State forgoing millions in federal reimbursements

The state each year misses out on potentially tens of millions of dollars in federal reimbursements because it fails to aggressively pursue claims related to teaching Medicaid-insured special education students, according to a review of federal data and interviews with legislators and state officials.

The U.S. government reimbursed the state $259,946 for school-based Medicaid health services in fiscal year 2016 — a fraction of what most other states received, a Honolulu Star-Advertiser analysis of the federal Centers for Medicare & Medicaid Serv­ices data shows.

In 2016, the latest year in which state-by-state statistics are available, states on average received $48 million, according to the CMS data. Hawaii didn’t get even 1 percent of that amount. Three states got nothing.

By contrast, Rhode Island, Montana, Maine and New Hampshire — states with overall student populations comparable to or smaller than Hawaii’s roughly 181,000 — each received $26 million to $38 million in reimbursements, according to the data.

Rep. Sylvia Luke, who heads the House Finance Committee, said she believes the state has been missing out on probably $50 million to $100 million annually for years.

“The figures were very shocking,” said Luke, who has taken the lead at the Legislature along with Sen. Michelle Kidani and Rep. Della Au Belatti to address the reimbursement problem.

The state Department of Education provided statistics to the Star-Advertiser for state fiscal years — not federal ones used by CMS — that were higher than the CMS numbers. But even with the DOE numbers, its reimbursements still were just a fraction of what most states received.

For 2016, for instance, DOE reported getting nearly $550,000 in federal reimbursements — or 1 percent of the national average.

DOE officials declined to comment on whether the department has left millions of federal dollars on the table, saying that would be speculative. The department also said the wide disparity in reimbursements among states reflects the complexity and difficulty of the Medicaid program.

“A lot of states are still trying to figure it out,” said Heidi Armstrong, interim assistant superintendent of the DOE’s Office of Student Support Services, which deals with Medicaid.

But under Superintendent Christina Kishimoto, who took over a year ago, the DOE is taking aggressive steps to maximize Medicaid reimbursements, including distributing newly revised consent forms starting this month to parents of special education students and ensuring the families know their rights, Armstrong said.

The department also is training principals and staff and updating its computer system to enhance the reimbursement effort, she added.

Armstrong, who was named to her new post last month, said she “absolutely” agrees that more federal money can be recouped going forward. “We are aggressively going to seek reimbursement for every service and every eligible child that we’re able to. We are committed to doing that.”

Medicaid, the government health insurance program for the poor, is funded by state and federal dollars. Some of the DOE’s more than 21,000 special education students, who have education-related disabilities, are covered by Medicaid and receive health services while in school. The DOE, however, could not say how many of its students are enrolled in Medicaid.

Statewide, about 41 percent of Hawaii’s children are covered by the insurance program.

For the DOE to get reimbursed for qualifying expenses, it must submit the proper billing records and ensure all federal requirements are met — a process that can be time-consuming and tedious. The DOE also must get permission from the students’ parents to share their child’s confidential health information with CMS.

Though lawmakers have raised questions about low reimbursement rates since at least 2015, the DOE has had little incentive to improve because it knows legislators must fund special education, according to legislators. That lessens the pressure on the agency to jump through the federal hoops to recoup funds, they added.

“It’s easier for DOE just to come to the Legislature and say, ‘We need so much money for special needs services and special education kids,’ ” Luke said. “That’s so much easier to do.”

DOE officials declined to address that contention.

The Education Department is spending $367 million this fiscal year on special education — about the same as last year.

With that level of spending, legislators have been pressing the DOE to seek greater reimbursements for one primary reason: The more money the department can recover from Uncle Sam, the more money the Legislature can steer toward other initiatives.

“There are a lot of good programs that we left on the table because we couldn’t fund them,” said Kidani, who along with Au Belatti is leading a working group formed recently to address the state’s dismal reimbursement record. Representatives from the DOE and the Department of Human Services, the state Medicaid agency, are among the other members.

This isn’t the first time the state has fallen short in recovering or using federal funds.

The state’s inability in recent years to spend backlogged federal money on a timely basis at the departments of Transportation, Health and Hawaiian Home Lands raised questions about their operations, put future funding at risk and prompted harsh criticism from legislators.

At a December 2016 hearing, Sen. Jill Tokuda, then-head of the Senate Ways and Means Committee, described the problem as “absolutely unacceptable” and said the state was leaving hundreds of millions of federal dollars on the table while pressing needs were going unmet.

Repayment challenges

In the Medicaid arena, states can seek repayment for the cost of certain school-based services, such as hearing, speech and physical therapy, as long as the services are deemed medically and educationally necessary, are performed by a licensed provider and are properly documented. The expenses are divided into two reimbursement categories: services and administration. The latter can include partial salaries.

To seek repayment, the DOE first must get permission from the student’s parent or guardian to submit the necessary records to the federal government.

Yet many parents don’t even get the consent forms, according to legislators and the DHS.

If parents provide permission, education officials are able to submit billing forms to the DHS’s Med-QUEST Division, which processes and submits them to the CMS for reimbursement.

In addition to not widely distributing the form, the DOE has spent an inordinate amount of time — about three years — revising it, legislators said.

Armstrong could not say why some parents were not getting the forms previously or why it took so long to revise the document. But the changes align the new form with federal regulations and enable the department to seek maximum reimbursements, she said.

Adding to the challenges, the DOE does not seek repayment for some services, such as skilled nursing, that the federal government already has deemed eligible for potential reimbursement, according to Judy Mohr Peterson, Med-QUEST administrator.

Armstrong said the DOE is updating its computer system so electronic bills can be submitted for all eligible services, including skilled nursing.

Another factor contributing to low reimbursement rates is that the state has yet to get federal approval to start submitting claims in the administration category, according to DHS officials.

For many states, at least half their school-based reimbursements are for administrative expenses, and some states get the bulk of their federal funds in that category, according to the CMS data.

The state of Washington, for instance, received about $5 million in reimbursements for school-based services and $40 million for administration-related expenses in fiscal 2016.

Hawaii received nothing for administrative expenses. All of its reimbursements came on the services side.

Mohr Peterson said the DHS is working with the federal government to get permission to start submitting administration-related billings, but that approval likely is months away.

The DHS also is working with education officials to increase overall reimbursement requests, including looking at services that are not currently being submitted, according to Mohr Peterson.

Asked whether she agrees that the state is leaving millions of federal dollars on the table, she said, “There is potential to be drawing down a lot more. I don’t have a way to quantify it.”

Lack of progress

According to DOE data, the department’s reimbursements have varied widely over the past decade, hitting a peak of nearly $850,000 in 2010. Last fiscal year, it recouped $424,140.

In 2015 the Legislature passed a budget bill that directed the DOE to bolster its Medicaid reimbursements.

Jessica Schubel, senior policy analyst for the Center on Budget and Policy Priorities in Washington, D.C., told the Star-Advertiser that the process for seeking reimbursement can be difficult for school personnel not versed in Medicaid regulations and terminology. Some schools believe the effort might not be worth it, she added.

“Schools have not been great about billing services for Medicaid reimbursement, which makes sense,” Schubel said. “Their job is to educate kids, not provide health care.”

Yet Hawaii legislators say other states clearly have been successful in tapping into the federal Medicaid reservoir.

While the Legislature has left it to the DOE the past several years to determine how to recover more federal money, lawmakers said they have been frustrated by a lack of progress, which prompted them to pass a resolution this past session forming the legislative-led working group.

“We are done waiting for them to figure things out,” Luke said.

Through the efforts of the working group, Luke said she expects improvements to be put in place over the next year or so, including statutory changes the Legislature can address next session.

“We have to take a much more hands-on approach,” Luke said.

Armstrong said the DOE recognizes the urgency of maximizing reimbursements while ensuring federal regulations are met. But she sounded a cautionary note.

“We have to be mindful that federal funding can be unpredictable,” Armstrong said, “and that Medicaid reimbursements are supplementary funds that cannot be relied on as a guaranteed source of funding for some of our most vulnerable students.”