Audit: Schools Losing Millions

Cheryl Hines attends the Los Angeles premiere of HBO's "Curb Your Enthusiasm" at the Paramount Theater in Hollywood, Calif., on Sept. 21, 2005. GETTY IMAGES/Stephen Shugerman

Medicaid payments meant for schools that provide counseling, hearing tests and other health care for poor children are being siphoned off by states and consultants, leaving some schools with a small fraction of their share, congressional auditors say.

The General Accounting Office said it found schools in one state ended up with less than a dime for every dollar spent on health care services for poor students.

Because states are retaining a portion of Medicaid reimbursements, they may be ignoring questionable billing practices at consulting firms, which commonly charge commissions of between 9 percent and 12 percent of what they bill, the GAO said.

“Embedded in ... these practices are incentives for states and private firms to experiment with 'creative' billing practices, some of which we have found to be improper,” the GAO auditors said in a report being released Wednesday at Senate Finance Committee hearing. The GAO is the investigative arm of Congress.

Schools, under the advice of private billing companies, charged Medicaid for groups of services, not all of which actually were provided to students, auditors said. Schools also billed for activities that are not covered by Medicaid and didn't provide adequate documentation to justify other billings.

Federal officials acknowledged that there have been problems with the Medicaid reimbursements and said new policies have been initiated to correct them.

Some 13 million school-aged children are eligible for Medicaid, the federal health program for low-income Americans that is funded with state and federal money.

Schools are entitled to federal reimbursements to recover their costs of providing health care for these children. Expenses incurred while enrolling kids in the program and arranging their appointments are also reimbursable. States spent $2.3 billion for school-based health care in the latest years for which data were available, 1998 and 1999, the GAO said.

Many have hired billing firms that promise big returns. The GAO said the arrangements with consultants, made both by states and school districts, are creating “an environment for opportunism that drains funds away from their intended purposes.”

Eighteen states kept part of the reimbursements, including seven that kept between 50 percent and 85 percent of the federal money, the GAO said.

State officials told GAO auditors that states are entitled to some of the reimbursements because state funds support local school districts.

Auditors said the practices resulted in schools getting back less than what they spent on care for Medicaid eligible children.

In New Jersey, a school district may receive as little as $7.50 in federal reimbursement for every $100 spent, the GAO said.

Auditors also found $28 million in improper payments in Michigan and questioned an additional $33 million in reimbursements. Michigan school disticts hired consultants at accounting firm Deloitte Touche for billing, according to state officials. A message left with the company's public affairs office was not returned Tuesday.

In Illinois, consultants arranged for school districts to submit $16.6 million in claims that inadequately documented why schools used skilled medical people to perform administrative activities. The GAO report did not specify which consultants were used. State officials could not be reached for comment.

Tim Westmoreland, director at the Health Care Financing Administration, which runs Medicaid, said the agency has taken steps to prevent improper claims and asked some states to pay back inappropriate payments.

The states the GAO said had retained some portion of federal reimbursements for schools included New Jersey, Iowa, Delaware, Vermont, Alaska, New York, Pennsylvania, Washington, Connecticut, Michigan, Wisconsin, Illinois, New Mexico, Ohio, Utah, Colorado, Massachusetts and Minnesota.

  • CBSNews.com staff CBSNews.com staff

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