New proposed federal rule will take away Medicaid support for special education services

On Friday, September 7, 2007 the federal Department of Health and Human Services (“HHS”) announced its proposed rule change to eliminate Medicaid reimbursement to schools providing certain administrative services and transportation.  The proposal is lengthy, but as the summary states:

under the proposed rule, Federal Medicaid payments would 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, and 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 the Individuals with Disabilities Education Act (IDEA).

The proposal rule would not affect federal reimbursement for direct medical services such as speech and physical therapy. 

Regarding transportation, HHS states “[t]ransportation from home to school and back is not properly characterized as transportation to or from a medical provider.” “School-age children, including children with an IEP or IFSP,” says HHS, “are transported from home to school primarily to receive an education, not to receive direct medical services.” Yet schools are required to provide medical services as a related service and, indeed, HHS will reimburse for PT, Speech, etc. provided at the school. Under the proposed rule, HHS will also reimburse transportation from school to a direct medical service provider - even if it is for the same services as provided in the school (this later scenario, however, would probably violate anti-segregation requirements). But ignoring HHS’s own funding and intra-federal policy inconsistencies, the reality is that most children receiving these reimbursable medical services receive them only at school. Transportation, for them, is equally essential for both education and the reimbursable services. No doubt this is why reimbursement for transportation has been permitted.

HHS’s justification for eliminating these reimbursements is that the Department of Education via the IDEA already ponies up the funds, so HHS should not pay. “The IDEA authorizes funding through the U.S. Department of Education (not Medicaid) for special education and related services for children with disabilities. . .” HHS also says “[s]tates receive Federal aid under IDEA to assist public schools in delivering mandated services in pursuit of a free appropriate public education. . . . Schools must perform these activities pursuant to education requirements, even in the absence of Medicaid payment. . . .” Although public schools must indeed provide the services, HHS and incoherent federal policies cynically worsen the already hollow federal promise to fully fund the IDEA special education mandate.

According to the notice, “[t]he proposed rule is estimated to reduce Federal Medicaid outlays by $635 million in FY 2009 and by $3.6 billion over the first five years (FY 2009-2013).”   HHS explains that “the estimated annual Federal savings under this proposed rule is only about one eighth of one percent of total annual spending on elementary and secondary schools (in 2004 total elementary and secondary spending was $453 billion according to the Statistical Abstract of the United States. . . .” Especially compared to other fully-funded federal initiatives  (or even an Alaskan bridge or two), this is but a pittance, even more so per child. But it is a pittance taken, ultimately, from needy children and who have always been, and still are, the poorest of the poor.

Elimination of federal financial support to any degree on grounds that another agency is supposed to pay is bad policy and, in the absence of proper and full funding of the special education mandate, is disingenuous.  It is illustrative of the penurious federal attitude toward the nation’s special needs population.  Such a rule change simply should not occur without concomitant IDEA funding increases.

If nothing else, HHS’s justifications demonstrate a profound need to rationalize the federal mandates for special needs children (education, medical, health and welfare, etc.) and to finally fulfill the so-far phantom federal promise to fully fund the special education mandate, which, admittedly, is not HHS’s concern.  But it is, after all, when IDEA 2004 was passed, the federal government's promise, again, to fully fund (Cong. Rec. S11657-658 (Nov. 19, 2004), among many other statements) the federal share of special education (which is only 40 percent of the total cost).  Regardless whether this agency or that agency is supposed to disburse funds, In the end, special needs children bear the cost of the broken promise.

HHS will accept comments regarding the proposed rule change, which may be submitted, among other means, electronically. More information on submitting comments is available in the HHS notice.