Sign up for The Brief, The Texas Tribune’s daily newsletter that will keep you informed about the most important news in Texas.
Federal officials are requesting Texas schools to return $16 million that they claim was incorrectly billed through a Medicaid reimbursement program for special education services. This comes after a lengthy legal battle between the two parties.
The U.S. Department of Health and Human Services’ Office of the Inspector General recently contacted 572 school districts in Texas via email. The purpose of the email was to notify officials that they would be required to reimburse the department for services that were billed in 2011. The amounts to be paid back vary, ranging from $100 to $800,000. This action was prompted by a federal health agency audit conducted in 2017, which revealed that Texas had incorrectly billed the agency 238 times for services provided under the School Health and Related Services program.
The Texas Association of School Boards reports that currently, over 950 out of the state’s 1,200 school districts are enrolled in the SHARS program. This program aims to reimburse schools for the various services they provide to Medicaid-eligible students, such as mental and physical therapy, nursing, and screenings.
The federal government identified a total of 238 errors, which were related to services that were deemed ineligible for reimbursement. Additionally, the Inspector General’s Office discovered that over 94% of the billed services, including some that were actually eligible, lacked the necessary documentation.
The Texas Health and Human Services Commission was cautioned by the audit about the need to recover the funds that were paid for services that were deemed ineligible. However, the repayment process was delayed due to a series of appeals. Fortunately, Texas’ appeals, along with a review conducted by the Center for Medicaid and Medicare Services, resulted in a decrease in the number of billings that were considered ineligible. As a result, school districts were required to return a lesser amount of funds.
According to the federal agency, the state has a six-week period to determine its preferred method of repaying the $16 million. Interestingly, the federal agency does not mandate that the state recover the funds from school districts. Instead, the state has the option to utilize state funding to cover the expenses.
According to a spokesperson from the Health and Human Services Office of the Inspector General, the responsibility to recover funds from individual school districts lies with the state, should it decide to pursue such action.
According to a statement from the Texas Health and Human Services Commission, the department has already disbursed $16 million to the federal government. The statement clarified that it is legally obligated to recover its expenses and noted that the HHSC has made every effort to challenge the charges by submitting denials and requests.
Texas districts are facing a challenge in paying back the money as their school budgets for the year have already been set, leaving them with little flexibility to reallocate funds.
Brian Woods, director of advocacy at the Texas Association of School Administrators, expressed his concerns about the impact of the clawback on school planning. He stated, “Because this comes in the middle of a budget year, it makes planning for schools virtually impossible. Had this clawback been known prior to schools approving their budgets in the summer of 2024, then at least it could have been planned for, right?” Woods emphasized the importance of being aware of such changes beforehand to allow schools to make informed decisions and better plan their budgets.
Pete Pape, the chief financial officer for the Leander school district, expressed his frustration with the lack of support from the Texas health agency for districts and their programs, calling the charge “the tip of the iceberg.” In 2023, federal appeals officers stated that Texas failed to provide any evidence to dispute the investigators’ findings. They noted that the only evidence submitted in Texas’ appeal was a spreadsheet created by CMS, which listed the improperly billed services.
Pape expressed his frustration, stating that if their school district acted in a similar manner, they would face severe criticism. He believes that the approach taken by the other party is merely a checkbox exercise, aimed at being able to claim that they appealed the decision. This lack of genuine commitment is what adds to his frustration.
The Leander district is currently in debt, owing approximately $99,000. In response, Pape has expressed his intention to appeal the charge. However, the repayment notice received by the district did not provide any information regarding the possibility of appealing the charge.
In response to the errors made in 2011, the state of Texas has implemented strict limitations on the types of services that school districts can be reimbursed for. As a result, the state has cut over $607 million in funding for SHARS. This drastic reduction in funding has forced some smaller schools to completely withdraw from the program. Now, the state is requesting a repayment of $16 million.
According to Woods, the repayments are significant, even for the largest districts, as they are already facing financial constraints. Woods, who previously served as the superintendent of the Northside school district in San Antonio, emphasized the financial burden these repayments impose on the districts.
Northside ISD is poised to repay over $420,000, making it one of the largest reimbursements requested by the federal government.
More than 40 schools have outstanding debts exceeding $100,000, but it is worth noting that over half of the schools on the list owe less than $10,000. Among the school districts, Houston and Austin have the highest payment obligations, with each owing over $780,000.
Many districts are receiving the notice at a time when officials are already dealing with budget shortfalls. These shortfalls have been exacerbated by inflation, the expiration of pandemic relief funds, and a lack of significant increases in public school spending from the state for the past five years.
According to Woods, districts’ reactions to the lack of a consistent, programmatic-type plan have been less than positive. He expressed his disbelief, stating, “You got to be kidding me, right?” He highlighted the additional challenge of these new cuts, which come on top of the multimillion-dollar cuts that were already discussed in the fall.
District officials are hopeful that relief will be provided by lawmakers in response to the SHARS cuts. In anticipation of the upcoming state legislative session, several bills addressing special education funding have already been filed. Woods noted that there is currently no designated advocate specifically for special education funding within the legislature, but emphasized that there is still an opportunity to bring attention to the issue before the session begins.
Woods suggests that concerned parents and citizens should reach out to their representatives and express their belief that the situation needs to be addressed.
Disclosure: The Texas Association of School Administrators and the Texas Association of School Boards have provided financial support to The Texas Tribune, a nonprofit, nonpartisan news organization. The Tribune’s journalism is funded through donations from members, foundations, and corporate sponsors. It is important to note that financial supporters do not have any influence over the Tribune’s editorial content. You can find a comprehensive list of our financial supporters here.