After a prolonged legal dispute, federal authorities are now urging Texas schools that utilized a Medicaid reimbursement program for special education services to repay $16 million, alleging incorrect billing practices.
This month, the U.S. Department of Health and Human Services’ Office of the Inspector General notified 572 school districts across Texas via email, specifying that they must return amounts ranging from $100 to $800,000 for services billed back in 2011. This situation arose from a 2017 audit by a federal health agency which uncovered that Texas had wrongly billed the agency 238 times for services offered under the School Health and Related Services (SHARS) program.
SHARS offers financial reimbursements to schools for services provided to students eligible for Medicaid, including mental health therapy, physical therapy, nursing services, and health screenings. The Texas Association of School Boards reports that nearly 950 of the state’s 1,200-plus school districts are currently participating in the SHARS program.
According to the federal investigation, the 238 identified billing errors pertained to services that were ineligible for reimbursement. The audit further revealed that over 94% of the billed services, including some that were valid, lacked the necessary documentation.
The audit alerted the Texas Health and Human Services Commission (HHSC) that school districts would be expected to repay funds associated with ineligible services, yet a series of appeals delayed the repayment process. The total financial impact could have been higher, but Texas’ appeals and reviews from the Center for Medicaid and Medicare Services reduced the number of claims marked as ineligible.
Federal officials have given Texas six weeks to decide how to repay the $16 million, indicating that it is not mandatory for the state to recover the funds directly from school districts. This opens a possibility for the state to allocate public funds to cover the repayment.
A spokesperson from the Health and Human Services Office clarified, “It is up to the state to recoup from individual school districts, if it chooses to do so.”
In response to the situation, Texas’ Health and Human Services Commission has stated that it has already settled the $16 million debt with the federal government and is required by law to recover its expenses. The HHSC added that they “submitted every possible denial and request” to contest the federal charges.
Facing this financial demand in the midst of a budget cycle, officials from Texas school districts express concern over their capacity to adjust funding to cover the costs.
Brian Woods, director of advocacy at the Texas Association of School Administrators, 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?”
Pete Pape, the chief financial officer for the Leander school district, described the situation as merely “the tip of the iceberg,” voicing his displeasure with the Texas health agency’s support for educational districts and their programs. In 2023, federal appeals officers stated that Texas had not presented any substantial evidence to contest the audit findings, mentioning that the state only provided a spreadsheet from CMS listing the billing discrepancies.
Pape indicated that the Leander district owes approximately $99,000 and intends to appeal the repayment request, although the notice did not clarify if an appeal was possible.
This $16 million repayment demand follows significant cuts to SHARS funding in Texas, exceeding $607 million, alongside more stringent regulations on reimbursements for services. Some smaller schools claim that these changes, seen as an overcorrection in response to earlier billing mistakes from 2011, have compelled them to leave the program entirely.
Woods, who has formerly served as superintendent of the Northside school district in San Antonio, remarked that the financial returns are substantial for even the largest districts, struggling to cope with limited resources. Northside ISD faces a repayment of over $420,000, one of the highest amounts requested by federal authorities.
More than 40 school districts owe upwards of $100,000 each, though over half of the listed districts owe less than $10,000. The Houston and Austin school districts have the largest repayment amounts, each facing obligations of over $780,000.
For many districts, this repayment notice comes during an already challenging budget period, further exacerbated by inflation, the conclusion of pandemic-related aid, and the absence of significant funding increases for public schools over the past five years.
“I don’t think that I’ve heard a consistent, programmatic-type plan. Most of what I hear is, ‘You got to be kidding me, right?’” Woods commented regarding the reactions from the districts. “This comes on the heels of multimillion-dollar cuts discussed extensively in the fall, and now we confront yet another setback.”
District officials are hopeful that state lawmakers will provide relief following the SHARS cuts. Several funding bills aimed at special education have already been introduced ahead of the upcoming legislative session. Woods noted that no lawmaker currently serves the role of a “designated advocate” for special education funding, but emphasized the importance of addressing the issue with legislative representatives before the new session begins.
He encouraged community members and parents to contact their legislators to advocate for necessary changes, as the urgency of the situation continues to grow.