It was, without question, a call to action. Millions in federal Medi-Cal funds would flow to California schools, the state auditor said in 2005, if districts filled out the paperwork to collect a little-known reimbursement for the cost of referring low-income students to the health care program.

Now, a decade later, California districts and school programs are caught in a fight with the federal government over $500 million in unpaid reimbursement claims.

From the start, the idea was to claim federal money that was there for the taking. “School districts need stronger encouragement to apply for federal dollars for Medi-Cal administrative activities,” said the state auditor’s report. Districts across the state had left $57 million in federal funds on the table in 2002-03, the report said, by not seeking reimbursement for Medi-Cal administrative tasks school staff were performing. A 2006 follow-up report, titled “No Dollar Left Behind” by the advocacy group Consumers Union, urged state legislators and the California Congressional delegation to help districts collect “their share of federal funds to which they are entitled.”

And so school officials sought out the money. By 2010-11, hundreds of districts and school programs were submitting nearly $200 million in annual claims for time spent by staff distributing fliers about Medi-Cal, assisting with Medi-Cal enrollment and helping students, including those in special education, find services such as speech therapy and counseling. The reimbursements streamed into recession-strapped districts as funds they could spend as they chose, from filling budget shortfalls to funding salaries for school nurses.

“We thought it was a win-win,” said Gil Ogden, director of student services at Turlock Unified.

Then came a 2013 federal Centers for Medicare & Medicaid Services audit report that looked at three California entities – Turlock Unified School District, the special services program in the Tulare County Office of Education, and the special education program in the Santa Barbara County Office of Education – and charged Turlock and Tulare with overzealous and unallowable claiming.

In one example cited by the auditors, two preschool teachers in Turlock Unified billed half of their working hours in one quarter to outreach efforts for Medi-Cal, which is the California name for the federal Medicaid health care program for low-income persons. Turlock has denied any intentional wrongdoing.

The audit declared the California Department of Health Care Services’ claiming process out of compliance and chastised the state for inadequate oversight. As a result of those findings, the federal agency halted payment on Medi-Cal administrative claims filed in 2011 and 2012, some of which involved expenses dating back to 2009. A total of $321 million of these deferred claims remain in dispute and unpaid. Also unpaid are newer claims that districts continued to file, totaling $179 million, according to the California Department of Health Care Services, which funnels federal reimbursements to the districts and oversees the program.

For California school districts to get paid, the federal agency said in a letter referred to as “the settlement,” the state must throw out the methodology used by districts to calculate Medi-Cal administrative expenses and adopt a new method. By a deadline extended to April 1, the state must submit a plan for how districts will use the new method to recalculate disputed claims greater than $25,000 and all claims from July 2012 through December 2014.

Furthermore, the federal agency said, districts will receive interim payments on deferred reimbursements that range from full payment for smaller claims to as low as 40 cents on the dollar for claims more than $50,000 per quarter. Those payment amounts could change after the invoices are recalculated under the new method.

The terms of the settlement, agreed to last fall by the Department of Health Care Services, have raised an outcry from the California Department of Education, the California Teachers Association, San Diego Unified School District and others, who wrote to Senators Dianne Feinstein and Barbara Boxer asking for help in obtaining more favorable terms. On March 5, 51 state legislators, led by Richard Pan, D-Sacramento, and Rob Bonta, D-Oakland, sent a letter to the California Congressional delegation asking that districts not be asked to recalculate old claims.

“It’s a mess,” Erika Hoffman, legislative advocate for the California School Boards Association, said of the settlement terms. “They want to apply new rules to old claims.”

Last week, the Centers for Medicare & Medicaid Services indicated in a letter that it has no interest in further negotiations.

The settlement puts an end to a time survey method of calculating administrative costs – a self-reported worksheet used by teachers, administrators or staff to document time spent on Medi-Cal outreach and referral activities during one week selected by the state. The one-week sample would be used to calculate reimbursement for the quarter. A reimbursable expense, said Tylee Navo, who oversees Medi-Cal administrative activities at the Sanger Unified School District, could be a meeting between an assistant principal, a school psychologist and a special education teacher during which they decide to refer a suicidal student to a county mental health program. Sanger Unified is currently waiting for resolution of $1 million in unpaid invoices.

In its audit of Tulare, the federal agency said staff members were instructed to perform an inordinate amount of outreach and referral during the time survey week, in order to maximize reimbursements. The county has acknowledged it erred. “We were wrong and it’s been fixed,” said Patty Blaswich, director of internal business at the Tulare County Office of Education.

But before the federal audit, Turlock Unified had not been told that it was wrong to ask hundreds of teachers to use the time survey week to photocopy and distribute Medi-Cal fliers, said Gil Ogden, director of student services for the district. Instead, the district’s claiming process had twice been reviewed by the state Department of Health Care Services, for fiscal years 2004-05 and 2008-09, and found to be compliant, according to state documentation.

And because Turlock conducted aggressive outreach, Ogden said, the percentage of Turlock Unified students enrolled in Medi-Cal increased from 26 percent in 2003-04 to 34 percent in 2011-12.

“We thought it was a win-win,” he said. “Students were enrolling in health care programs and receiving services, while the school received funding that was used on capital and program improvements.”

But the federal government disagreed, stating that the time survey week must be a representative sample of activities throughout the quarter, not an anomaly.

Under the new method, called Random Moment Time Survey, specified school district employees will receive an email instructing them to write down what they are doing at certain times of the day. Their reports of the percentage of their time spent on Medi-Cal administration will be pooled within a group of districts and schools to create a reimbursement percentage. Districts must collect four quarters of Random Moment Time Surveys, which were rolled out in January, before the reimbursement calculation is established.

The new rules may not be as generous as the old. “Schools’ claims could be reduced significantly,” stated a letter written by the state Department of Health Care Services at the request of the districts. If the interim payments received by the districts exceed the final calculations, they will be asked to return the funds.

“It may be there will be a good deal of money due,” said Ken Gragg, chief financial officer for the Medi-Cal Administrative Activities program for the Kern County Superintendent of Schools.

With large reimbursements deferred and subject to change, districts have had to adjust to the loss of millions of dollars once integral to their budgets. The special education services program in the Tulare County Office of Education had received about $500,000 per quarter in 2011 in federal reimbursements for administrative costs, Blaswich said.

“You drop $2 million out of your budget and take a deep breath,” she said.

The Contra Costa County Office of Education, which oversees Medi-Cal administrative activities claims for 50 districts, is waiting to see how the $10 million in reimbursements it is waiting for are recalculated, said Terry Koehne, spokesman for the office.

Dissatisfied, some districts and education associations are asking that the state management of the program, known as School-Based Medi-Cal Administrative Activities, be moved out of the Department of Health Care Services and into the Department of Education. They cite differences in culture between health and education departments and say it makes more sense for school districts to be working with a department that has a deep understanding of how schools operate.

“What we’d like to see is can we shift this one over to Education,” Hoffman said, adding that the move would facilitate “better communication.”

To lay the groundwork for a possible change, legislators have requested another state auditor’s report on the program, which is expected in May. Senate Bill 123, authored by state Sen. Carol Liu, D-La Cañada Flintridge, is serving as a placeholder for legislative discussion of the audit findings, according to her staff. The bill asks State Superintendent of Public Instruction Tom Torlakson to provide specific recommendations to improve administration and oversight of the program.

In the meantime, reimbursements have started to flow to districts with smaller amounts of deferred claims – $25,000 or less per quarter. For districts with larger outstanding claims, the long wait for reimbursement continues.

“We’ll be able to make payments in summer 2017,” said John Mendoza, chief of the Safety Net Financing Division of the California Department of Health Care Services.

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  1. Phyllis 7 years ago7 years ago

    As a Speech-Language Pathologist I bill Medi-Cal for assessments and therapy on all students that are on my caseload regardless of financial need. Does the school district get reimbursed for all students or just the ones currently receiving Medi-Cal. How much do they get for an assessment and therapy?

  2. Sonja Luchini 8 years ago8 years ago

    How many claims are fraudulent in the first place? I have a special needs son and when he was in a nonpublic school, the owner discovered that he was assigned a case number by LAUSD so they could bill Medi-Cal for his services that we were paying out of pocket. I did not ask that he be signed up and was not asked permission to include him. Where that money went is … Read More

    How many claims are fraudulent in the first place? I have a special needs son and when he was in a nonpublic school, the owner discovered that he was assigned a case number by LAUSD so they could bill Medi-Cal for his services that we were paying out of pocket. I did not ask that he be signed up and was not asked permission to include him. Where that money went is a mystery because the school did not receive it.

    When El Dorado School District decided to get clever and form the El Dorado Charter SELPA (separate from the regular El Dorado School District), they realized that they, too could bill Medi-Cal for “services” by creating an account for every student with disabilities that was enrolled in one of the charters receiving “services” through them. It was a money machine that I questioned the state about but no one seemed to know or care where to direct my concerns.


    • Jay Anderson 8 years ago8 years ago

      While I cannot address your specific example, this article is referring to the administrative claiming program that measure staff activities and not a measure of services to students.
      You may want to try to talk to the IEP case manager for your student.

      • Sonja Luchini 8 years ago8 years ago

        Staff cannot record “activities” unless servicing students enrolled in the program. Someone is using our children to make a buck.