Congress Continues Efforts to Delay Implementation of CMS Rules

Legal Brief: March 25, 2008

Within the next few months, the Centers for Medicare and Medicaid Services (CMS) is expected to begin implementing several new rules that threaten the availability of Medicaid reimbursement for some services provided by school districts and other health care providers across the country. CMS estimates that the new rules will reduce Medicaid payments by $15 billion over the next five years. However, a Congressional committee report published earlier this month estimates that the reduction in federal Medicaid payments will be closer to $50 billion over the next five years.

Congress is making new efforts to delay implementation of CMS’s rules to allow time for further review of the financial impact the rules will have on states, local government agencies and providers. On March 13, 2008, a bill (H. R. 5613) was introduced in the House of Representatives that provides moratoria delaying implementation of several rules through April 1, 2009. The bill provides moratoria for the CMS rules regarding:

• School-based administration and transportation costs;
• rehabilitative services;
• case management and targeted case management services; and
• provider cost limits.

However, if the bill is passed by Congress, a Presidential veto is likely. Congress is considering other options to protect states, school districts and other health care providers from the potentially devastating financial impact of these and other recent CMS rules.

School districts are encouraged to continue coordinating with Congressional representatives, state Medicaid agencies, Medicaid providers and other advocates in efforts to prevent CMS actions to reduce Medicaid payments for covered services provided to or on behalf of Medicaid-eligible children and adults.

Current Status of CMS Rules That Impact School Districts

School-Based Administration and Transportation Costs: Through its final rule 2287-F, CMS will eliminate Medicaid reimbursement for the costs of school-based administrative activities and most specialized transportation services. School-based Medicaid administrative activities include Medicaid outreach to identify children in low-income families and to arrange and coordinate the delivery of necessary health services with school-based and community providers. School-based transportation services that are currently subject to Medicaid reimbursement are only the transportation services provided for students with disabilities and only when specially
adapted/equipped buses are necessary to accommodate the students’ physical and/or mental health care needs. Implementation of CMS rule 2287-F will eliminate reimbursement for these services and will reduce total Medicaid reimbursement for most school districts by up to an estimated 50%. The current moratorium that precludes CMS from implementing this rule will expire on June 30, 2008 Rehabilitative Services: Under proposed rule 2261-P, CMS plans to redefine rehabilitative services to, among other things, exclude Medicaid reimbursement for services that are intrinsic elements of education programs. The term “intrinsic elements” is not defined in the rule which leaves the term subject to interpretation by CMS. Rule 2261-P is not yet final and it is unclear how the rule will impact Medicaid reimbursement for school districts. The current moratorium that precludes CMS from implementing this rule will expire on June
30, 2008.

Cost Limits: Under final rule 2258-F, an individual school district’s Medicaid reimbursement for school-based health services will be limited to the school district’s actual costs to provide Medicaid services. Each school district must determine and allocate its actual costs in accordance with federal guidelines and submit a cost report each year to the state Medicaid agency. Most school districts will need to conduct a time study each year to determine the actual costs of providing Medicaid services. Medicaid payments made to a school district that are in excess of its actual costs, as reflected in the district’s cost report, will be recouped by CMS. The current moratorium against implementation of this rule expires on May 25, 2008.

Case Management and Targeted Case Management: Interim final rule 2237-IFC became effective on March 3, 2008. The rule redefines case management and targeted case management (TCM) services to exclude, among other things, services that are purely functions performed for purposes of the Individuals with Disabilities Education Act (IDEA). This rule is subject to an interpretation that would preclude reimbursement for some services related to the school district’s development of a student’s education/treatment plan under IDEA.
Currently, there is no moratorium to prevent CMS from implementing this rule and the impact on school districts is unclear

DAB Decisions: In December 2008, CMS proposed a new rule that, if implemented, will significantly reduce the authority of the Department of Health and Human Services (DHHS) Departmental Appeals Board (DAB) to render binding decisions in favor of a school district or other provider that appeals a final CMS action such as a disallowance of Medicaid reimbursement. Under this new rule the DHHS Secretary or his/her delegated agency (e.g., CMS) will have the authority to make the final decisions with regard to such appeals.

CMS Proposal Regarding Its Free Care Policy

In the President’s Budget for Federal Fiscal Year 2009, CMS proposes to introduce a rule or legislation to clarify its “free care policy”. CMS has historically interpreted its free care policy to preclude Medicaid reimbursement for school-based health services provided to Medicaid-eligible students with disabilities who are not eligible for special education. In 2004, the DAB ruled in
Decision No. 1924 that CMS’s free care policy, as applied to school districts, has no basis in Medicaid law and cannot be used to prevent reimbursement for medically necessary services provided to students regardless of the students’ eligibility for special education. The DAB decision, which is legally binding on CMS, means that school districts can receive Medicaid reimbursement for services provided to Medicaid-eligible students in accordance with Section 504 of the Rehabilitation Act. As expressed in the President’s 2009 Budget, CMS proposes to take action to override the DAB decision.

For further information please contact your local Public Consulting Group representative or:

Patsy Crawford,
Director of Legal Services
Education Services Practice Area
Phone: (312) 425-0550
Email: pcrawford@pcgus.com

* Note: This document is not intended as legal advice and is for informational purposes only.