Medicaid claiming: a consortium model in Texas eases school-based reimbursement claims for serving students with disabilities

John E. Sawyer

Every school administrator’s Rubik’s Cube is figuring out how to provide increasingly broad services (both educational and noneducational) to a more diverse population with the same or fewer dollars.

Such a puzzle is embedded in every administrative job description even though it is seldom stated directly. It may be worded in more politically appropriate terminology, such as the “efficient use of resources.” Superintendents and school business officials spend countless hours twisting the brightly colored building blocks of the organization to find the correct pattern for student success within the confines of available resources.

Is it any wonder then that funding for any array of programs or services would be a welcomed relief from the normal scenario of a lack of money? Some years ago, as an assistant superintendent for business, I literally stumbled across a new (to me, at least) concept while scanning one of the professional magazines stacked atop my desk. The article described a program that allowed school districts to access Medicaid funds as partial reimbursement for medically related services that were provided to Medicaid-eligible children, who also were identified for special education services and who had specific eligible services written into their individualized educational plans.

“Aha,” I thought. “That’s nice, but such a small population is probably not worth the effort.” Luckily, I discovered I was wrong. Cutting to the chase (and it was a chase that included a wild political ride, some interesting revelations, a lot of bureaucracy and a determination to “see this thing through!”), my school district at the time, Fort Worth, Texas, received almost $1 million for its retroactive claim for direct services and a similar, ongoing revenue stream to help support and extend much needed and costly services to eligible kids. In Texas, this program is known as School Health and Related Services or SHARS.

Once the revenue stream was finally established as an expected part of the annual revenue stream, my direct contact with Medicaid claiming initiatives was ended. Today most districts have acquired “providers,” who for a fee help them realize these reimbursement dollars. However, many districts did not participate because the tracking of individual students and their Medicaid eligibility demands considerable staff time even when claims are coordinated by a third party. Most of the smallest districts found the effort involved in tracking students offset the financial advantages.

Various Services

When I became superintendent of the 7,000-student La Porte, Texas, Independent School District, it already was participating in the direct reimbursement portion of the Medicaid, also known as SHARS, by coordinating a small claim through a third-party vendor. The claim grossed about $20,000. After deducting staff time, the district netted about $10,000.

Soon after my arrival in La Porte, the same consultants I had hired in Fort Worth to provide the needed technical expertise and support helped me to create and operate SHARS. A second Medicaid program, Medicaid Administrative Claiming or MAC, was described as having been approved for trial by the federal agency. MAC could provide reimbursement to local schools for administrative costs and outreach activities in support of a state’s defined Medicaid program and was doing so in a few other states.

While reimbursable activities vary by state rule, they could include the following outreach services for Medicaid programs:

* Facilitating applications for Medicaid;

* Planning and coordinating care for medical and mental health services;

* Early and periodic screening, diagnosis and treatment training;

* Coordination with the state’s Medicaid agency and medical providers;

* Health-related program planning, development and monitoring; and

* Transportation or translation assistance to access Medicaid services.

Under these broad descriptions are a variety of services school districts provide to students. Because screenings and other services may lead to Medicaid assistance, at the time they are initiated district personnel could not know which students are or will be Medicaid eligible. Therefore, the appropriate distribution of time spent performing eligible administrative and outreach activities, among many other duties, could be determined by a methodology called a time study, which then is related to a school district’s expenditure and Medicaid eligibility. Such a methodology already had been approved by federal agencies.

A time-study-method participant distinguishes between “allowable” and “nonallowable” (for reimbursement purposes) administrative outreach activities to derive their costs. Districts that are eligible under state regulations have their time study participants track work-related time using a series of state-designated codes. Each code is assigned an appropriate level of federal funding participation for the corresponding activity. Codes cover time spent providing direct health services that are eligible for reimbursement under the SHARS program, but not under the MAC program. No double dipping is permitted. Educational services and social-related activities are not allowable costs.

Still the allowable services are significant. (To gauge the differences between the two reimbursement programs, the IEP could be considered the boundary.) Service provided to students prior to IEP development–and therefore before a student is known to be eligible for special services and Medicaid eligibility–is allowable and calculated as outreach. After the IEP is developed, reimbursement is attached to prescribed services to defined students under SHARS.

Again, staff time could be a problem because training requirements insist every potential provider go through training every quarter. The methodology softens that impact because it uses a stratified random sample approach to quantify provider time, greatly reducing staff involvement and allowing even tiny school districts to participate in a consortium model. A consortium is the only available vehicle for many districts in Texas because the state education agency ruled that no district under 15,000 students could file an individual claim. In Texas, that rule would have eliminated all but approximately 50 of the more than 1,000 school districts, or about 95 percent. These few districts, however, educate about half of the school-age population. This model potentially could encompass all districts in the state, permitting the other 50 percent of students to be claimed.

Consortium Benefits

Implementation was not a technical problem but rather a political problem because the administrative state agency was reluctant to implement a program due to the miserable failure of an earlier pilot program, which included about nine of the state’s largest districts and a couple of smaller ones (who promptly dropped out). Each pilot district had tried to report and claim independently. The data errors, extraction problems and overall inconsistency of reporting created months and months of work, but no paid claims.

Because of my past involvement, I was asked to allow LaPorte Independent School District to be the fiscal agent for a consortium of school districts across the state. With my school board’s approval, along with the technical direction from some expert consultants, the LaPorte MAC Consortium has succeeded during its 5-year existence, now filing claims for more than 400 districts serving about 2 1/2 million students. This also simplifies the state’s role (one claim instead of 400-plus). Other vendors and other consortiums have formed during the past few years and most of the state’s 1,042 school districts now are receiving reimbursements.

While the size of Medicaid claims are clearly a function of the number of students with disabilities and frequency of services, the simplification of the onerous time study requirements by sampling and sharing results has been a tremendous benefit for school districts. It also has allowed more reasonable allocation of staff time for training purposes, especially as web-based training and some negotiated rule changes for some staff repeat training has been achieved by the consultants.

While rules specify that funding should be put back into similar outreach and service programs, the very fact that salaries and benefits drive budgets creates a scenario allowing such funds to offset increased salary and benefit costs, additional technology and training and additional services without having to dip so deeply into other school resources.

Medicaid administrative claiming offers a chance for districts to offset the costs of funding many services required for students. Most school districts have neither the desire nor the expertise to broker a claiming mechanism alone even if they meet the requisite size requirement. Therefore, in virtually every case in Texas, school districts have rightfully chosen to pay an administrative fee (not an allowable reimbursement) to decrease their internal workload and ensure a timely and regular reimbursement flow.

The most noteworthy exception is the Houston Independent School District, the largest Texas district, which not only claims for itself but also serves as a provider on a fee basis for other districts’ consortiums. Houston’s own claim, however, is not filed within their consortium model.

Because a state rule prohibits districts under 15,000 students from filing an individual claim, a consortium model is the only alternative, It has worked and it pays.

John Sawyer is superintendent of the Harris County Department of Education, 6300 Irvington Blvd., Houston, TX 11022. E-mail:

RELATED ARTICLE: A Program in Peril

The Centers for Medicare and Medicaid Services have proposed revised federal guidelines for the Medicaid Administrative Claim Program, which in many ways are more restrictive than earlier proposals. The draft guidelines, if implemented by CMS, will have an extremely negative financial impact on schools serving students with disabilities.

Since February 2000, the Centers for Medicare and Medicaid Services has proposed the issuance of a Medicaid School-Based Administrative Claiming Guide intended to promote understanding about the requirements for submitting claims for administrative costs incurred by school districts in support of state Medicaid plans. The reaction to the proposed claiming guide, which was distributed for review in February 2000, and the numerous comments submitted from stakeholders from across the country were so strongly negative that CMS never formally issued it.

Since then, however, two developments have unfolded. First, CMS regional and national office staffs began to apply the principles of the February 2000 draft guidelines to state Medicaid administrative claims, even though the guidelines were never formally issued, Second, CMS has revised the draft guidelines, now stating that they will be in effect Jan. 3, 2003. Apparently the “proposed guidelines,” which received universal negative response, are the guidelines. It is important to note they were released for comment after Thanksgiving, and closed for comment on Dec. 21, 2002. The fact that schools were on winter breaks, and that Congress was at intercession could NOT have been accidental.

CMS also has proposed that these guidelines would supercede any prior CMS approvals of administrative claims programs regardless of whether that approval was the result of a state plan amendment, approved cost allocation plan or any other formal approval. Therefore no state and no school district is immune to the impact of the revised guidelines. Furthermore, CMS has proposed that these provisions could be applied retroactively in all but the three states that do not have a formal, CMS-approved program for Medicaid administrative claims. Whether these states could have future claims even further reduced (or eliminated) to offset payments paid under old guidelines is not clear.

It is well past time to bring resolution to the issue of school-based Medicaid claiming and to create responsible policy that recognizes the vital role schools play in serving the health needs of disadvantaged children. Here’s what you can do:

1. Write your senators and congressional representative. Agencies should be upfront about their rulemaking and allow for appropriate input to which they should at least review and respond. Clearly they should not attempt to hide their intentions.

2. Make your case simply. Schools are required to comply with federal mandates without adequate funding.

John Sawyer

COPYRIGHT 2003 American Association of School Administrators

COPYRIGHT 2003 Gale Group

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