Major Changes to Federal Medicaid Rules Hit State, Local and School Budgets and Providers

Some Federal cuts to be implemented 12 months earlier than anticipated

January 30, 2008

AUGUSTA – The federal Centers for Medicaid and Medicare Services plans to adopt five rule changes that eliminate federal dollars that have supported healthcare services for the elderly, persons with developmental disabilities, school-aged children and persons with mental illness.

These are programs that were approved and supported by federal Medicaid funds in the past. Some of the programs, such as services to special education students from birth to age 20, are services that another federal law requires to be provided. The changes affect all states and give states little time to react.

A moratorium on the in-depth rule that narrows the scope of services matched by federal funds was supposed to be enacted when President George W. Bush signed SCHIP legislation. The moratorium would have lasted 18 months, into the next biennium. Since the bill was vetoed, implementation has moved forward a full year, leaving all states little time to adjust. President Bush made his third and final veto on Dec. 29.

The two state agencies hit hardest in Maine, the Department of Health and Human Services and the Department of Education, are taking a two-pronged approach to the rules changes. They are simultaneously working with Governor Baldacci, the Congressional delegation and other states to oppose the federal changes, and working with providers and school systems to seek ideas for restructuring programs to keep delivering what are essential services to those who receive them.

Health and Human Services Commissioner Brenda M. Harvey and Education Commissioner Susan A. Gendron outlined the impacts of the recently announced changes in a briefing to reporters on Wednesday in the Cross State Office Building in Augusta and will brief school systems and providers on Thursday.

The total fiscal impact to the state general fund for fiscal years 2008 and 2009 is $45 million. The total fiscal impact to communities, including to non-profit providers and schools is $141 million.

“Case management services for many individuals, including children in our child protective system, adults receiving protective services, probation and parole, public guardianship and special education will no longer be eligible for federal repayment,” Harvey said. “In the area of Rehabilitation Services, many services that were covered will no longer receive federal Medicaid funds. In many cases, these changes will affect people with the highest needs.”

“Federal law rightly requires schools to provide rehabilitation services, such as occupational therapy, physical therapy and speech therapy, that are necessary for students with special needs to be able to access an appropriate education,” Gendron said. “In fact, federal law even requires us to maximize all revenue sources, including the federal government, to make those services available. Now we are being told that Medicaid will no longer fund some of those services that are required.”

Harvey and Gendron will present detailed information to providers, including school districts, via the state’s distance learning videoconferencing network on Thursday afternoon. Staff from DHHS or DOE will be present at many of the sites to take feedback and suggestions on ways to restructure services to respond to the federal cuts in a way that maintains the maximum possible delivery of services to those who need them. Providers and school systems interested in viewing the videoconference can get information about locations online at: www.maine.gov/education/medicaid.html. The Department will also post additional information about the changes, including a fact sheet and PowerPoint presentation.

30 -

Fact Sheet

Substantive Changes in Federal Medicaid Rules and Anticipated Impact

Summary: The Centers for Medicaid and Medicare Services has announced five rule changes that eliminate federal dollars that have supported healthcare services for the elderly, persons with developmental disabilities, school-aged children and persons with mental illness, all of whom are Maine’s poorest citizens.

These are programs that were approved and supported by the Medicaid federal funds in the past. The areas affected and implementation dates are:

Targeted Case Management (TCM) – effective March 1, 2008 Case managers coordinate access to needed medical, social, educational and other services to Medicaid members living in the community. Activities that are integral to the administration of another non-medical program are no longer eligible for federal financial participation. This provision specifically excludes case management services provided by child welfare/child protective services; probation and parole; public guardianship and special education.

Rehabilitation Services - effective July 1, 2008 These services are diverse and designed to assist individuals to improve their health and functional abilities. Services include a wide range of therapies that assist people with disabilities or illness of all ages. A moratorium on this in-depth rule that narrows the scope of services matched by federal funds was supposed to be enacted when President George W. Bush signed SCHIP legislation. The moratorium would have lasted 18 months, into the next biennium. Since the bill was vetoed, implementation has moved forward a full year, leaving all states little time to adjust. President Bush made his third and final veto on Dec. 29.

Hospital Outpatient Physicians Services – effective July 1, 2008

Hospital-based physician services will be impacted by the rule change which states that only one fee schedule can be used to reimburse physicians. Currently, hospital-based physicians are paid at a higher reimbursement.

Administrative/Transportation Services - effective February 26, 2008

This rule change disallows federal financial participation for school-based administrative activities and for transportation of school-age students to and from school.

Certified Public Expenditure (CPE or “Certified Seed”) – effective May 25, 2008

This rule change impacts those who raise ‘seed money’ to secure matching federal funds. This will no longer be allowed, as seed money must now come from either a “governmental unit or an instrumentality of the state.”

Significant Areas of Financial Impact - Targeted Case Management and Rehabilitation Services

Department/Program	Loss to General Fund	Loss to Community
	FY ’08 FY ‘09	FY ’08 FY ‘09
Targeted Case Management
Education	$733,000 $2,200,000	$133,000 $400,000
Corrections	$280,000 $720,000
Headstart/Home Visitation Fund	$1,080,000 $3,240,000
DHHS	$4,850,000 $14,550,000	$5,240,000 $15,720,000
Rehabilitation Services
Education – school-based	$7,400,000	$19,600,000
Education – developmental therapy required by IDEA	$10,000,000
DHHS		$100,000,000

TOTAL	$6,943,000 $38,110,000	$5,373,000 $135,720,000

John Martins, Maine Department of Health and Human Services, 287-5012 David Connerty-Marin, Maine Department of Education, 207-624-660

Education Information

Contact Info

Major Changes to Federal Medicaid Rules Hit State, Local and School Budgets and Providers