Review of Medicaid School-Based Services in Kansas-Bundled Rate Development (A-07-05-01018)

In Kansas, the Department of Social and Rehabilitation Services administers the Medicaid program. Individual school districts provide or arrange health services for students with special needs when such health services are identified in the students' individual education plans. However, instead of using the traditional fee-for-service basis to pay for school-based services, Kansas uses bundled payment rates and reimburses participating school districts one monthly payment for each special education student.

An audit by the Office of Inspector General revealed that by following this model, Kansas did not develop rates in accordance to federal requirements and the state plan and should be required to refund $18.5 million in overpayments for fiscal years 1998 to 2003. The audit was part of a multi-state initiative requested by the Centers for Medicare & Medicaid Services. Additional recommendations and the reply from Kansas can be found in the attached report.