Withdrawal of CMS Proposed Rule
On November 18, 2009 the Centers for Medicare and Medicaid Services (CMS) sent notice to Congress that CMS is withdrawing its proposed rule on rehabilitative services (CMS Rule 2261‐P). Among other things, the proposed rule was intended to redefine rehabilitative services to exclude Medicaid reimbursement for the direct and administrative costs of rehabilitative services that are intrinsic elements of education programs. This could have seriously jeopardized Medicaid reimbursement for school‐based therapy services and Medicaid administration. The rule also proposed to eliminate reimbursement for school‐based transportation services provided to children with disabilities. Twice, Congress imposed a moratorium that prohibited CMS from finalizing the rule, which was originally proposed in August 2007. In February 2009 Congress passed legislation that included a “Sense of Congress” that CMS should not finalize the proposed rule. In the withdrawal notice, CMS stated that its decision to withdraw is “to assure agency flexibility in re‐examining the issues and exploring options and alternatives with Congress and stakeholders.” The Lewin Group, selected by CMS to review the impact of Rule 2261‐P and several other rules as required by Congress, conducted the required review and is reportedly in the process of finalizing a report of its findings.

“Race to the Top” Grants
On November 12, 2009 the U.S. Department of Education (USDE) published in the Federal Register its finalized requirements for the competitive “Race to the Top” grants. Although the final requirements reflect some new flexibility, the standards remain stringent for receiving a grant from the $4 billion “Race to the Top” fund which was established as part of the State Fiscal Stabilization Fund (SFSF) under the American Recovery and Reinvestment Act of 2009. In the final requirements, USDE continues to emphasize the importance of high‐performing charter schools, but also recognized that there are other “innovative schools” that can be considered in education reform. USDE clarified that teacher effectiveness would not be determined solely by student test scores and that other determiners could be included as long as student growth is a significant factor. The final document retains the provision for mandatory replacement of at least 50% of turnaround school staff, but adds that a Principal of a failing school will have the operational flexibility to select staff and implement a comprehensive approach to substantially improving student achievement outcomes. USDE will award “Race to the Top” grants to states based on the number of points, or the score, the state receives on its grant application. The highest possible score is 500 points. States can receive up to 138 points based on its proposal to ensure great teachers and leaders and up to 125 points for the various components of its education reform agenda. A state can earn up to 50 points for turning around its lowest achieving schools and up to 47 points for implementing a statewide longitudinal data system. The “Race to the Top” grant application and supporting information is posted on USDE’s website at www.ed.gov. USDE plans to award the grants in two phases. Applications for Phase 1 are due January 19, 2010 and awards will be announced in April 2010. Applications for Phase 2 are due June 1, 2010 and awards will be announced in September 2010. The applications for the second round of SFSF grants are also posted on the USDE website.

Health Care Reform
On November 7, 2009 the U.S. House of Representatives narrowly passed the Affordable Health Care for America Act (H.R. 3962) to address national health care reform. The U.S. Senate recently finalized its version of health care reform, which may be largely based on the America’s Healthy Future Act (S. 1796). Both bills mandate insurance coverage for U.S. citizens and legal residents and both propose to expand Medicaid to cover lower‐income adults under the age of 65. Both bills propose health insurance exchanges that will offer various insurance plans and make them available for consumers to compare and choose from. Both bills also propose grants for school‐based health clinics or centers. However, there are significant differences between these two versions of health care reform that must be resolved before a final bill can be presented to the President for signature. For example, the bills differ regarding the Children’s Health Insurance Program (CHIP). The House bill proposes to eliminate CHIP and require beneficiaries with income above 150% of the poverty level to obtain coverage through health insurance exchanges beginning in 2014. CHIP supporters are concerned that coverage available through the exchanges may not be as broad as the coverage that CHIP provides and may require greater out‐of‐pocket expenses for families. The elimination of CHIP may also reduce the opportunity for school‐based Medicaid billing. The Senate bill proposes to maintain current CHIP through 2019. A side‐by‐side comparison of the bills can be obtained at www.kff.org.

National Children’s Health Insurance Summit
The Centers for Medicare and Medicaid Services (CMS) hosted its National Children’s Health Insurance Summit in Chicago on November 4 – 6, 2009 in Chicago. The purpose of the Summit was to provide a forum to share strategies for increasing the enrollment and retention of children in Medicaid and the Children’s Health insurance Program (CHIP). Representatives from every state attended the Summit. The Secretary of the U.S. Department of Health and Human Services (DHHS), Kathleen Sebelius noted that the Children’s Health Insurance Reauthorization Act (CHIPRA) of 2009 provided $80 million to facilitate state and local outreach to children and families and to encourage innovations in efforts to get and keep children enrolled. The Secretary reported 5 million of the 8 million uninsured children in the United States are eligible for CHIP or Medicaid. Enrollment and retention innovations discussed at the Summit included:

• Presumptive eligibility – enrollment of children while the application for benefits is pending;
• Express Lane eligibility – using data from applications for other benefit programs, such as free and reduced lunch, to establish eligibility for Medicaid/CHIP; and
• Eligibility retention – streamlining the renewal application process.

It was reported at the Summit that the number of uninsured low‐income children has declined during the economic recession while the number of uninsured for other groups has increased. The decline in the number of uninsured low‐income children is directly attributed to increased enrollment in Medicaid and CHIP. Research reflects that health care insurance for lowincome children provides significant health care benefits, such as decreases in the numbers of asthma attacks and hospitalizations due to asthma when children have access to health care. To provide additional guidance and information regarding Medicaid/CHIP outreach, CMS has created a new website www.InsureKidsNow.gov.

Medicaid Billing for Section 504 Services
Historically, CMS has maintained that its “free care rule” precludes school‐based Medicaid billing for services provided pursuant to Section 504 of the Rehabilitation Act of 1973. At the October 2009 annual conference of the National Alliance of Medicaid in Education (NAME), CMS representatives gave a presentation and outlined a rationale for the preclusion without specifically referencing the “free care rule.” CMS representatives indicated that Section 1903(c) of Title XIX of the Social Security Act allows Medicaid payment for school‐based services in individualized education programs and individualized family services plans and, since Section 504 services are not specifically referenced in the statute, school districts are legally liable to pay for those services. The CMS rationale is contrary to the 1988 U.S. Supreme Court decision, Bowen v. Massachusetts, which upheld a lower court decision that Medicaid payment cannot be denied because the services were provided in a school setting. The CMS representatives did not reference the DHHS Departmental Appeals Board (DAB) Decision No. 1924 which concluded that CMS’s “free care rule”, as applied to school districts, is not supported by Federal Medicaid law and, therefore, unenforceable.

Stimulus Funds and Medicaid Matching
Representatives of the USDE Office of Special Education and Rehabilitative Services (OSERS) also gave a presentation at the NAME conference. The OSERS representatives addressed the questions regarding the use of Government Services funds provided to states from the SFSF. The representatives clarified that Government Services funds cannot be used by states and school districts to match the Federal share of Medicaid expenditures. Also, if a state or school district uses Government Services funds to pay for medical care for Medicaid recipients, the expenditure of those funds cannot be claimed to Medicaid for reimbursement. Questions about this should be directed to the USDE.

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

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

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