Report 2004-125 Summary - August 2005

Department of Health Services:

Participation in the School-Based Medi-Cal Administrative Activities Program Has Increased, but School Districts Are Still Losing Millions Each Year in Federal Reimbursements

HIGHLIGHTS

Our review of the Department of Health Services' (Health Services) administration of the Medi-Cal Administrative Activities program (MAA) revealed the following:

  • School districts' participation in, and reimbursements for, MAA have significantly increased since fiscal year 1999-2000.
  • Despite receiving $91 million for fiscal year 2002-03, we estimate school districts could have received at least $57 million more had all school districts participated and certain districts fully used MAA.
  • Health Services has not performed a sufficient number of local on-site visits.
  • Simplifying the MAA structure would increase efficiency and simplify program oversight.

RESULTS IN BRIEF

According to a survey conducted by the University of California, Los Angeles, more than 1.1 million California children under the age of 19 did not have health insurance during all or part of 2003; 26 percent of those children were eligible for enrollment in the California Medical Assistance Program (Medi-Cal), the State's version of the federal Medicaid program. Because they have an incentive to help children obtain health insurance, school districts perform various outreach activities targeting children and families eligible for Medi-Cal. The State established the school-based Medi-Cal Administrative Activities program (MAA) to provide school districts with the means to obtain federal reimbursements for 50 percent of the costs they incur conducting Medi-Cal administrative activities, including outreach.

Only a limited number of school districts applied for MAA reimbursements for fiscal year 1999-2000. Since then, however, participation has significantly increased. A May 2005 estimate predicts the number of school districts applying for reimbursements for fiscal year 2004-05 will be triple that for fiscal year 1999-2000. A different measure of growth shows the statewide federal reimbursements increased from $15 million for fiscal year 1999-2000 to $91 million for fiscal year 2002-03, the latest year for which complete data were available at the time of our review.

We estimate that school districts could have received a total of at least $53 million more for fiscal year 2002-03 if all districts had participated and an additional $4 million if certain participating school districts had fully used MAA. According to our survey of 19 school districts that did not participate in MAA in fiscal year 2002-03, one of the major reasons for not participating was that the districts did not believe the program would be fiscally beneficial. However, the nonparticipating school districts generally indicated they already perform one or more of the activities eligible for reimbursement under MAA. Additionally, some of those school districts have not recently assessed whether the benefits of the program outweigh its costs. For example, one nonparticipant may have forfeited an estimated $313,000 for fiscal year 2002-03, based on the average MAA reimbursement received by similar-sized school districts. In contrast, many of the school districts that recently conducted cost analyses have decided to participate in MAA. The two consistent reasons offered by school districts that have underused the program were the lack of an experienced MAA coordinator with sufficient time to focus on the program and a general resistance to and lack of support for recording time spent on reimbursable activities.

The Department of Health Services (Health Services) limits its role in MAA to support, processing, and oversight activities because it does not believe it has the resources or a specific mandate to increase the use of MAA by school districts. Further, Health Services believes that assuming the role of increasing federally allowable MAA reimbursements would conflict with its fiduciary responsibility as the single state agency responsible for ensuring the integrity of the expenditure of federal MAA funds. However, we do not believe that encouraging school districts to invoice for all federally allowable costs is in conflict with Health Services' responsibility to ensure the accuracy of MAA invoices. Indeed, as the administering state agency for MAA, Health Services has a responsibility to California to help school districts receive all the federal funds to which they are entitled. By amending its contracts with educational consortia (consortia)—11 local entities that assist in administering MAA throughout the State—Health Services could require the consortia to perform outreach activities that would increase MAA participation and federally allowable reimbursements. Although some consortia already do so to some extent, Health Services has not contractually obligated them to perform these activities and has not established ways to measure their performance.

As the state agency with the overall responsibility for administering Medi-Cal, Health Services is required to oversee MAA. Inadequate oversight may have caused school districts to receive less MAA funds than they were entitled and may have increased the risk of a federal disallowance. Because it has not performed a sufficient number of site visits and has not collected basic program data, Health Services is limited in its ability to identify potential problems at the local level. For instance, some consortia and local governmental agencies, which also help Health Services administer MAA at the local level, charge school districts fees that exceed their costs. Health Services has not established policies on the appropriate level of fees to be charged by consortia or local governmental agencies. Additionally, Health Services was unaware that the federal government might be billed twice for the same services because some consortia and local governmental agencies changed their fee structure to allow school districts to claim costs for which the consortia and local governmental agencies were also requesting MAA reimbursements.

Simplifying the MAA structure would increase its efficiency and simplify program oversight. Currently, school districts can elect to submit invoices either through a consortium or a local governmental agency. Removing local governmental agencies, which are typically county health agencies, from the process would streamline MAA and make oversight simpler for Health Services. To further simplify the MAA structure, Health Services should require a school district that needs additional program assistance to use a vendor competitively selected by a consortium, rather than allowing such a school district to enter into a separate contract with a vendor. This would likely result in more uniform, possibly lower fees and more consistent service.

RECOMMENDATIONS

To simplify and improve program oversight and to increase the efficient operation of MAA, Health Services should do the following:

  • Reduce the number of entities it must oversee and establish clear regional accountability by eliminating the use of local governmental agencies in administering MAA.
  • Require consortia to periodically identify and contact specific nonparticipating school districts that have a potential for high MAA reimbursements and periodically identify and contact participating school districts that appear to be underusing MAA to help ensure that they have a correct understanding of those costs that are federally reimbursable.
  • Require school districts that use a private vendor to use one selected by the regional consortium through a competitive process.

If Health Services believes it does not have the authority to implement the above recommendations, it should seek statutory changes.

Regardless of how MAA is structured, Health Services should do the following to ensure that it is adequately monitoring the activities of the entities it contracts with to administer the program at the local level:

  • Develop policies on the appropriate level of fees charged by local administering entities to school districts and the amount of excess earnings or reserves they are allowed to accumulate.
  • Monitor local administering entities and take appropriate action when their performance is unsatisfactory.
  • Improve its ability to monitor MAA by consistently performing site visits of the entities it contracts with to administer the program at the local level and by updating its current invoice and accounting processes so that it can more easily collect data on the participation and reimbursement of school districts.

AGENCY COMMENTS

Health Services agrees with several of our recommendations. However, although Health Services stated it would continue to research the issue, it does not believe it has the express authority to implement policies on the appropriate level of fees charged to school districts. Health Services disagrees with our recommendation that it seek a change in the law to eliminate local governmental agencies from MAA. Finally, Health Services partially disagrees with our recommendation that it require school districts that choose to use the services of a private vendor to use one competitively selected by the consortia. Although it agrees with the merits of the recommendation, Health Services does not believe its authority can be extended to school districts' selection of vendors.


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