WASHINGTON, D.C. — Communication and collaboration between transportation departments and state Medicaid agencies are vital if a proposed change to a widely misunderstood federal regulation of state Medicaid reimbursements alters the ability of how some school districts fund transportation of special education students.

Prior to Labor Day weekend, U.S. Health and Human Services Secretary Mike Leavitt issued the proposed rule in an effort to eliminate fraudulent claims to the tune of $3.6 billion over the next five years. It came on the heels of President Bush’s FY07 budget plan earlier this year to block federal reimbursement of transportation for Medicaid-eligible students.

The Centers for Medicare and Medicaid Services (CMS) within HHS plans to eliminate a previously available pool of funds awarded for special needs transportation as a covered medical service to and from a qualified provider. The Government Accountability Office has uncovered many instances nationwide of insufficient documentation on the student IEP or verification of service at schools that participate in state Medicaid plans.

If approved, it would go into effect Oct. 1, 2008 and would eliminate reimbursements for “transportation from home to school and back for school-aged children with an Individualized Education Program (IEP) or an Individualized Family Services Plan (IFSP) established pursuant to IDEA.” Medicaid would also no longer be available for administrative activities performed by school employees or contractors, “or anyone under the control of a public or private educational institution.”

The big indicator for pupil transporters whether or not they are eligible to receive reimbursement is student eligibility for an approved Medicaid-related service. Funding had been available for transportation to and from these Medicaid services in a school setting on the days the student received IEP or IFSP services.

Many schools are scared away by the enormous burden of document requirements for tapping Medicaid funds. John Fairchild, a former Oregon state director and transportation director at Salem-Keizer Public Schools, said districts must review the necessary paper work against cost and the number of Medicaid Advantage enrollments.

“There are some districts where this will be a significant impact, if enacted, where there will be no dollars at all,” he said. “Your talking significant dollars in a district like Salem, where there was more than enough money to make it worth while as long as we established the right policy and procedure to maintain that documentation.” Among areas figuring to be hard hit is West Virginia, where counties have relied on federal money to offset the purchase of new special needs buses for providing Medicaid service.

“The way we see it is it’s a hand-in-hand process,” said Ben Shew, executive director of the West Virginia Department of Education’s Office of Transportation. “The administrative costs (are) not a great amount to us. The other part is significant enough to the counties to support their transportation costs.”

West Virginia provides replacement bus funds every year, but the formula does not account for Medicaid-related issues. Shew said Medicaid was the only recourse for some counties to provide required service to medical providers.

CMS explained that the vast majority of pupil transportation services support educational goals and not those of the Medicaid program. Furthermore, Medicaid funding was never intended to replace grants under the Individuals with Disabilities Education Act (IDEA). Specifically, CMS-2287-P would affect “certain activities based on a Secretarial finding that these activities are not necessary for the proper and efficient administration of the State plan, nor do they meet the definition of an optional transportation benefit.”

“It seems punitive if they cut out all transportation costs, especially for us who have taken the time to document to the nth degree everything they want. It’s not like the feds give us a lot of money, anyway,” Shew said. “When you look at the total transportation cost, it’s not a huge cost. But at the same time, to pull a million or two out of your budget, that’s significant.”

Reprinted from the October 2007 issue of School Transportation News magazine. All rights reserved.