Summary: Despite growing expenditures for school-based Medicaid services, the potential benefits to schools and the children they serve are being compromised by poor guidance and oversight from the Health Care Financing Administration (HCFA) and by improper payments. Forty-seven states and the District of Columbia reported $2.3 billion in Medicaid expenditures for school-based activities for the latest year for which they have data. Although this affects only a small percentage of overall Medicaid spending, more schools are expressing interest in Medicaid as a source of funds, especially to reimburse administrative activities. Some school districts and states claiming Medicaid reimbursement for school-based services lack adequate controls to help ensure that their claims are legitimate. Despite the significant Medicaid payments for school-based services in some states, school districts may receive little in direct reimbursements because of funding arrangements among schools, states, and private firms. Seven states keep as much as 85 percent of the federal reimbursement for Medicaid school-based claims. Some school districts also pay up to 25 percent of their federal Medicaid reimbursement to private sector firms that help them develop claiming methodologies, train school personnel to apply them, and submit the claims for reimbursement. As a result, schools may end up with as little as $7.50 for every $100 claimed. These funding arrangements can reduce incentives for appropriate program oversight and create an environment of opportunism that siphens funds away from their intended purposes. HCFA has historically provided little or inconsistent direction and oversight of Medicaid reimbursements for school-based claims. HCFA has recently focused more attention on these issues, but the states are still awaiting more guidance.
