The future of special education funds looks even better. The House budget resolution proposes to increase overall K-12 and higher education funding by $2.2 billion, with all but $200 million of that increase targeted for special education.

With such an overwhelmingly positive attitude toward funding the Individuals with Disabilities Education Act, the simultaneous effort to cut Medicaid reimbursements for the administration of school-based health services is rather shocking. School districts frequently recover funds from Medicaid to offset the costs of health-related administration and outreach not covered under IDEA. Unfortunately, the Health Care Financing Administration has spent the last year trying to save money by limiting the services Medicaid will continue to reimburse.

Schools are eligible for federal assistance to provide an array of health services. Basic health care, including preventive health and dental care, immunizations, primary medical care, family planning and mental health services, are partially paid for by Medicaid. The program also covers a percentage of administrative costs associated with outreach programs and the oversight of IDEA.

Under this program, a small rural school district could expect to collect anywhere from $40,000 to $90,000, while a large city system might receive reimbursement well into the millions. The Chicago Public Schools receive nearly $50 million a year from Medicaid--three times the amount of federal money the district receives annually for serving students with disabilities.

The latest assault on school Medicaid claims came earlier this spring when the Health Care Financing Administration issued the School-Based Administrative Claiming Guide, a set of draft guidelines that outlines a uniform policy for reimbursement procedures. The proposed measures include a detailed time study as part of any state Medicaid plan, severe limitations on the type of outreach programs covered and numerous new hurdles for schools to clear.

While we would relish a uniform claiming policy instead of 50 different state policies, school districts already have designed and implemented Medicaid billing procedures. School districts would be faced with costly and burdensome work to completely reformat the process, purchase new software and create a new billing system. What is particularly worrisome is HCFA’s insistence that its Administrative Claiming Guide represents current law.

The 50 state Medicaid plans, while unique, were approved individually by HCFA’s regional offices. If the new guide is simply a reiteration of current law, all of the existing programs should be unaffected. But new guidelines would force almost every state to revamp its procedures and sharply reduce services.

HCFA is aggressively pursuing school health care reform for several reasons.

The amount of Medicaid funds sent to schools has risen markedly, owing to a surge in student participation. HCFA is justified in reviewing these figures. Public schools only began to participate in the program in 1988, at which time a handful of schools made Medicaid claims. As AASA and other education organizations spread the word that Medicaid funds were available for services that schools administer, the program grew tremendously. According to an informal AASA poll, more than 10,000 school districts in 48 states today make claims to Medicaid.

HCFA also is intent on issuing new guidelines as a response to the just-issued report detailing the Government Accounting Office’s investigation into school-based Medicaid claims. The report points to several flaws in the reimbursement process.

First, the report finds many schools use outside consulting agencies to do the Medicaid billing because the requirements for reimbursement are too detailed and cumbersome for educators to handle themselves. Outsourcing makes particular sense in smaller and more rural districts. Unfortunately schools pay as much as a 25 percent contingency fee to attract consultants. Although this may seem a poor use of Medicaid funds, it is the only way many schools can recover their expenses.

Another inappropriate practice turned up by the GAO is the way governors take a percentage of Medicaid funds to use for non-school-related purposes. Schools oppose this skimming of resources, but given the choice between a smaller share of Medicaid money and no reimbursement, educators opt for the smaller share.

Finally, and most unfortunately, the GAO report finds a few school districts have used inappropriate billing practices and pushed the limits of Medicaid reimbursement. While HCFA must enforce existing law and ensure no fraud is taking place, the agency’s recent insistence on new claiming policies goes far beyond this. The discovery of a few examples of inappropriate billing does not justify a solution that will hurt thousands of poor and disabled students.

AASA is soliciting comments from school districts to help HCFA understand the full extent of the issue. The association is doing everything possible to ensure that representatives from the education field are present during the next round of policy drafting.

HCFA is not accustomed to dealing with schools, and schools are not used to dealing with HCFA. If we expect to create a set of guidelines that guarantees fair billing practices and assist schools in seeking reimbursement, both parties must be at the table.

Jordan Cross is a legislative specialist at AASA. E-mail: jcross@aasa.org