June 10,1999


WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr., (R-DE) today announced the Committee will meet Thursday, June 17, 1999 at 2:00 p.m. in room 215 of the Dirksen Senate Office Building to hear testimony on Medicaid and School-Based Services.

The following witnesses are expected to appear before the Committee:

I. A panel consisting of:

Sally Richardson, Director, Center for Medicaid and State Operations, Health Care Financing Administration; Washington, D.C.

William J. Scanlon, Ph.D., Director, Public Health and Financing Issues, Health, Education and Human Services Section, General Accounting Office; Washington, D.C.

Vernon K. Smith, Ph.D., Principal, Health Management Associates; Lansing, MI

Gregory A. Vadner, Director, Division of Medical Services, Missouri Department of Social Services; Jefferson City, MO

Sue Gramm, Chief Specialized Services Officer, Chicago Public Schools; Chicago, IL


Over the past decade, Medicaid has assumed a greater role in providing health care services to children in schools. This role is most prominent and legitimate in caring for children enrolled in special education.

Recently, it has been brought to the Committee's attention that some school districts and states, in coordination with private consulting companies, may be implementing strategies to maximize their federal Medicaid dollars.

These strategies take advantage of vagueness or inconsistecies in HCFA policy to draw down federal funds in two major ways:

1. Bundled billing for services. Rather than submitting bills for actual services provided to Medicaid-eligible children on specific days, school districts in 8 states have been creating and using bundled billing systems, based on assumptions rather than actual claims. Other states are in the process of preparing bundled billing systems.

While this can be done legitimately, with this practice there is no proof that children are receiving the services claimed; therefore, it is easily taken advantage of.

2. Administrative Claiming. Eighteen states are working with consultants to bill Medicaid for administrative expenditures that support Medicaid services in the schools, with many more states expressing interest.

In some cases, consultants receive 20 percent of federal revenue generated through these administrative claims. For example, consultants coach school districts that their personnel should bill Medicaid for any time school personnel spend interacting with Medicaid beneficiaries. Opportunities exist for padding time records and documentation is poor.

Consulting companies are integrally involved in developing the bills submitted to Medicaid for administrative expenditures, and their payment is linked to the level of the bills they develop. For example, if the federal government receives a $100 claim from state X for administrative expenditures incurred by the schools as presented by the consulting companies, the state is reimbursed based on its Medicaid matching rate. For example, state X is reimbursed $53 and the consultant then takes 20% of that reimbursement, or $10.60, for its fee.

State X then takes for itself the next 40% of the reimbursement, or $21.20. The remaining 40% ($21.20) would go back to the schools. In a clean, traditional Medicaid reimbursement situation, a school district that submitted this $100 claim would have received the full $53, its Medicaid matching rate, back - instead it is getting $21.20.