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Volume 13 Number 64 News: Medicaid The Department of Health and Human Services (HHS) did not act arbitrarily or capriciously in refusing to reimburse the Illinois Medicaid program for certain costs the state claimed for administering its school-based programs, a federal trial court ruled March 28 (Illinois Department of Healthcare and Family Services v. U.S. Department of Health and Human Services, N.D. Ill., No. 06-cv-6402, 3/28/08). The U.S. District Court for the Northern District of Illinois said HHS acted reasonably in finding the state was not entitled to recover on claims stemming from two classes of disputed school-based Medicaid program administration costs. The claims involved administration costs the state claimed were related to efforts to identify Medicaid-eligible children on the one hand and, on the other, those related to providing skilled professional medical personnel (SPMP) and their support staff in school-based settings. In the former case, HHS claimed--and a Departmental Appeals Board agreed--that the coding system utilized by the state failed to distinguish adequately between costs associated with identifying eligible children, or Medicaid outreach, and costs associated with activities directed at determining eligibility for other state and federal programs, such as the Individuals with Disabilities Education Act. In the latter case, the department argued--and a separate Departmental Appeals Board again agreed--that the state's method for tracking SPMP services administration expenses failed to distinguish between administration activities and the actual provision of medical care by SPMPs. The provision of Early and Periodic Screening, Diagnostic and Treatment services was one example cited by the court of services that would not be reimbursable as an administration cost. Reimbursement Rates Differ According to the court, the reimbursement dispute stemmed in part from a larger disagreement between officials with the Centers for Medicare & Medicaid Services (CMS) and their counterparts in the Illinois Department of Healthcare and Family Services over how reimbursement of these two categories, and coding related thereto, should be handled. The dispute was significant, the court noted, because, while states may obtain federal reimbursement of 50 percent of Medicaid-outreach program administration costs, states may recover 75 percent of state SPMP program administration costs from the federal Medicaid program. In finding the CMS and DAB rulings had to be upheld, the court looked to whether CMS's actions were reasonable and supported by substantial evidence. In both cases, the court concluded, the agency had reasonably decided that the administration expenses sought were not reasonable and necessary for the proper and efficient administration of the state program. With respect to outreach administration costs claimed by the state, the court found that the coding system used by the state allowed costs of conducting widespread medical screening prior to determination of Medicaid eligibility to be included, despite the fact that the process ultimately led to expensive screenings for ineligible children. In this regard, the court said, CMS reasonably determined that the state coding system "unnecessarily and inefficiently focused upon identifying medically at risk children first and financial eligibility second." The court held reasonable the DAB's conclusion that costly testing should come after a child is determined to be Medicaid-eligible, adding that "it is reasonable to conclude that focusing upon Medicaid-eligibility first will not harm children who are 'at risk' of serious medical conditions because mandatory EPSDT benefits will afford them comprehensive assessments and screening." Skilled Professional Medical Personnel Costs With respect to SPMP administration expenditures, the court similarly found that the state coding system did not effectively distinguish between those costs that were in fact related to administration from those costs associated with the provision of medical care in school settings. The court found that accepting the state's position would allow the state to seek reimbursement at the 75 percent reimbursement rate in relation to non-SPMP services otherwise eligible for reimbursement only at the 50 percent rate. "Because the codes for SPMP were so similar to those of non-SPMP, it was reasonable for the DAB to conclude that the SPMP codes were flawed in that they captured activities that did not require SPMP skills," the court said. "Moreover, it is reasonable to conclude that enhanced reimbursement is inappropriate if the same activity can be effectively and efficiently performed by a non-SPMP," it added. The court concluded that the DAB heard substantial evidence that the SPMP administration claims were also unreasonably large, citing evidence that the SPMP administrative costs the state claimed dwarfed costs of administering the remainder of its school-based Medicaid program. The court's decision is available.
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