Medicaid and Schools

As a condition of accepting funds under the Individuals with Disabilities Education Act (IDEA), public schools must provide special education and related services necessary for children with disabilities to benefit from a public education.Generally, states can finance only a portion of these costs with federal IDEA funds.Medicaid, the federal-state program that finances medical and health services for the poor, can cover IDEA required health-related services for enrolled children as well as related administrative activities (e.g., outreach for Medicaid enrollment purposes, medical care coordination).Despite written federal guidance, schools have difficulty meeting the complex reimbursement rules under Medicaid.According to federal investigations and congressional hearings, Medicaid payments to schools have sometimes been improper.P.L. 110-173 included a moratorium on any administrative action restricting Medicaid coverage or payments for school-based administration and transportation services until June 30, 2008.Other legislation would extend this moratorium.Under IDEA, public schools are required to provide children with disabilities with a free appropriate public education (FAPE), including special education and related services according to each child's individualized education plan (IEP) or individualized family service plan (IFSP).States receive some federal aid under IDEA, but are otherwise responsible for the expense of special education and related services.One approach Congress has taken to ease the burden on states and school districts of fulfilling these IDEA requirements is to allow Medicaid to finance covered health services (e.g., physical, occupational and speech therapy, and diagnostic, preventive and rehabilitation services) delivered to low-income, Medicaid-eligible special education students. Recent HistoryPrior to 1988, Medicaid did not pay for coverable services that were listed in a child's IEP/IFSP since special education funds were available to pay for these services, and because generally (with a few explicit exceptions), Medicaid is always the payer of last resort.Congress changed the financing relationship between IDEA and Medicaid in the Medicare Catastrophic Coverage Act of 1988 (P.L. 100-360).However, there is some controversy about the exact nature of this legislative change.IDEA requires states to establish interagency agreements to ensure that IDEA-eligible students receive the CRS-2 1 Personal communication with CMS officials, November 14, 2002. 2 See Medicaid Questionable Practices Boost Federal Payments for School-Based Services.Testimony by William J. Scanlon before the Senate Finance Committee on June 17, 1999 (GAO/T-HEHS-99-148), and Medicaid in Schools: Poor Oversight and Improper Payments Compromise Potential Benefit.Testimony by Kathryn Allen before the Senate Finance Committee on April 5, 2000 (GAO/T-HEHS