SB 345-SCHOOL SERVICES FOR DISABLED STUDENTS  MR. GREG MALONEY, Director of Special Education for DOEED, explained that SB 345 allows school districts the opportunity to capture more Medicaid funds for support services provided to students with disabilities that are Medicaid eligible. The services include medical needs, school psychology, counseling, occupational therapy, physical therapy, speech and language pathology and other services for which school districts are now responsible but for which resources are not always adequate. MR. MALONEY gave the following background of SB 345. Medicaid provides assistance for low-income individuals with medical issues. Medicaid has not always been associated with education but since the passage of the Individuals with Disabilities Education Act as amended in 1997 (IDEA '97), it was incorporated as a payer of first resort. Since IDEA '97 took effect, a number of cases have required schools to provide more medical services. The medical services costs are typically expensive and put quite a burden on school districts. The purpose of SB 345 is not to put a process in place, but to give DOEED and the Department of Health and Social Services (DHSS) the green light to go forward and explore how such a program could work. He noted this bill will help the state to capture significant resources; he expects almost $8 million to be captured of which about $4 million would be directly available to school districts. SB 345 will not require significant general fund contributions - the only cost will be for DHSS staff support to help implement the Medicaid system. Once SB 345 passes, DOEED would continue to work with DHSS, school districts and other stakeholders to design a system that is easily managed, easily audited and provides the necessary resources. MR. MALONEY said that many states have already implemented similar legislation. Alaska can learn from mistakes other states have made so that this program does not become a burden on the department but captures significant resources for school districts. 1:46 p.m. MR. BOB LABBE, Director of the Division of Medical Assistance, DHSS, said he shares Mr. Maloney's view that this is an opportunity to provide additional funding to the schools through the federal portion of the Medicaid program at no additional cost to the state. He cautioned, however, such a program will create a significant workload. He implemented a similar program in the State of Oregon in the late 1980s and learned from experience that trying to bring a medical program into an education setting requires that a number of issues be addressed. Clear policies, good audit trails, and a system that is not burdensome on the day-to-day work of the educational staff is necessary. DHSS and DOEED are seeking, in SB 345, the authority to work on a design that will be efficient and effective and allow the state to capture the maximum dollars with the lowest amount of overhead to the districts. He advised that there will a need for ongoing quality assurance because these programs are subject to federal and state review. He held that SB 345 provides a source of revenue when school districts' costs are increasing. He noted the working group has met with the federal agency about putting together a plan. CHAIRWOMAN GREEN asked what process a school district will use to implement this program that will stress the fact that if the federal portion falls off, the funds will not become a State of Alaska obligation. MR. LABBE said the working group envisions that each school district would have the option of participating and would sign a provider enrollment agreement. One condition of participation would be that districts would submit actual, individual claims for individual children and provide matching funds to DHSS for those expenditures. DHSS would pay the bill and receive the state's matching share from the districts. Districts will have additional administrative costs, maintain and submit records, and determine whether a student is Medicaid-eligible. MR. MALONEY said the cost of special education nationally, right now, is estimated to be about $50 billion. The federal share of paying for those services is about 16 percent, or $8 billion. In this time of shrinking resources, SB 345 provides an opportunity to capture additional federal resources that schools can use to provide services without adding more burden to the state. It will not solve the problem but will help. In talking to his counterparts in other states, he learned the Medicaid piece has become a significant portion of budgets in those states. SB 345 will also provide salaries for professionals that are hard to find in Alaska, such as speech pathologists, school psychologists and other related service providers. MR. MALONEY said if SB 345 passes, DOEED and DHSS would work with a consultant, with the Governor's Council on Disabilities and Special Education, and with other stakeholders in the system to come up with a process that is not overly burdensome but results in a significant capture of funds. He believes the additional services that can be offered will be worth the effort. CHAIRWOMAN GREEN asked if the process became a matter of routine after the program was in place for several years in Oregon. MR. LABBE said there was an ongoing need for quality assurance. One concern he has had is that the Office of Inspector General recently did an audit of a district in Oregon that may result in penalties. Because of high staff turnover, people will continually have to be trained. The Oregon department of health converted its policy role of development into a quality assurance role and sent a person out to inspect records and make sure all was working okay. He said that with health care issues, new technologies create questions about what is covered and what is not. He maintained there will be initial costs for staffing and to pay a contractor to change computer systems to process claims. CHAIRWOMAN GREEN indicated that this program is voluntary so no district will have to participate. She asked if districts with a larger population are likely to participate without too much thought while smaller districts will need more help as a program such as this could have a major impact on personnel and budgets. MR. LABBE said designing a system that is administratively simple is key because if a full time position is necessary to handle billing for one or two children, it won't be worthwhile. MR. MALONEY said currently DOEED collects some Medicaid funds for schools through a time survey, allowable under the administrative portion of Medicaid. That will not change. He said as a new system is developed, the rural school districts will be represented in terms of how they can take advantage of this system. Some states have third party billing systems or a third party non-profit agency do the billing. In some small districts in Alaska, a number of services are farmed out to other agencies for the sake of efficiency. SENATOR WILKEN noted that, according to the sponsor statement, 42 other states have already done this. He asked what happened in Alaska that suddenly allows us to do that. MR. MALONEY explained that a few years ago a study called "Educaid" was done by a consultant from Oregon. That study was about the current Medicaid system. The consultant determined that with the available resources, funding available to districts and a number of other factors, the best way to use Medicaid funds was to use the time survey, which was then put in place. Since then, with the advent of IDEA '97, there has been more allowance at the federal level for incorporating Medicaid funds into special education services and budgets. SENATOR WILKEN asked if this process began with IDEA '97. MR. LABBE clarified that a Supreme Court case in the mid 1980s directed that state Medicaid agencies could not deny payment for services provided to a child on an IEP solely because that child was in the school setting. He noted that Mr. Sherwood worked on a plan in the early 1990s but there was no interest in pursuing it at that time. DHSS got involved in 1996 at the time when consultants around the country were estimating this would cost "zillions" of dollars. He said that over the last year there has been renewed interest. SENATOR WILKEN asked if the districts will have to submit lists of eligible students and allowable services to DHSS. MR. MALONEY said the student will have to be Medicaid eligible and that certain services will be allowable. SENATOR WILKEN stated: "It says that [for] each dollar expended for these covered services, the district would receive $1.50 so for every dollar spent you get a 50 percent investment so why the premium, why isn't it dollar for dollar - why do you make $1.50 for every dollar spent?" MR. LABBE said that basically Medicaid would be paying for services that are already being provided with school funds only. Districts will have to cover the match portion but then get the federal portion. Right now the federal portion amounts to about 60 percent. He noted Mr. Maloney's point that this program will allow districts to provide services that are inadequately funded is a good one. After some discussion about the amount that districts will be reimbursed from Medicaid, SENATOR WILKEN pointed out that the sponsor statement is incorrect as it appears that the district will be reimbursed 160 percent when it will be reimbursed for the federal portion, which is about 60 percent. CHAIRWOMAN GREEN asked if transactions are traded or whether checks are actually transferred. MR. LABBE said the district would be expected to submit a claim that would be processed and DHSS would write the district a check. After that, DHSS would submit a claim to the federal government - that claim rolls up all of Alaska's Medicaid expenditures, it is not an item by item submittal. CHAIRWOMAN GREEN apologized to those who wished to testify on the school funding bill from the Mat-Su LIO and said she did not realize they had been waiting. She then took public testimony on SB 345. 2:11 p.m. MS. JOAN FRANZ asked when a child receives occupational therapy within a school district and the district bills for the service, what will happen in terms of services when the school district uses a school function model. She explained that the occupational therapist's role in a school district is limited compared to that of an occupational therapist in private practice, rehabilitation agency or in a hospital setting. She asked if that child could also use the Medicaid funds to cover other services that the district will not offer because it is limited to a school function model. MR. MALONEY said the money captured from Medicaid would go to the district and the district itself would be responsible for providing the services required for any student covered under an IEP. If the district contracts services for an occupational therapist, those costs, presuming the district and/or occupational therapist was enrolled as a provider, could be captured back or claimed under Medicaid. He advised that the district may also choose to hire an occupational therapist to provide that service. It will be an administrative decision on the part of the district as to how it will provide the occupational therapy. MS. FRANZ repeated the role of an occupational therapist in a school is limited by the school function model therefore the occupational therapist would not provide a lot of the services that an occupational therapist in another setting would provide. She questioned whether receiving services through the school district will limit that child from receiving comprehensive and rehabilitative services that Medicaid was originally designed to cover. CHAIRWOMAN GREEN said she does not believe the current system will change, so that if a child can receive services from the district, that will continue, and if the child receives services from a private entity, that will continue. The only thing that will change is that the school district can bill Medicaid instead of using foundation formula money. She asked Mr. Sherwood to address the question. MR. JON SHERWOOD, Division of Medical Assistance, said if a child currently receives any other medical service outside of the IEP and is authorized to do so, SB 345 will have no effect. CHAIRWOMAN GREEN said her concern is that children might not receive the full gamut of occupational therapy services they may need because a child could not receive the private services from an occupational therapist within the school district. CHAIRWOMAN GREEN said she believes her earlier answer holds, that the child will continue to receive whatever he or she is receiving now. MS. FRANZ said that is her hope because the educational model limits what kinds of services a child can receive in a school setting as compared to the services a child could receive elsewhere. MR. MALONEY said that nothing in the bill would prohibit that and the definition actually broadens the definition to include students with disabilities. He added that school districts are required to perform complete evaluations under IDEA '97 and whatever services are required to allow the student to make progress on the general curriculum should be provided. He said he hopes there is not a big difference between what is being provided in each setting and, if there is, that is something DOEED can help the parent learn more about. MS. FRANZ said there has been a big difference, in her experience, because of the definition of what services are considered to support a child within an educational setting as opposed to the child's medical needs. CHAIRWOMAN GREEN asked Ms. Franz to contact Mr. Maloney to discuss the matter. MS. FRANZ said that equipment ordered through Medicaid for a child is usually custom fit for that child and belongs to that child. She asked how that will work through the school district. MR. MALONEY said that specific regulations speak to ownership. Generally, if the school purchases equipment, it remains the property of the school unless there is a specific need to use the equipment at home. MS. PAULINE BENNETT GANNON, an occupational therapist speaking on her own behalf, told members that the school function model of occupational therapy focuses on the child's ability to be in the school while therapy services are secondary. She noted that the idea of charging Medicaid for school services has come up before and she believes at one time, DHSS looked at having school districts provide more medical services. She thought the plan was to do a pilot project to see how that would work. She pointed out that typically, when one bills for Medicaid services, for intense, individual therapy that doesn't lend itself to groups. One focus of IDEA '97 is to incorporate students with disabilities into the classroom using special education staff. She said she is not sure the same types of services are being provided and could be charged to Medicaid. [Portions of Ms. Bennett-Gannon's testimony were indiscernible due to transmission problems.] TAPE 02-19, SIDE B MS. BENNETT-GANNON questioned whether this bill will expand the role of schools beyond education. CHAIRWOMAN GREEN repeated that school district participation will be voluntary and that this bill will simply provide another method of funding. MR. MALONEY emphasized that SB 345 will allow for a process that will include stakeholders throughout. SENATOR WARD moved SB 345 from committee with individual recommendations and its accompanying fiscal note. CHAIRWOMAN GREEN announced that with no objection, the motion carried. She then took a brief at-ease. CHAIRWOMAN GREEN called the committee back to order at 2:28 p.m. and turned the gavel over the Vice-Chair Loren Leman. The committee took up SB 346.