quarterly expenditure
reports (the HCFA-64 reports), and are reviewed by the HCFA regional offices. Questions
arising from reviews of the expenditure reports may result in more formal financial management
reviews of the States administrative claiming activities.
State Plan Process Specific to School-Based Health Services
If a State wants to reimburse for new services in a school-based setting, a State plan amendment
must be submitted which describes the proposed changes in coverage and/or the proposed
reimbursement methodology for those services. The covered services and proposed
reimbursement methodology must meet the Federal requirements. A State plan amendment for
school-based health services is not required if the State is already covering those medical
services under its current State plan and the reimbursement methodology will not change (i.e.,
the rate for providers of school-based services is the same as the rate for non school-based
providers). However, if a State is proposing to bundle school-based health services for
reimbursement, the State plan amendment must describe the methodology used in developing the
bundled rate and the requirements for services documentation. Also, a schedule for the State's
periodic review and reconciliation of costs to services provided must be described in the plan
amendment. (Note: The bundled rate methodology requirements concerning the services
documentation and the reconciliation of costs to services has recently been clarified.)
With regard to school-based health services, we have requested that the regional offices submit
copies of all school-based health services plan amendments to central office. This will foster a
consistent application of policy throughout the regions and alert central office staff to any
potential coverage or reimbursement problems. If additional information is required in making a
final determination, central office staff will provide input and technical assistance to the regional
office which will compose the request for additional information letter and submit it to the State.
The Regional Administrators retain the authority to approve plan amendments. Other aspects of
the plan amendment process remain the same, such as the 90-day clock provisions and the FFP
funding.
Financial Management Reviews
Financial Management Reviews are conducted by regional financial management staff. The
scope of these reviews may be limited to a specific area. Regional office staff usually do
financial management reviews on an exception basis as a result of the State's submittal of the
HCFA-64. These reviews may also be conducted on the State's operations/procedures to ensure
consistency with Federal policies/requirements. An onsite review may be conducted when
specific claims or services are questioned or when concerns are brought to the attention of the
regional or central office staff by beneficiaries, interest groups, etc. Central Office may require
the regional offices to perform a financial management review on a specific area as indicated in
the work plan.
The Medicaid agency submits Form HCFA-37 quarterly which is an estimate of the State
expenditures. The State then submits the HCFA-64 quarterly to central office with a copy to the
regional office. This report is the State's accounting of actual recorded expenditures.
Available Results of Financial Management Reviews
* Boston Regional Office
Massachusetts: Onsite review at four school districts resulted in approximately $700,000
in recovery. This review showed the billing of services for students not in attendance on
the dates billed.
Maine: No onsite review but due to regional office review of their proposal, estimate that
a reduction of $6 million was realized.
Vermont: Regional Office is currently reviewing their proposal.
*New York Regional Office
New York: Two reviews
1)A review of pre-school health claims resulted in a voluntary decreased adjustment by
the State for the entire amount of $32.4 million. The review showed a lack of
documentation. 2)A review-of administrative claiming resulted in a voluntary adjustment
decrease from $185.1 million to $96.1 million. This review reflected unallowable
claiming of educational rather than medical activities.
3) Another review was planned but has been placed on hold. The Office of the Inspector
General may be conducting a review.
New Jersey: A review is planned
*Philadelphia Regional Office
District of Columbia: Onsite review of transportation resulted in a decrease in allowable
costs from $5.8 million to $1.6 million. The review showed that the claims were not
connected to a Medicaid service.
* Atlanta Regional Office
Florida:
1) Review of two school districts in 1995 and 1997 resulted in recommended recovery of
the entire payment of $12,580. This review showed billing for an level of service not
provided, provider qualifications not met, and lack of documentation.
2) Another review is planned in February.
North Carolina: Review of two school districts resulted in a recommended recovery of
$6.7 million. The review showed a lack of documentation, unacceptable reimbursement
rates, duplicate services, etc.
* Chicago Regional Office
Illinois: A review of an administrative claim resulted in one quarter's claim being
deferred.
Michigan: A review of State administrative claiming activities is underway.
* Kansas City Regional Office
Missouri: Review of administrative case management services was performed in FFY
1995.
Kansas: A review of the bundled rate and State plan amendment was conducted. The
plan amendment and payment rate was approved in 1998.
No other financial management reviews have been conducted in the regional offices. The lack of
staff, time and workplan priority to conduct these intensive reviews have been the roadblocks.
There have been no financial management reviews of the reconciliation process in the six States
which currently have a bundled payment rate. Under a bundled rate, the States must periodically
reconcile the costs to services provided.
Audits
Audits are only conducted by the Office of Inspector General. They conduct periodic audits of
State operations in order to determine whether 1) the program is being operated in a cost-efficient
manner, and 2) funds are being properly expended for the purposes for which they were
appropriated under Federal and State law and regulations.
According to the New York Regional Office, an OIG audit may be conducted in New York.
MEDICAID REIMBURSEMENT FOR SCHOOL BASED HEALTH SERVICES
SUMMARY
GAO released a study in June 1999 that detailed the exponential increase in Medicaid claims for
school based services over the past 4 years (from $82 million to $469 million in the 10 states
surveyed) and testified before the Senate Finance Committee that the financing mechanisms
currently being used by states were similar in practice to the recycling schemes used in the late
1980s that substituted provider taxes and donations for state Medicaid match. To address this
problem, HCFA released new guidance clarifying and refining its policy on reimbursement for
school based services and pledging to release additional guidance in the Fall. This guidance was
well received by members of Congress, but has caused considerable unrest in the states.
SERVICES PROVIDED AT SCHOOL BASED CLINICS
Medical services provided by school based clinics include: routine and preventive medical
exams, diagnosis and treatment of acute conditions such as eye, ear, or upper respiratory
infections, monitoring and treatment of chronic conditions, such as epilepsy and diabetes, and
services provided to children with special health care needs as required under the Individuals
with Disabilities Act.
MEDICAID REIMBURSEMENT FOR SCHOOL BASED CLINICS
In order to be covered by Medicaid, the services provided must be listed under section 1905(a),
delivered by a Medicaid provider, and be considered medically necessary for the individual
receiving the service.
Currently, 41 states enroll schools as qualified providers under the Medicaid program for covered
services provided by school personnel and other qualified practitioners contracting with the
school. Medicaid is also authorized to reimburse schools for certain administrative costs,
including conducting Medicaid outreach and application assistance and arranging appointments
with health care providers. For administrative activities related to Medicaid eligible and non-
eligible children, the cost of the activities must be allocated to Medicaid in the appropriate
proportion and specified in an approved cost allocation plan.
There are three different ways that Medicaid can reimburse for school based health services: fee
for service, bundling, and capitation.
Fee for service reimbursement. Under traditional fee for service reimbursement, each
service provided to a Medicaid beneficiary generates a claim which is submitted to the state
Medicaid agency. Thirty out of the 41 states providing school based services submit fee for
service claims.
Capitation. The state Medicaid agency pays the school a per student rate that covers a
package of services. The cost of the capitated rate is determined through a competitive
bidding process. Although this is an option, no states reimburse their schools in this manner.
Bundling. More recently, schools have begun to bundle together a package of medical
services expected to be provided to children with special health care needs served under
individual education plans (IEPs), who have varying degrees of disability, and charge the
state Medicaid agency a single payment rate. The cost of the bundled rate is calculated by
reviewing the average cost of the services received by a statistically valid sample of children
at each level of disability. States are required to periodically review the cost of the claims and
reconcile them with services provided. Six states submit bundled claims for reimbursement;
three states use a combination of bundling and fee for service claims.
HCFA had no information available on the reimbursement methodologies used by the remaining
8 states.
ABUSE OF MEDICAID REIMBURSEMENT FOR SCHOOL BASED SERVICES
There are three ways for states to use the provision of school based services under Medicaid to
shift the burden of costs traditionally assumed by the state to the Federal government.
Inappropriate claiming of administrative costs under Medicaid. HCFA estimates that 18
states are currently claiming reimbursement for administrative costs under Medicaid.
Although there is no nationwide estimate of the recent increase in Medicaid reimbursement
for the administrative costs associated with school based services, a survey of 10 states
conducted by GAO indicated a five-fold increase in claims over the past four years ($82
million to $462 million). Two of the states surveyed, Illinois and Michigan, accounted for
most of the increases in administrative cost claims over this period of time. In Illinois, claims
increased from $82 million in 1997 to $145 million in 1998; in Michigan, claims increased
from $79 million in 1996 to $227 million in 1997.
Insufficient Federal oversight has led to an increase in inappropriate claiming of
administrative costs. For example, a school will request 100 percent reimbursement from
Medicaid for the cost of a principal's salary because of their role as a "program
administrator" of the Medicaid services being provided in their school, regardless of the
amount of time they spend on activities related to the provision of services to children with
special health care needs. In some school districts, the administrative costs they claim are
higher than the costs of the services they provide. In one state, the regional office identified
and deferred over $33 million in inappropriate administrative claims.
HCFA recently issued guidance stating that they are reviewing practices related to State
claiming for school-based administrative activities and plan to publish a guide clarifying
Federal policy this Fall.
Bundling payments without cost reconciliation. Out of the six states which submit bundled
claims, only one of them reviews and reconciles their claims on a regular basis (Connecticut).
The remaining states (Massachusetts, New Jersey, North Carolina, Utah, and Kansas) do not.
Failure to review and reconcile claims makes the Medicaid program vulnerable to excessive
overpayments for services on two fronts. First, states artificially inflate the rate charged for
health care services. Second, states may not provide all of the services included under the
bundled rate to students. For example, an on-site review of four school districts in
Massachusetts by the HCFA regional office revealed claims of $700,000 for services that
were never provided to students.
Recent guidance published by HCFA eliminates the use of a bundled rate for reimbursement
for school based services and states that these claims will be disallowed if submitted after
July 1, 1999.
Claiming inappropriate transportation costs. HCFA estimates that 16 states are currently
receiving Medicaid reimbursement for the cost associated with busing students - with and
without special health care needs - to and from school. Medicaid policy states that
reimbursement for transportation costs associated with school based services is available if
the child receives a medical service in school on that day, if the transportation takes place in a
vehicle equipped for children with special health care needs, and if transportation is listed as
a needed service in the child's individual education plan. The Department of Education's
policy is that children who ride to school in the regular bus should not have transportation
listed in the child's individual education plan.
However, these states are including transportation in the individual education plans of all
children with special health care needs, whether they ride to school in the regular buses or
not, in order to claim Federal match.
Recent guidance published by HCFA reiterates that Medicaid should not be billed for the
transportation costs for children unless they require transportation in a vehicle adapted to
serve the needs of the disabled, and states that these claims will be disallowed if submitted
after July 1, 1999.
FOCUS OF GAO INVESTIGATION
The GAO report, which focuses primarily on the claiming of administrative costs, indicates that
some school district and state claiming procedures are designed to maximize their receipt of
Medicaid funds through suspect financing mechanisms. In four out of the 10 states surveyed, a
portion of the Federal reimbursement for services provided at schools is retained in the state's
general revenue funds. In FY 1998, Federal dollars contributed about $8 million in Illinois and
$47 million in Michigan to the state general revenue funds. Since Michigan schools began
claiming for administrative costs, the state has retained almost $106 million of the Federal share.
IEP health care Ares
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In their testimony before the Finance Committee, the GAO compared these financing
arrangements to the financing mechanism that used provider taxes and donations as a way to
increase Federal matching dollars without increase state expenditures before it was outlawed by
the passage of OBRA 1993.
GAO also notes that a number of private firms, employed by school districts to help them
maximize their Federal reimbursement, typically receive as compensation a share of the revenue,
ranging from 3 to 25 percent, generated by the claims the school submits.
NEXT STEPS
Issuing guidance on administrative claiming. HCFA and OMB are working internally to
develop and release guidance on reimbursement for administrative costs associated with school
based services by the Fall. A number of private firms, most notably in Texas and New York,
have been lobbying HCFA, the First Lady's Office, and the Vice President's Office, to ensure
that they have input into the guidance that is being developed. Because this issue is so sensitive
and has been pinpointed as the primary source of the fraud and abuse, HCFA is not taking private
sector or state input as they develop their guidance.
Federal-state workgroup on bundling of services. HCFA has developed a Federal-state
workgroup to bring the states who currently bundle their reimbursement claims into compliance
with the new guidance. The states are using the workgroup as a forum to lobby HCFA to change
its guidance. Although HCFA is currently considering options, OMB feels very strongly that
they should not renege on the original guidance in any way.
AL guide used to day
OH, MI payment defenal
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Medicaid School-Based
Administrative Claiming
Guide
Medicaid School-Based Administrative Claiming Guide
Table of Contents
Introduction
1
I.
Program Basis and Authority
2
II.
Program Agreements
2
A. Interagency Agreements
2
B. Cost Allocation Plan
3323
1. Overview
3323
2. General Principles
4423
3. Time Allocation Methodology
4424
Overview
4424
Time Study Surveys
4424
Sampling Universe
5525
Sampling Guidelines
5525
Training
6626
Documentation
6626
Reimbursable Activities
6626
Non-Reimbursable Activities
7727
Activity Codes
7727
General Guidelines
7727
Activity Code Categories
7727
Capture 100 Percent of Time
8828
Administrative Case Management
8828
Identification of Activities Eligible for Enhanced FFP
8828
4. Cost Reporting Methodology
9828
General Overview
9828
Duplicate Payments
9929
Indirect cost rates
9929
Offset of Revenue
9929
Documentation
10929
5. Claim Calculation Methodology
1010210
Overview
1010210
Criteria for Enhanced FFP for Skilled Professional Medical Personnel
1040210
Criteria for Reimbursement of Family Planning at 90 Percent FFP
1140210
Allocable Share of Costs
1141211
6. Review / Approval Requirements
1111211
Timely Filing
1242212
State Law Requirements
1242212
III. Program Integrity
1212212
IV. Conclusion
1313212
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Medicaid School-Based Administrative Claiming Guide
Appendix A: Details Regarding Basis and Authority
1414214
Statute/Regulations
1414214
OMB Circular A-87
1515215
Appendix B: Skilled Medical Personnel
1616216
42 CFR $432.50
1616216
Appendix C: Activity Code Categories
1717217
100% Medicaid Share:
1717217
Proportional Medicaid Share:
1818218
Reallocated Activities:
1818218
Non-Reimbursable Activities:
1818218
Appendix D: State Oversight
1919219
Time Allocation Methodology
1919219
Cost Reporting Methodology
1919219
2020220
Claims Processing
2020220
Verification DRAFT of SPMP Criteria
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Medicaid School-Based Administrative Claiming Guide
Medicaid School-Based Administrative Claiming
Guide - DRAFT
Introduction
The purpose of this Administrative Claiming Guide is to provide further guidance to all State
Medicaid Agencies regarding the requirements for claiming Medicaid reimbursement for
administrative activities performed in the school-based environment. Additionally, HCFA
believes that this Guide will be of significant benefit in helping school districts and all other
interested parties better understand the intent of the school-based administrative claiming
program. It is expected that this Guide will promote greater consistency in claiming practices to
ensure program integrity, and to-assist states in the implementation of effective administrative
claiming practices. It is important to note that to minimize the possibility of confusion, this
Guide does not, except where there are potential issues of overlap or duplication, address
requirements related to LEAs' provision of direct medical services, commonly referred to as fee-
for-service (FFS) programs. With regard to the school-based administrative claiming program,
this Guide does not supercede or reinterpret any existing statutory or regulatory requirements.
The school environment offers unique advantages and opportunities to reach children and
families to inform, encourage and assist them to access needed health care services and to enroll
in the Medicaid program. Collectively, the Individuals with Disabilities Education Act (IDEA),
Section 504 of the Rehabilitation Act, and certain titles of the Elementary and Secondary
Education Act (ESEA), contain numerous requirements related to LEAs' responsibilities to
identify, evaluate and accommodate the physical and mental health needs of all children that may
place them at-risk for poor school outcomes. These requirements have served to define schools
as a vital link for families to needed health care and a cost effective, timely, and accessible
source of service delivery.
The administration of the Medicaid program depends upon an effective state and federal
partnership. Federal Medicaid guidelines provide a framework for each State to establish and
administer its Medicaid program to best meet the needs of its people. States have flexibility to:
1. Establish eligibility standards;
2. Determine the provider, type, amount, duration and scope of service;
3. Set the rate of payment for services; and
4. Administer their own program, including development of administrative requirements to
verify claims.
Federal law permits reimbursement of allowable administrative activities when necessary for the
proper and efficient administration of the Medicaid State plan. The determination of allowable
administrative activities requires close coordination between the LEAs, State Medicaid Agency,
State Department of Education, providers and other public agencies.
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Medicaid School-Based Administrative Claiming Guide
The Health Care Financing Administration (HCFA) is legally responsible for assessing all such
programs in accordance with the applicable Federal Medicaid requirements. Therefore, state's
programs for administrative claiming for school-based activities must be reviewed and approved
by HCFA, prior to implementation. HCFA review and approval should occur in a reasonable
timeframe and the submission date of the state's intent to claim for administrative costs defines
the first quarter for which the LEA will receive reimbursement. This Guide should be useful for
LEAs, State Medicaid Agencies, and HCFA staff in the process of development, review,
approval, and implementation of school-based Medicaid administrative claiming programs.
1. Program Basis and Authority
This Guide provides the basic Federal requirements for administrative claiming in the Medicaid
program and is intended to foster better understanding of program parameters and the applicable
statutory and regulatory provisions. This Guide lists the relevant legal and programmatic bases
and authorities, including sections of the Social Security Act, Parts 42 and 45 of the Code of
Federal Regulations (CFR), and the Office of Management and Budget (OMB) Circular A-87,
"Cost Principles for State, Local, and Indian Tribal Governments." In addition, OMB mandated
in Circular A-87 that the Department of Health and Human Services (DHHS) issue
implementing material for Circular A-87 on behalf of the federal government. The resulting
document issued by DHHS, ASMB C-10, is intended to assist state, local, and Indian tribal
governments in applying OMB Circular A-87. The Guide also references HCFA policy
issuances, such as the Medicaid and School Health: A Technical Assistance Guide, issued in
1997.
Please see Appendix A for a detailed list of statutory, regulatory and other federal government
references/authorities applicable to claiming federal funding under the Medicaid program for the
costs of school-based administrative activities.
II. Program Agreements
A. Interagency Agreements
In order to claim Federal matching funds for the costs of Medicaid administrative activities
performed in schools, the State Medicaid Agency can administer the program directly with
the LEAs through provider enrollment agreements or by must entering into an interagency
agreement with another appropriate state level entity such as the state education agency or
another appropriate entity with oversight of LEAs in accordance with regulations at 42 CFR
431 Subpart M. The interagency agreement serves to describe and define the
responsibilities of each party under the agreement. Additionally, the interagency agreement
should describe the relationship between the LEAs and the parties to the interagency
agreement. For example, the agreement should address whether LEAs will participate in
preparing and submitting Medicaid Administrative Claims independently or as participants
in a consortium of LEAs.
I
See 42 CFR 431.10(b)
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The interagency agreement should include:
A statement regarding the general purpose, basis and mission for the agreement
The mutual objectives and responsibilities of all parties with respect to this program
Provisions for a participation agreement with LEAs, either through a consortium or
independently
The activities or services each party performs and under what circumstances
The general principles of reimbursement
General guidelines regarding how the program will be structured and administered
Provisions regarding program oversight and monitoring
The cooperative and collaborative relationships at the state and local levels
The methods of payment or reimbursement, exchange of reports and documentation,
and a continuous liaison between the parties, including the designation of state and
local liaison staff
A cost allocation plan amendment is also required and a copy should be provided as an
attachment to the interagency agreement to provide more specific details regarding claim
calculation methodology and reimbursement.
Please see Section B below for more information regarding cost allocation plans.
B. Cost Allocation Plan
1. Overview
Federal regulations 2 require that under the Medicaid State plan, the single state agency
shall have an approved public assistance cost allocation plan (CAP) on file with the
Federal Department of Health and Human Services (DHHS) that meets certain regulatory
requirements 3 As indicated in OMB Circular A-87, Attachment D, a state's public
assistance cost allocation plan is an official document which describes the grouping and
allocation of administrative costs to federal awards performed by the State under such
programs as Temporary Assistance to Needy Families (TANF), Medicaid, Food Stamps,
Child Support Enforcement, adoption assistance, Foster Care and Social Service Block
Grants.
There are certain items that should be included in the public assistance CAP that a State
Medicaid Agency must submit in order to claim reimbursement for administrative
activities performed by LEAs. The public assistance CAP should reference the
methodologies, claiming mechanisms, interagency agreements, and other relevant
approaches that will be used by the LEAs for making such claims and appropriately
allocating costs.
2 42 CFR 433.34
3
Subpart E of 45 CFR part 95
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Medicaid School-Based Administrative Claiming Guide
2. General Principles
School district employees routinely engage in activities that involve providing direct
medical services and/or the performance of administrative activities, as well as other
social programs, and educational programs. Time spent on activities associated with the
administration of the Medicaid program may be reimbursed by following an appropriate
claiming methodology.
The CAP amendment provides details regarding the method used to allocate the costs
associated with Medicaid administrative activities. The CAP amendment should specify
that all claims for reimbursement will be made in accordance with OMB Circular A-87,
the State Medicaid Plan, Early and Periodic Screening Diagnosis and Treatment (EPSDT)
regulations, and all appropriate Federal regulations. The CAP amendment should contain
the following information:
A list of identified LEA personnel who are performing Medicaid administrative
activities.
A mechanism to identify and categorize activities performed by personnel who are
eligible for administrative reimbursement.
A method to identify the level and amount of reimbursable activity performed by
eligible personnel.
A method to identify and allocate costs based upon the level of reimbursable activity
being performed.
3. Time Allocation Methodology
Overview
In order to ascertain the portion of time and activities that are related to administering the
Medicaid program, States must develop a time allocation methodology that adheres to
acceptable cost allocation principles. This methodology should meet acceptable
statistical sampling standards and may use contemporaneous time sheets or other
quantifiable measures of employee effort.
Time Study Surveys
OMB A-87 provides a variety of options for collecting data to allocate the time spent by
individuals who work on multiple activities and cost objectives. The most common
mechanism for identifying and categorizing activities performed by the LEA employees
is a time study.⁴ A time study is a survey documenting how personnel eligible for
4While activity reports are the most common method used to allocate time, they are impractical for purposes of this
program. For individuals who work on multiple activities and cost objectives, OMB Circular A-87 permits the use
of "a statistical sampling system (see subsection (6)) or other substitute system
approved by the cognizant
Federal agency" for allocating salaries and wages as an alternative to an activity report. [OMB A-87 Attachment B,
Section 11, (h) (4)]
OMB Circular A-87 states that, with regard to sampling:
"Substitute systems for allocating salaries and wages to Federal awards may be used in place of activity reports.
These systems are subject to approval if required by the cognizant agency. Such systems may include, but are not
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Medicaid School-Based Administrative Claiming Guide
reimbursement (or a sample of eligible personnel) are spending their time. Activities are
recorded based upon predefined activity codes, over a predetermined period of time. The
time study should incorporate a comprehensive, all-inclusive list of the activities
performed by staff whose costs are to be claimed under Medicaid. The time study should
account for 100% of the time and activities (whether allowable or unallowable)
performed during the time study period by employees participating in the Medicaid
5
administrative claiming program.
Sampling Universe
A basic step in the development of a time study is the determination of the sampling
universe (i.e., identifying all of the LEA personnel whose activities may be reimbursed
under the Medicaid Administrative Claim). Medicaid administrative activities may be
performed by staff who provide any direct medical services (for example, nurses and
physical therapists), as well as any staff who focus on activities related to special
education, exceptional children's programs, or other administrative duties related to the
Medicaid program. The sampling universe should include individuals who spend a
portion of their paid work time performing administrative activities that are eligible for
Medicaid reimbursement.
It may also be appropriate to exclude some personnel from the sample universe. For
example, there may be medical providers in the LEA under contract who furnish specific
services to students and who are paid on a fixed fee per service (for example, audiologists
who are paid a set amount for each hearing test performed] and who do not perform any
other activities that would be claimable. These providers should not be included in the
sample universe and their costs should be excluded fromithe base to be allocated.
The sampling universe must include all employees whose salafies are to be allocated to
the Medicaid program (e.g., physical therapists or speech therapists). Costs associated
with direct support personnel°, are allocable and reimbursable at the same level as the
employees they support. Direct support personnel would not need to be included in the
sample population since they do not directly perform Medicaid administrative activities.
However other paraprofessional staff who do perform Medicaid administrative activities,
such as physical therapy aides, or speech therapy aides, should be included since they do
not qualify as direct support personnel.
Sampling Guidelines
In accordance with OMB Circular A-87, valid statistical sampling methods may include,
but are not limited to: random interval sampling, random moment sampling, case counts,
or other quantifiable measures of employee effort or outcomes.
limited to, random moment sampling, case counts, or other quantifiable measures of employee effort." [OMB A-87
Attachment B, Section 11, (h) (6)]
5 See OMB A-87 Attachment B, Section 11 for additional guidance.
6
42 CFR $432.50 In the context of FFP relating to skilled professional medical staff, defined as follows:
(v) The directly supporting staff are secretarial, stenographic, and copying personnel and file and records clerks who
provide clerical services that are directly necessary for the completion of the professional medical responsibilities
and functions of the skilled professional medical staff.
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Medicaid School-Based Administrative Claiming Guide
In order to meet acceptable "statistical sampling methods", the sample method should be
valid for application to the entire sampled period, such as a quarter, but should not
include weeks when schools are not in session. It should be structured to meet a high
confidence level for statistical compliance. For time studies, all activities need to be
documented in the sample even if they are not strictly related to Medicaid.
Training
All personnel who complete a time study should be trained in advance of completing the
survey. Training should cover all aspects of the time study process and should assist the
LEA personnel to understand the Medicaid program and the relationship of the activities
and services they routinely provide in the school setting to services covered by the
Medicaid State plan and EPSDT. Staff should be sufficiently familiar with how to
complete forms, how to determine the appropriate activity designation, the difference
between Medicaid health related and other activities, and where to obtain technical
assistance if there are questions. In addition, skilled professional medical personnel
should be trained to document when their professional medical knowledge and skill was
required in performing a particular function or activity.
Documentation
The State Medicaid Agency shall determine the required documentation to be maintained
to support the claims submitted to the State. Time study documentation to be retained
will be based on the time study methodology and instructions, as well as the cost
allocation requirements issued by the State Medicaid gency to the LEAs and should
include the following:) the population to be included in the time study, sample selection,
results, and forms as appropriate for the method utilized.
The documentation for administrative activities should clearly demonstrate that the
activities are performed for administering services covered under the Medicaid State
plan.
7
Reimbursable Activities
"There is much flexibility in what services may be properly claimed as administrative,
and some activities can be billed as either medical services or administration. ,,8
According to section 1903(a)(7) of the Act and the implementing regulations at 42 CFR
430.1 and 42 CFR 431.15, for the cost of any activities to be allowable and reimbursable
under Medicaid, the activities must be "found necessary by the Secretary for the proper
and efficient administration of the plan" (referring to the Medicaid State plan).
7
In accordance with the statute, the regulations, and the State Plan, the State is required to retain adequate source
documentation to support the Medicaid payments for administrative claiming. See §1902(a)(4) of the Act and 42
CFR 431.17; see also 45 CFR 74.53 and 42 CFR 433.32(a) (requiring source documentation to support accounting
records) and 45 CFR 74.20 and 42 CFR 433.32(b and c) (retention period for records). The administrative claiming
records must be made available for review by State and Federal staff upon request during normal working hours
(§1902(a)(4) of the Social Security Act, implemented at 42 CFR 431.17).
8 Medicaid And School Health: A Technical Assistance Guide, p. 72
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Medicaid School-Based Administrative Claiming Guide
In order for Medicaid to reimburse for health services provided in schools, the services
must either be included among those listed in the Medicaid statute (section 1905(a) of the
Act) and included in the State's Medicaid plan or be available under the Early and
Periodic Screening, Diagnosis and Treatment (EPSDT) benefit. Correspondingly, the
administrative expenditures appropriate for reimbursement by Medicaid are those that are
in support of the health services defined in the state's Medicaid plan and/or EPSDT.
Non-Reimbursable Activities
Activities and services that are direct, face-to-face medical services, including but not
limited to, those paid as part of an established fee-for-service reimbursement rate, should
be clearly delineated in the activity codes. These activities cannot be included in claims
for reimbursement for administrative activities.
Additionally, administrative activities that support the provision of or access to non-
medical or non-health related services such as: academic instruction, healthy lifestyle
education programs, and social service programs including the free and reduced price
meal program, TANF, WIC, child abuse and neglect, and employment assistance, are
non-reimbursable activities.
Activity Codes
General Guidelines
A key objective of these HCFA guidelines is to help States address certain basic tenets
with regard to Administrative Claiming. HCFA and States determine allowable Medicaid
administrative activities in accordance with the regulations related to reimbursable
administrative activities (see Appendix C, page 1717217). However, because the
Medicaid Administrative Claim program is a Federal Medicaid program implemented by
the State Medicaid Agency, each State should implement a program that reflects the
unique delivery model in that State
Activity Code Categories
It is essential to develop activity codes, with recognition and consideration of the actual
functions and responsibilities being performed by LEA employees, the requirements of
the programs, and in accordance with principles that appropriately distinguish between
and account for all these factors.
In general, activity codes should be developed and organized to capture time spent on
activities according to the following general categories of allocable cost:
100% Medicaid Share - the activity fully supports the administration of the State
Medicaid plan and/or EPSDT program and as such is fully reimbursable.
Proportional Medicaid Share - the activity is reimbursable as administration under
the Medicaid program, but the Medicaid allocable share of costs must be determined
by the application of the percentage of the Medicaid eligible population.
Reallocated - the activity supports the general requirements of the position and is
partially reimbursable based on the percentage of time spent on reimbursable versus
non-reimbursable administrative activities.
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Medicaid School-Based Administrative Claiming Guide
Non-reimbursable - the activity is not reimbursable as a Medicaid administrative
cost.
Activity codes should be designed to effectively differentiate and distinguish between the
types of activities that fall into each of these categories. Appendix B provides general
examples of appropriate activities for each designation. However, specific activity codes
should reflect the distinct characteristics of each state and be compatible with the State
Medicaid plan.
Capture 100 Percent of Time
Time study activity codes must be developed to capture all of the possible activities
performed by the time study participants. This may be accomplished through a variety of
coding conventions, such as detailed examples with respect to reimbursable and non-
reimbursable activities, or through development of a parallel coding structure that can
differentiate between similar activities performed for multiple purposes, some of which
may be non-reimbursable. Regardless of convention, however, thorough training on
coding procedures is integral to appropriate differentiation.
In order to ensure that 100% of the activities performed by staff participating in the time
study are reflected in the time study results, the staff classifications and associated
supporting documentation (such as position descriptions) for time study participants
should be reviewed and considered in developing the timestudy activity codes.
Administrative Case Management
While some case management activities may fall within the scope of both administrative
and targeted case management, a State may not claim the same costs at the same time
both as targeted case management and administrative case management for a given
population.
School districts may, subject to the provisions of the State Medicaid Plan and based upon
administrative and cost-efficiency considerations, choose to define their case
management activities as either administrative case management or targeted case
management.or. as a non-duplicative combination of both.
Identification of Activities Eligible for Enhanced FFP
Skilled professional medical personnel (SPMP) perform many Medicaid administrative
activities that are reimbursable. They may require their professional medical knowledge
and skills to perform specific Medicaid and non-Medicaid activities. However, some
activities may not necessitate skilled medical knowledge. The coding structure and/or
time study documentation should include a means to differentiate allowable activities for
which the SPMP required his/her specialized training and knowledge.
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Medicaid School-Based Administrative Claiming Guide
4. Cost Reporting Methodology
General Overview
Cost reporting methodology should capture the allowable costs associated with personnel
who perform Medicaid administrative activities. OMB Circular A-87, which contains the
cost principles for state and local governments for the administration of federal awards,
provides that "Governmental units are responsible for the efficient and effective
administration of federal awards." Under these provisions, costs must be reasonable and
necessary for the operation of the governmental unit for the performance of the federal
award.
Claim calculation methodology should be developed which supports the ability to isolate
costs that will be claimed as Medicaid administration from all other costs incurred for
those same personnel.
Duplicate Payments
Claims for allowable administrative activities should not duplicate payments that are
included and paid as part of a rate for services, part of a capitation rate, or through some
other federal program. The methodology used to calculate claims related to allowable
administrative activities should eliminate costs related to non-reimbursable activities, and
costs already reimbursed using federal funds The State must provide assurances to
HCFA of non-duplication through their administrative claims and the claiming process to
HCFA.
Indirect cost rates
Claims for the LEA's indirect costs are allowable and may be allocated based on an
approved indirect costrate issued by the cognizant agency, or the use of predetermined
rates, as defined by the state, where the cognizant agency has reasonable assurance based
on past experience and reliable projection of the costs, that the rate is not likely to exceed
a rate based on actual.costs.
Offset of Revenue
It may be necessary to offset costs allocated to the Medicaid program by amounts
received from other funding sources. Federal Financial Participation (FFP) may not be
claimed by applying federal funds as matching funds. Any federal funds relating to costs
claimed for Medicaid administrative activities must be offset from the claim prior to
submission. Also, costs may only be included net of applicable credits such as discounts,
rebates, recoveries or adjustments. 9 The following include some of the revenue-offset
categories that must be applied in developing the net costs:
All federal funds, along with any state/local matching funds required by the federal
grant.
9 See OMB Circular A-87, Attachment A, Part C., Items 4.a.and 4.b.
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Medicaid School-Based Administrative Claiming Guide
All state expenditures which have been previously matched by the federal
government (includes Medicaid funds for medical assistance (e.g., fee-for-service
funds).
Documentation
As with all administrative costs that are related to time study activities, there must be
documentation of the costs that will be claimed for reimbursement. LEAs should
maintain copies of the cost information reported for eligible personnel, and any
supporting documentation related to developing these costs. The state should determine
an appropriate method to assure that costs reported by LEAs are accurate and adhere to
relevant regulations.
Additional guidance regarding documentation for compensation of salary and wages is
found in OMB Circular A-87, Attachment B, Section 11.h.
5. Claim Calculation Methodology
Overview
The Claim Methodology should be designed to allocate reimbursable costs based on the
selected time allocation methodology and apply the appropriate Federal Financial
Participation (FFP) rates and Medicaid share percentages to develop a claim. The
methodology must be designed to apply the rates and percentages that are appropriate to
the activity type, the skill level of the personnel performing the activity, and the medical
credentials employed.
Criteria for Enhanced FFP for Skilled Professional Medical Personnel
Federal Financial Participation (FFP) at the enhanced rate of 75 percent may be available
for state claims for expenditures related to the costs of activities performed by SPMPs
(and their directly supporting-staff) in the administration of the Medicaid program if the
appropriate criteria are met (see Appendix A: Citations). 10
Federal regulations contain specific requirements for SPMPs, including that SPMPs have
completed a two-year or longer program leading to an academic degree or certificate in a
medically related program. State qualification requirements for SPMPs can differ from
(be more or less stringent than) the qualification requirements for participating as a
Medicaid provider. The State is responsible to provide assurances to HCFA that the
appropriate criteria for claiming enhanced reimbursement for qualifying activities have
been met.
When the individual meets the SPMP qualifications, those administrative activities that
require the use of medical knowledge are eligible to be reimbursed at the enhanced rate
of 75 percent. The coding structure and/or time study methodology should include the
means to differentiate allowable activities for which the SPMP required his/her
10 Law: Section 1903(a)(2) of the Social Security Act. Regulations: 42 CFR 432.2 - Definition of SPMP; 42 CFR
432.50 - FFP rates (personnel); 42 CFR 433.15 - FFP rates (program); SPMP Review Guide (dated June 1986)
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Medicaid School-Based Administrative Claiming Guide
specialized training and expertise. Allowable administrative activity codes are discussed
on page 7727 and in Appendix B.
Criteria for Reimbursement of Family Planning at 90 Percent FFP
The enhanced family planning matching rate of 90 percent is available for the
administrative activities associated with family planning services. In order to be
reimbursed at the enhanced rate, the time study methodology utilized should differentiate
allowable administrative activities related to family planning from similar activities
unrelated to family planning.
Allocable Share of Costs
Many school-based medical or medical-related activities are provided to both Medicaid
and non-Medicaid eligible students. Some activities fully support the administration of
the State Medicaid plan and/or EPSDT program and as such do not require the
application of the Medicaid share percentage. For certain activities, however, costs are
reimbursable only to the extent that they are allocable to activities performed on behalf of
Medicaid eligible students. For these activities, it is necessary to develop and apply a
Medicaid share percentage.
The Medicaid share percentage is the number of Medicaid eligible students in the
relevant claiming population as a percentage of the total number of students in that same
population. The State will determine the relevant population. The Medicaid share is then
applied to the total costs applicable to those activities that are categorized as
"proportional Medicaid share" to determine the costs applicable to Medicaid
administrative activities. The purpose of applying a proportional Medicaid share is to
determine the amount to be allocated between Medicaid and nom Medicaid students.
Whatever method is used to determine the rate, the number of Medicaid eligible students
and the total number of students must be identified for the same time period.
6. Review / Approval Requirements
Prior approval by HCFA of the administrative claiming programs and codes is not
explicitly required in Medicaid statute and regulations, but HCFA is required to and will
review claims made by State Medicaid Agencies for federal reimbursement related to
Medicaid administrative activities. In situations relating to the establishment of a new
program such as a school-based administrative claiming program, the review will focus
on determining the allowability of such claims for federal matching funds. States are
required to submit amendments to cost allocation plans and have them approved before
they may be reimbursed for Medicaid administrative costs.
II Law: Section 1903 (a)(5) of the Social Security Act. Regulations: 42 CFR 432.50(b)(5) as referenced by 42
CFR 433.15(b)(2)
See Committee Print accompanying the Social Security Amendments of 1973, Brief Description of Senate
Amendments to H.R. 3153, at p. 41 (statement by Conference Committee that "Federal payments for family
planning expenditures[are] not limited to administrative costs.
.90 percent Federal matching for family
planning is available for the cost of providing family planning services and not merely for the cost attributable to
administering such programs").
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In accordance with federal regulations and OMB Circular A-87, a public assistance CAP
must be amended and approved by the Division of Cost Allocation (DCA) within DHHS
before FFP would be available for school-based administrative claims in the Medicaid
program. The public assistance CAP amendment must provide (in accordance with the
approved interagency agreements) for reimbursement of the administrative activities
performed in the school setting and for claims which will be made on behalf of the LEAs
by the State Medicaid Agency. The public assistance CAP amendment must make
explicit reference to the methodologies, claiming mechanisms, interagency agreements,
and other relevant criteria that will be used by the LEAs for making such claims and
appropriately allocating costs. HCFA does not have direct authority for approval of the
public assistance CAPs; that is the purview of the DCA. However, HCFA works directly
with the DCA in the public assistance CAP review and approval process; under this
process, the DCA will not approve such public assistance CAPs without HCFA's review
and approval of the methodologies referenced in the public assistance CAP.
The required elements of public assistance CAPs are further discussed in the Cost
Allocation section on page 3323 as is the review and approval process for such plans.
Timely Filing
Section 1132(a) of the Act requires that a claim by a State for with respect to an
expenditure made during any calendar quarter must be filed within the two-year period
that begins on the first day of the calendar quarter immediately following such quarter.
This section also provides that with certain exceptions, no payment shall be made for
expenditures not claimed within this period 12
State Law Requirements
FFP for school-based services and administrative outreach claims is not available if the
State is not in compliance with its own laws. The OMB Circular A-87 states in item 1.c.
of Attachment A, "General Principles for Determining Allowable Costs," Section C,
Basic Guidelines: "To be allowable under Federal grants, costs must meet the following
criteria:
c. Be authorized or not prohibited under state or local laws and regulations."
A question of state law may surface during a review of state practices or be brought to
light by other means; however, it is not expected that an exhaustive review of all state
laws be conducted. If there is a question of whether the state agency is in violation of
state law, a legal opinion should be sought.
III. Program Integrity
State oversight is the cornerstone to maintaining the integrity of the Medicaid School-based
Administrative Claiming program. Through appropriate reviews, the State can be assured
that claims are accurate and that methodology adheres to the provisions specified in the Cost
12 45 CFR $95.4 Definitions State Agency
45 CFR §95.7 Time limit for claiming payment
45 CFR $95.13 In which quarter we consider an expenditure made.
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Allocation Plan. Ideally, maintaining claim integrity should be a joint responsibility shared
by HCFA, LEAs, the state agencies and any claims processing agents involved.
HCFA may review the results of the state oversight on a periodic basis. This review can be
based on a report submitted by the State. This annual report can be augmented if the
situation warrants more detailed and/or on-site review.
Please see Appendix C for recommended monitoring parameters.
IV. Conclusion
This Guide contains information for LEAs, State Medicaid Agencies, HCFA offices and
staff, and other interested parties about the existing requirements by which LEAs can claim
Medicaid reimbursement for activities that are performed under the administrative claiming
program. It is important to note that to minimize the possibility of confusion, this Guide
does not, except where there are potential issues of overlap or duplication, address
requirements related to LEAs' provision of direct medical services, commonly referred to as
fee-for-service (FFS) programs. With regard to the school-based administrative claiming
program, this Guide does not supercede or reinterpret any existing statutory or regulatory
requirements. This Guide is intended to support and enhance the goals shared by Medicaid
and education of ensuring that all children, especially those who are economically
disadvantaged or disabled, have access to needed health care; that all eligible children are
enrolled in Medicaid, and that LEAs have equal access to the resources available to support
those efforts.
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Appendix A: Details Regarding Basis and Authority
The following sections provide selected statutory, regulatory and other Federal Government
references/authorities applicable to claiming Federal funding under the Medicaid program for the
costs of school-based administrative activities.
Statute/Regulations
Proper and efficient methods of administration: section 1903(a)(7) of the Social Security Act
(the Act)
Federal matching rate for administration: section 1903(a)(7) of the Act
Maintenance of Documentation section 1902(a)(4) of the Act
Timely filing: section 1132 of the Act, Title 45 of the Code of Federal Regulations (CFR)
Subpart A 95.1 ff
Skilled Professional Medical Personnel (SPMP): section 1903(a)(2)(A) of the Act, 42 CFR
432.50
Family Planning: section 1903(a)(5) of the Act, 42 CFR 433.15(b)(2), 432.50(b)(5)
Early and Periodic Screening, Diagnosis and Treatment (EPSDT): section 1902(a)(43) of the
Act; 42 CFR Part 441, Subpart B
Medical Assistance Case Management: section 905(a)(19) and 1905(r)
Section 504 of the Rehabilitation Act: 34 CER Part 104, Subparts A and D
Individuals with Disabilities Education Act (IDEA): section 612(A)(B) and (C)
Regulatory citations related to documentation
42 CFR
Description
Subpart M
Interagency Agreements
430.1
Scope of subchapter C - Proper and efficient
administration
430.10(b)
Interagency Agreement
430.12
Submittal of State plans and plan amendments
430.30(b)
Grants procedures Program estimates (HCFA-37)
430.30(c)
Grants procedures - Expenditure reports (HCFA-64)
430.32
Program reviews
430.33
Audits - OIG audits including cost efficiency
430.40
Deferral of claims for FFP
430.42
Disallowance of claims for FFP
431.15
Methods of Administration
431.17
Maintenance of Records
431.53
Assurance of transportation
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431.107
Required provider agreements
432.2
Definition of SPMP
432.30
Training Programs: General Requirements
432.50
FFP: Staffing and training costs - Availability of FFP at
various rates, allocation basis for personnel costs
432.50(b)(5)
FFP for Family Planning
432.55
Reporting training and administrative costs
433.15
Rates of FFP for administration
433.15(b)(2)
FFP for Family Planning
433.32
Fiscal policies and accountability
433.34
Cost allocation
433.51
Public funds as the state share of financial participation
433.53
State plan requirements - for state funds
441.61
Utilization of providers and coordination with related
programs
45 CFR
Part 74
Subpart C - Post Award Requirements
Part 95
Subpart A - Time Limits for States to File Claims
Part 95
Subpart E - Cost Allocation Plans
OMB Circular A-87
The OMB Circular A-87 establishes cost principles and standards for determining costs for
Federal awards carried out through grants, cost reimbursement contracts, and other
agreements with state and local governments and Federally recognized Indian tribal
governments (governmental units).
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Appendix B: Skilled Medical Personnel
42 CFR $432.50
(1) Medicaid agency personnel and staff. The rate of 75 percent FFP is available for
skilled professional medical personnel and directly supporting staff of the Medicaid
agency if the following criteria, as applicable, are met:
(i) The expenditures are for activities that are directly related to the administration of
the Medicaid program, and as such do not include expenditures for medical
assistance;
(ii) The skilled professional medical personnel have professional education and
training in the field of medical care or appropriate medical practice. "Professional
education and training" means the completion of a 2-year or longer program
leading to an academic degree or certificate in a medically related profession.
This is demonstrated by possession of a medical license, certificate, or other
document issued by a recognized National or State medical licensure or certifying
organization or a degree in a medical field issued by a college ordersiversity
certified by a professional medical organization. Experience in the administration,
direction, or implementation of the Medicaid program is not considered the
equivalent of professional training in a field of medical care.
(iii) The skilled professional medical personnel are inpositions that have duties and
responsibilities)that require those professional medical knowledge and skills.
(iv) A State-documented employer-employee relationship exists between the
Medicaid agency and the skilled professional medical personnel and directly
supporting staff; and
(v) The directly supporting staff are secretarial, stenographic, and copying personnel
and file and records clerks who provide clerical services that are directly
necessary for the completion of the professional medical responsibilities and
functions of the skilled professional medical staff. The skilled professional
medical staff must directly supervise the supporting staff and the performance of
the supporting staff's work.
(2) Staff of other public agencies. The rate of 75 percent FFP is available for staff of
other public agencies if the requirements specified in paragraph (d)(1) of this section
are met and the public agency has a written agreement with the Medicaid agency to
verify that these requirements are met.
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Appendix C: Activity Code Categories
The manner by which each state establishes a comprehensive and detailed set of activity codes
for the school-based administrative claiming program will vary based upon each state's existing
Medicaid program organization and delivery, applicable demographics, state and local funding
levels and mechanisms. The following defines the broad range of activities by category of
allocable cost that should be accommodated in each State's set of activity codes. The specific
activity code definitions that a State proposes to use must be included in the cost allocation plan
amendment.
100% Medicaid Share:
These activities are not subject to the application of the Medicaid share
percentage.
Informing children, parents/guardians, LEA staff, and the community about the
benefits and availability of the Medicaid program and Medicaid covered services.
Seeking out and identifying children within the general student population or within
a targeted student population(s) who are in need of Medicaid covered health services.
Assisting potentially eligible students and their families to enroll in Medicaid.
Providing or participating in training designed specifically to enhance the
effectiveness of Medicaid outreach and the identification and referral of children in
need of Medicaid covered services.
Identifying and coordinating program planning and development of Medicaid
covered services with individual providers and provider agencies.
Citations: 42 CFR 433.135, 42 CFR 435.905, 42 CFR 435.940, 42 CFR
432.30, 42 CFR 441.61, SMM 5230
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Proportional Medicaid Share:
The proportional Medicaid share percentage must be applied to allocable costs
associated with these activities.
Referring, coordinating, planning and monitoring health services designed to
address an individual child's health needs.
Arranging and/or providing translation or transportation services to enable a student
to access needed medical care.
Arranging or referring for family planning services.
Citations: 1903(a) SSA, SMM 4302.2(G)(2), 42 CFR 431.53, 42 CFR
441.62, 42 CFR 441.56(a)(3), 42 CFR 432.5(b)(5), 42 CFR
433.15(b)(2)
Reallocated Activities:
These activities support the general requirements of the position and are partially
reimbursable.
Performing administrative or clerical duties relating to the general functions or
operations of the LEA including paid time off and breaks.
Citations: 45 CFR 95.507
Non-Reimbursable Activities:
These activities are not reimbursed under the Medicaid Administrative Claim
program.
Providing direct medical care, treatments or counseling interventions.
Performing activities relating to the provision of a direct health service that is
included in a fee-for-service rate for which the LEA is claiming reimbursement.
Providing instruction, supervising students, or conducting extra-curricular activities.
Arranging or providing services associated with social service programs, or other
programs that do not yield health-related outcomes.
Citations: OMB A-87 Attachment A, C. 1. a. and h.
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Appendix D: State Oversight
To ensure that the Medicaid School-based Administrative Claiming program is relevant to the
"proper and efficient administration of the State's Medicaid plan" and that it complies fully with
all applicable federal and state requirements, the State Medicaid Agency should administer
certain oversight mechanisms on a periodic basis.
Oversight, as described below, should be maintained in the following areas: time allocation
methodology, cost reporting methodology, verification of Skilled Medical Professional
Personnel (SPMP) eligibility and utilization standards, and claims processing. State reviews
should be frequent enough to maintain the integrity of the program, while taking into account the
objectives of the effort, the resources of the agency, and the administrative burden upon the
LEAs.
As appropriate, the State may utilize independent professional services firms in its oversight of
the Program. The LEAs should provide assurance that resources shall be reasonably available if
a more detailed audit of the program is required.
Time Allocation Methodology
In order to ensure that the time study is statistically valid (for example, at the 95 percent
confidence level), the State Medicaid Agency should monitor the compliance of the LEAs to the
requirements of the time allocation methodology. The description of this effort should include
information on the frequency of reviews at the local level, staff performing the reviews, and the
review protocol.
Recommended activities may include
Review of training materials used to instruct the time study participants.
Periodic observations of time study training.
Interviews with a sample of personnel who completed time study surveys.
Random examination of a representative sample of time study surveys.
Cost Reporting Methodology
School district auditors provide assurance of cost reporting procedures through the annual audit
process, which includes adherence to requirements of the A-133 Single Audit Act. In addition,
the following or similar measures are recommended:
Desk reviews of a sample of LEAs conducted by an independent audit professional
services firm to determine the accuracy of submitted data.
Periodic on-site visits to verify that reported expenditures conform to OMB Circular
A-87, applicable claim guidelines and Generally Accepted Accounting Procedures.
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Verification of SPMP Criteria
Federal Financial Participation (FFP) may be available at the enhanced 75 percent for activities
performed by SPMP based on the activities of SPMP (see "Criteria for Enhanced FFP for Skilled
Professional Medical Personnel", page 1010210). The State Medicaid Agency, or its designated
agent should verify that SPMP providers have met all of the requirements for the SPMP
designation as outlined in 42 CFR 432.50.
Claims Processing
To ensure that the claim calculation methodology as defined in the cost allocation plan is
adhered to, the State Medicaid Agency may require any claims processing contractor to engage
in a SAS 70 Review (Statement of Auditing Standards Review) or other generally accepted
review of claim processing integrity. This annual review provides independent validation that
the controls, policies and procedures employed in the development and calculation of claims are
sufficient to ensure accurate claim results. The review also addresses design, and description of
the reliability of the security, control or processing techniques implemented in processing claims.
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