On February 12, 2009, after weeks of heated debate, the U.S. Senate and House of Representatives reached agreement on the economic stimulus bill (H.R.1, the American Recovery and Reinvestment Act of 2009).  The bill appropriates nearly $800 billion to provide economic relief to the nation’s struggling economy.  Appropriations to the U.S. Department of Education include, among other things:

• $13 billion for the education of disadvantaged students in accordance with Title I of the Elementary and Secondary Education Act of 1965;
• $12.2 billion for the education of children with disabilities in accordance with the Individuals with Disabilities Education Act (IDEA);
• $100 million for school impact aid in accordance with ESEA;
• $720 million for school improvement programs in accordance with ESEA and the McKinney-Vento Homeless Assistance Act;
• $200 million for innovation and improvement in accordance with ESEA; and
• $680 million for rehabilitation services and disability research in accordance with the Rehabilitation Act of 1973.

Congress intends that funds appropriated for the Department of Education will be available during school years 2009-2010 and 2010-2011 and that the funds are in addition to other appropriations.  The economic stimulus bill also increases Medicaid payments to states, which may result in increased Medicaid revenue to school district providers.  Congress is expected to vote to approve the bill this week and present it to President Barack Obama for signature by February 16, 2009.

As part of the economic stimulus bill, the Senate and House agreed to extend the moratoria until July 1, 2009 on four specific final rules published by the Centers for Medicare and Medicaid Services (CMS).  These rules are currently under congressional moratoria that are scheduled to expire on March 31, 2009. 

Two of the CMS final rules would eliminate or severely restrict Medicaid reimbursement for school-based services.  Those rules are:

• The rule to eliminate Medicaid reimbursement for the costs of school-based Medicaid administration (including Medicaid outreach, case management and care coordination) and specialized transportations services (Rule 2287-F); and
• The rule to redefine administrative case management and targeted case management to exclude services that are “integral components” of another program such as special education (Rule 2237-IFC).

The moratoria extension to July 1, 2009 also applies to the CMS final rules on provider taxes and outpatient hospital services.

The Senate and the House have also agreed on a Sense of Congress that three pending CMS rules should not be finalized, including two rules that are related to school-based services:

• The proposed rule to redefine rehabilitative services to preclude Medicaid reimbursement for the cost of specialized transportation services and direct or administrative services that are intrinsic elements of other programs such as education (Rule 2281-P), and
• The rule to limit Medicaid reimbursement to a governmental unit’s or provider’s costs as defined by CMS (Rule 2258).

It is also the Sense of Congress that the CMS proposed rule on graduate medical education should not be finalized.  The Sense of Congress does not have the effect of law, but it serves as a strong recommendation from Congress.

The extension of the moratoria on the CMS final rules allows additional time for potential administrative action to permanently eliminate the rules.  On January 20, 2009, Rahm Emmanuel, the President’s Chief of Staff, issued a memorandum to all department and agency heads directing them to review any new and pending federal regulations published by the previous President’s administration.

Mr. Emmanuel’s memorandum includes a request for department and agency heads to consider extending for 60 days the effective date of regulations “that have been published in the Federal Register but not yet taken effect.” The CMS final rules referenced above have been published in the Federal Register but have not yet taken effect due to multiple congressional moratoria. 

If Mr. Emmanuel’s memorandum is applicable to the CMS final rules impacting school-based Medicaid billing, the Secretary of the U.S. Department of Health and Human Services (DHHS) would have the opportunity to “re-open the notice-and-comment period for 30 days to allow interested parties to provide comments about issues of law and policy raised by those rules.”  Rules that raise substantial questions of law or policy will be subject to “appropriate further action” which could include amendment or withdrawal of the rules by the Secretary in accordance with the Administrative Procedures Act.  With the moratoria in place for these rules and the 60-extension referenced in Mr. Emmanuel’s memorandum, the DHHS Secretary would have until September 1, 2009 to take action on the CMS rules.

Currently, the President does not have a nominee for DHHS Secretary due the withdrawal of former Senator Tom Daschle.  It is anticipated that the President will select a new nominee in the near future.

Advocates for the retention of school-based Medicaid billing and other programs and providers negatively affected by the CMS rules have put forth considerable effort to alert members of Congress about the potentially devastating impact the rules would have on Medicaid providers and beneficiaries.  These efforts have been very successful. The advocates will likely continue their efforts with Congress and intensify coordination with appropriate members of President Obama’s administration to determine the best course for administrative action to permanently eliminate or substantially revise the CMS rules.

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.