Credit: Courtesy of Berkeley Unified School District

Nearly one in six California school districts has dropped out of a federal outreach program for low-income student health that brings millions in unfettered dollars into schools, citing bungled state management and years-long delays in receiving funds, according to a new state audit.

The exodus is part of the continuing fallout from a 2012 federal investigation that found California had “serious deficiencies” in its oversight and management of the School-Based Medi-Cal Administrative Activities program. The program reimburses schools for a portion of the cost of referring students to Medi-Cal, California’s name for the federal Medicaid low-income health insurance program.

After the 2012 investigation, federal officials temporarily froze payments to school districts effective July 1, 2012, recalculated previously paid claims submitted in 2011-12, introduced a formula for interim payments and devised a new method of calculating claims moving forward.

As a result, some districts are still waiting to be reimbursed for 2009 expenses, while others have been told to return money from previous reimbursements that are now under review. Still other districts may not receive their interim payments until 2019 because the state has used their reimbursements to offset money owed by districts that were overpaid, the state audit found. A final accounting of contested Medi-Cal administrative claims may not be resolved until 2019, according to the California Department of Health Care Services, which oversees Medi-Cal.

“A lot of districts have thrown up their hands,” said Maria Thomas of the California School Boards Association.

As of March, 145 districts have walked away from the program, according to the state audit report released in August, leaving more than 800 districts still participating.

“A lot of districts have thrown up their hands,” said Maria Thomas, senior director of business development at the California School Boards Association. Among the unified school districts exiting are Redondo Beach, Carlsbad, Galt Joint Union High School and Chino Valley.

Asked if the lengthy payment delays for California schools are unusual, John Hill, executive director of the National Alliance for Medicaid in Education, a national group that advocates for Medicaid reimbursements for schools, said, “Extremely.”

The California Department of Health Care Services agreed with many of the recommendations from the state auditor, including the recommendation that the department play a lead role in encouraging districts to participate in the reimbursement program.

At its peak in 2011-12, 966 California districts collectively claimed $200 million for administrative time spent discussing student health needs, translating information for families and arranging for Medi-Cal covered services such as speech therapy, counseling and dentistry. The reimbursements are particularly valued by districts because the federal funds may be spent as districts choose, from closing budget gaps to funding counseling groups.

But obstacles mounted following the investigation of three California school districts and county offices of education by the federal Centers for Medicare & Medicaid Services. Investigators found that two of the educational agencies had filed unallowable claims, and ordered the state to create new compliance and oversight systems.

Yet creating these systems, and explaining them to school districts, has been a challenge, according to the state audit report. In the last three years, the state has asked districts to recalculate their claims using three entirely different methods for tracking the amount of time school staff spend referring students to Medi-Cal services. Two of those methods were quickly discontinued, but not before districts spent untold hours trying to implement them.

At Chino Valley Unified, which received $2 million a year in reimbursements for Medi-Cal administrative activities before the federal investigation, the decision to leave the program about two years ago came after several years without payment. Lack of clarity from the California Department of Health Care Services about how much money the district was likely to receive in future payments exacerbated the problem, said Cheryl Rollins-Allen, a billing specialist for Medi-Cal administrative activities for the district.

“Everything was unknown,” she said. “There was nothing from the state and feds that said ‘This is exactly how this program is running.'”

The state offered the district a final payment of 35 cents on the dollar on its outstanding invoices, in lieu of waiting for a final reconciliation of past claims. Chino Valley Unified took the deal. It was a lot of money to walk away from, but with no money coming in and uncertainty about what future payments would look like, the decision made sense, said Rollins-Allen.

“It was $2 million a year, but if you’re not getting it, you’re not getting it,” said Cheryl Rollins-Allen, a Medi-Cal billing specialist for Chino Valley Unified.

“It was $2 million a year, but if you’re not getting it, you’re not getting it,” she said. “You’re living on promises.” The district could decide to rejoin the program after the current issues with reimbursements and accountability systems are worked out, she said.

Adding to the frustration, some districts say, is the way the California Department of Health Care Services has handled interim reimbursements, which are partial payments to districts that the state and federal agencies agreed upon in 2014 while the contested claims are being re-evaluated.

Those interim reimbursements range from 35 to 100 percent of outstanding claims, minus money that districts previously received for claims that the state now says were wrongly calculated. Those overpayments had to be returned to the state and, at least theoretically, to the federal government. But rather than trying to collect overpayments from individual districts, the state decided to consider districts collectively, and balance money that districts owed to the state against money that the state owed to other districts.

The Department of Health Care Services took the unusual step of writing a check to the intermediary agencies that stand between the district and the state, without instructions for how those funds would be distributed. These intermediary agencies are 26 regional claiming units that receive claims from districts and send them to the state, which then sends them to the federal government. Typically, the process is reversed for payments, with money going from the federal government, to the state, to the regional claiming unit to the district. But in the case of the disputed claims, the checks aren’t always making it back to the districts in the amounts they submitted, according to the audit report.

In the Los Angeles County regional claiming unit, for instance, districts were owed $2 million in interim payments, but the regional claiming unit received a lump-sum check for $55,000 “because other claiming units within the consortium had overpayments that totaled more than their interim payments,” the audit report stated.

Similarly, the report noted, San Juan Unified School District never received more than $76,000, to which it was entitled as an interim payment. Also denied its interim payment was the Folsom-Cordova Unified School District, which at one time received more than $100,000 a year in Medi-Cal administrative activities reimbursement.

“One of our sister districts owed more money than was given, so our money wasn’t given at all,” said Mary Ann Delleney, director of health programs at the Folsom-Cordova district. “I don’t think that is how the program is supposed to be run.” Folsom-Cordova Unified, which hasn’t received a Medi-Cal administrative reimbursement since 2012, is remaining in the program despite problems, she said.

At the Glenn County Office of Education, which acts as a regional claiming unit for dozens of districts, Randy Jones, assistant superintendent for business services, has a check for interim reimbursements that he doesn’t know what to do with. Missing from the check is a 14-digit district code that indicates which district should be paid. “The check is for $5,000 and change, but I don’t have a district due for that amount,” he said. “This check came as no other check has ever come in before.”

The California Department of Health Care Services defended the practice of distributing reimbursements as net payments to regional claiming units.

Otherwise, the state would have had to issue individual checks for more than 800 districts and county offices for eight quarters of deferred claims, the state wrote in a response to the audit.

Ultimately, the importance of matching students with Medi-Cal services, and the money the program can bring to districts, will outweigh difficulties, said Mary Barlow, associate superintendent for the Kern County Superintendent of Schools. The Kern County office was held up by federal investigators as a model accountability program. “This work is vital,” Barlow said.

She believes setbacks in the California program are temporary and will prompt positive changes. “There are many districts that decided they didn’t want to continue,” Barlow said. “But we believe some will re-enter the program.”

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