Legislators wanted to know Friday whether Arkansas would have to return millions of dollars to the federal government because of mistakes found in a sample audit of school districts filing for Medicaid reimbursements.
An official with the state Department of Human Services said he thought the state was in the clear, but an auditor said some of the errors could cost the state money.
The Legislative Joint Auditing Committee reviewed a special audit report of the Medicaid in the Schools Program, which found that the state Department of Education did not adequately monitor the program and that the Department of Human Services did not monitor the sample districts reviewed in the report. Several representatives from both agencies answered legislators' questions about the findings during the hour-long discussion.
The program has provided tens of millions of dollars annually to Arkansas schools in Medicaid reimbursements since 2006.
The report, released Tuesday by the state Legislative Audit Division, noted that some school districts failed to keep adequate records supporting claims. It also said they failed to follow the free-care principle -- a duty to seek reimbursement for medical services from insurance companies for children covered by private policies. Because of the problems, the federal government could demand that the money be returned, auditors warned.
Officials from the two state departments took issue with that part of the report Friday, telling legislators that a legal precedent set by an appeals court gave them confidence that they could defend the districts' billing practices.
"The free-care principle does not have the force of law," said Mark White, chief counsel for the Department of Human Services. "Our understanding is that this was basically an unwritten rule ... and in 1997 they put this in a technical-assistance guide they made for schools ... . They could deny payment for that, and we could appeal that decision. Based upon what I see now, I think it is extraordinarily likely that we would be successful if that were litigated."
Department of Education officials said the department took responsibility for training the schools, but the schools remained liable for errors under an interagency agreement between the department and the Department of Human Services.
According to the audit report, the Medicaid in the Schools Program was created by the Education Department in 2006 and is administered by the Southeast Arkansas Education Service Cooperative in Monticello. The program has satellite offices in Little Rock and Paris, auditors wrote.
The program pays for services such as speech, language and occupational therapy, as well as mental-health services, screenings and case management.
Schools and other providers received $34.6 million under the program in the fiscal year that ended June 30, 2013, according to the report.
The state's overall Medicaid budget this fiscal year is about $5.4 billion, with more than 70 percent of that coming from the federal government and the rest coming from the state.
School districts seeking reimbursement can handle the claims themselves or contract with a vendor to handle the claims, auditors wrote.
Rep. Fred Love, D-Little Rock, asked whether the state would be liable if the federal government performed an audit and found issues. White said he believed the state would be in the clear, but auditors stepped in to clarify.
Roger Norman, legislative auditor, said the audit addressed not just the fair-care principle, but also mistakes in record-keeping and discrepancies in filing for reimbursement.
"We're talking about two different things," he said. "If the documentation is there, or a lack thereof, on the Medicaid billings then [the Center for Medicare and Medicaid Services] could come back and collect those."
Love asked if there was a way to quantify the questionable costs in all of the school districts, but Norman said it would be a huge undertaking to check every file for each of the districts since the program's inception.
Legislators also asked about a portion of the report that questioned the relationship of a former director of the Medicaid in the Schools Program with a nonprofit group that submits Medicaid claims for school districts, saying the relationship "may conflict with ethical guidelines" found in state law.
Norman Hill, a financial consultant with the Southeast Arkansas Education Service Cooperative that oversees the Medicaid in the Schools Program, said former director Tony Boaz never received direct financial benefit from the relationship between the two entities. Hill said his understanding was there had to be more than $5,000 worth of financial benefit before any approvals or special considerations needed to be made.
But the audit pointed to more than $391,000 in fees from school districts paid to the cooperative in 2012.
Legislators said they wanted the departments to work to better train the school districts to file reimbursements, to examine whether the program is being used as intended and to improve monitoring of the program. No legislators motioned for any further investigation or legal actions Friday.
Information for this article was contributed by Andy Davis of the Arkansas Democrat-Gazette.
Metro on 06/07/2014