School districts reeling from a cut in federal funding for special ed students

BELFAST, Maine — Two years ago, RSU 20 received $1.3 million in federal Medicaid funds, money which the midcoast school district used to help offset the costs of services it is required by law to provide to special education students.

Last year, the nine-town school district received just $73,000 in Medicaid funds — a staggering 95 percent cut in federal support. But the mandated services provided to special education students remained the same.

The problem stems from a decades-long state practice of maximizing federal Medicaid funds. Now, it turns out, the way the state and local school districts have been handling special education and its funding may be out of compliance with federal standards. As a result, funding has declined by nearly $30 million statewide and districts are left scrambling.

Superintendent Bruce Mailloux of RSU 20 said that his cash-strapped school district, which has considered closing elementary schools to help fix a looming budget hole, is in a tough spot.

Because the services must still be provided, local taxpayers will be picking up the slack, which doesn’t seem fair to him.

“In Augusta, it doesn’t feel like anybody there is advocating for school districts,” he said recently.

Medicaid reimbursements to Maine school districts peaked in the 2009-2010 school year. At that time, the federal government sent about $37 million to schools in order to offset costs for children with recognized disabilities. The next year, Maine received just $7.7 million in Medicaid reimbursements, representing an 80 percent drop statewide.

One expert said the seeds of the problem were planted more than 20 years ago. At that time, the state decided to actively pursue the federal funds — but instead of centralizing the process left specifics up to individual school districts, which then numbered nearly 200.

The decision led to problems with consistency and accountability, said Dean Crocker, the state ombudsman for children’s services and president of the Maine Children’s Alliance. When state officials last year began to crack down on compliance and billing, it left school districts on the hook for the millions of dollars they had been accustomed to receiving for the services they provided.

“Too much money for the wrong things, that’s what it comes down to,” he said. “It’s quite possible to fix it. A lot of schools around the country do bill Medicaid successfully. We just have a lot of work to do.”

The law

The federal special education law, the Individuals with Disabilities Education Act of 1975, mandates that qualifying students must receive health or medical-related services regardless of their ability to pay.

Those services include speech, occupational, psychological and physical therapies, therapeutic recreation, medical services and transportation. They don’t include education-related programs such as tutoring.

Medicaid became the payer of first record when it came to the states’ special education students, according to Sue Mackey Andrews, a national special education consultant who lives in Dover-Foxcroft. Maine’s current federal reimbursement rate is 63 cents for every dollar spent on qualifying programs.

Each state had a lot of flexibility when it came to designing their Medicaid programs.

“Our states have very different personalities and temperaments,” she said. “Some states have been more aggressive in getting reimbursement for services. Some states have been more conservative.”

Crocker said that in 1991, under the administration of Gov. John McKernan, he was part of a group of consultants charged with identifying opportunities for Maine to find more Medicaid money for children.

“We were in the same place we are now. We had a huge deficit,” he said. “We were looking at major cuts for children’s services.”

The group found that Medicaid reimbursements for special education services was a potential source for a substantial amount of money. But the good news came with a big caveat: The state shouldn’t expect school districts to figure out how to do it on their own, the consultants said. They urged state government officials to create a central office where compliance and billing questions would be answered. That move, they figured, would leave the state secure and not in a position where it would be obligated to return money after problematic audits.

“Unfortunately, they didn’t take our advice,” Crocker said. “They left it up to the school districts.”

While the districts did provide valuable services to students, there were examples of school districts not meeting stringent Medicaid special education standards for paperwork, he said. There also were instances of Maine schools billing for services provided by people who were not considered eligible under Medicaid guidelines. For example, an ed tech can’t administer speech therapy services and be reimbursed through the federal program, he said.

Another factor that has compounded the pain for Maine school districts is a new, federally required Medicaid billing system. All Medicaid service providers had to re-apply and receive a new code for their services.

A year ago, Maine switched to a new Medicaid information system and used those new billing codes. For the districts, it was a disaster.

“Overnight, because the state changed what they could bill, and the switchover, many of them were left out in the cold,” Crocker said.

The problem grows

According to Jane Reagan, president of the National Alliance for Medicaid in Education, a few years ago the federal government began putting increased pressure on states in regards to reimbursements. New laws created “armies of auditors,” she said.

“Those auditors are marching around the country, finding typos and scaring the bejesus out of everybody,” she said. “The feds are telling the states, you’d better crack down. You’re in charge of overseeing your providers, the school districts. Everything had better be perfect.”

Another blow for Maine schools came with the demise of so-called “bundled billing,” something that school districts here had been doing for years. With that, MaineCare sent schools a monthly sum to reimburse costs for the services that a special education student received.

But Medicaid officials did not approve.

“The federal government said, ‘We don’t know what we’re paying for when we give a bundled payment. We don’t know if a student really receives all the services,’” said Jack Komart of Maine Equal Justice Partners, an advocacy group for the poor.

State officials decided to separate the bundled payments, which superintendents said is another reason why their reimbursements fell.

Reagan was surprised to hear of the magnitude of Maine’s reduction in Medicaid reimbursement money, and suggested that it might be connected to the state’s ongoing federal audit of school-based services.

“There are some states that just really react strongly to the threat of a federal audit,” she said.

According to Jim Rier, deputy commissioner of the Maine Department of Education, the reasons for the decline in federal Medicaid reimbursements are multiple and complex, but go back to one main point.

“The need to be in federal compliance has driven the change,” he said. “It’s never going to go back to what it was before.”

Multiple efforts over the last two weeks to interview federal Medicaid officials about the situation in Maine were unsuccessful.

John Martins, the communications director at the Maine Department of Health and Human Services, agreed with Rier.

“I can totally understand how a school would be upset over changing what it does,” he said. “We’re abiding by federal law that guides these programs. In order for us to get federal reimbursement, we need to be in compliance.”

Others are not so sure. Rep. David Richardson, R-Carmel, the chairman of the state Legislature’s Education and Cultural Affairs Committee, said that committee members had recently heard a report from the Maine DHHS about Medicaid reimbursements for schools. The lawmaker said he had heard from school district advocates that states like New Hampshire, Ohio and Texas are having much more success than Maine in getting federal dollars.

“We don’t really understand why they can bill and can access the money and why Maine is having such difficulty accessing the money,” he said. “As legislators, we’re probing a little bit to see if we can fully understand why there is this discrepancy.”

A New Hampshire Department of Health and Human Services administrator confirmed that his state has not seen a federal subsidy decrease for the last three years. In that time, New Hampshire received about $19 million annually from Medicaid, said Matthew Ertas of the New Hampshire Bureau of Developmental Services.

Maine state officials also have told school district administrators that if they continue to provide services to special education students, they must follow the same guidelines as any health service provider.

“They have to bill the same, supervise the same, have the same qualifications, document things the same,” Komart said. “Schools aren’t really set up to be health care providers. They deliver these services, but they do it in a school setting and not in a health care provider setting. It’s made it much more complicated.”

The future

School and state officials say that even if Maine’s federal Medicaid reimbursement figures stay low, it won’t affect services for needy children. Those are legally mandated to stay in place. What could change, however, are local property tax rates, as districts struggle to pay for the medical services for special education students as well as other educational costs.

Dan Lee, the superintendent of the Brewer School District, said that the Medicaid dollars used to help a lot. Now, he and the other superintendents are scrambling.

“It’s truly disappointing that there may be federal money out there that can help disabled children, but for some reason beyond the understanding of mortals, the money can’t be distributed to schools that are serving the needs of disabled people,” he said. “The question is, where is the money?”

Crocker said that he understands why state authorities have suddenly turned to rigid compliance with federal guidelines. He is reminded of a scandal that happened about a dozen years ago, when the Office of the Inspector General did a national study of the home health care industry and found that it was “rife with fraud and abuse.”

Before that time, when Medicaid mistakes were made, the government tended to forgive indebtedness if an agency came up with a plan to correct the problem.

“Beginning with home health fraud, they did away with that,” he said. “They basically said, you owe us money and we want it.”

People involved with the scandal were prosecuted under the Racketeer Influenced and Corrupt Organizations Act. Some were jailed.

“The precedent that was set there is that the government no longer considers a pattern of repeated mistakes to be mistakes,” Crocker said. “They consider it to be fraud.”

The problems in Maine do not rise to that level, he said.
“I don’t see it as fraud. However, our friends at [the federal Centers for Medicare & Medicaid Services] might not be so charitable,” Crocker said.

According to him, the solution now is the same fix proposed two decades ago: to centralize the system.

“I think that the situation is almost the same. We’ve got 126 RSUs. It makes no sense to let 126 RSUs figure this out and develop systems all over again,” he said. “It really needs to be consolidated.”

That’s the long term. In the short term, local school districts — and property taxpayers — will be stuck holding the bag.

“They will eat millions, no question,” Crocker said. “If I were a property taxpayer and I fully understood the situation, I’d be really pissed.”