On September 7, the Centers for Medicare and Medicaid Services issued a proposed rule titled “Elimination of Reimbursement Under Medicaid for School Administration Expenditures and Costs Related to Transportation of School-Age Children Between Home and School.” Under the proposed rule, CMS would eliminate a longstanding policy of providing federal matching payments for administrative activities when performed by school employees or contractors and for transportation services between home and school for school-aged children with an Individualized Education Program (IEP) or an Individualized Family Services Plan (IFSP) under the Individuals with Disabilities Education Act (IDEA). This proposal was included in the president’s FY 2008 budget proposal, and is the latest in a series of regulations CMS has issued this year to narrow federal matching funds for state Medicaid expenditures. The rule would supersede all previous agency guidance on school-based administrative claiming and school-based transportation. Assuming the rule will be implemented for the 2008-2009 school year, CMS estimates that the rule will reduce federal Medicaid outlays by $635 million in FY 2009 and by $3.6 billion over the first five years (FY 2009–2013).
Under section 1903(a)(7) of the Social Security Act, federal matching payments are available at a rate of 50 percent for state expenditures ‘‘as found necessary by the Secretary for the proper and efficient administration of the State plan.’’ Under the proposed rule, federal Medicaid payments would no longer be available for expenditures for administrative activities performed by school employees or contractors, or anyone under the control of a public or private educational institution. This proposal is based on a finding by the Secretary of the Department of Health and Human Services (HHS) that these activities are only necessary for the proper and efficient administration of the state plan when conducted by employees of the state or local Medicaid agency. When performed by the schools, these activities are largely to support their educational mission and do not directly benefit the Medicaid program.
The proposed rule would also eliminate federal reimbursement for expenditures for transportation between home and school for children with an IEP or IFSP established pursuant to the IDEA. This proposal is based on the HHS Secretary’s determination that transportation between home and school does not meet the definition of an optional medical transportation service and is not necessary for the proper and efficient administration of the state plan.
CMS would continue to provide federal reimbursement for costs of school-based direct medical services under the IDEA as covered in the state Medicaid plan, and for transportation from school to a non-school-based Medicaid provider.
State Medicaid and education officials have expressed opposition to this proposal and have supported a moratorium on these payment restrictions through May 28, 2008, which was included in the State Children's Health Insurance Program (SCHIP) bill (H.R. 976) vetoed by the president on October 3. Public comments on the proposed regulations are due November 6. The rule is available here
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