Medicaid

During the last four years, school districts' claims for Medicaid reimbursement for administrative costs associated with school-based health services rose from $82 million to $469 million in 10 states. More school districts and states have expressed interest in seeking such Medicaid reimbursements. Some school district and states appear to be intent on maximizing their receipt of Medicaid funds through suspect financing mechanisms. Many school districts with minimal knowledge of Medicaid and its billing requirements have contracted with private firms. The firms 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. The states and private firms are motivated to experiment with "creative" billing practices. Some Health Care Financing Administration (HCFA) regional offices have approved states' administrative claims while others have denied them. These weak controls create an environment in which Medicaid may be making excessive payments for inappropriate claims. Mounting claims for school-based administrative services demand prompt attention by the federal and state governments.

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