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HHS Audit Says New Jersey Must Pay Back Hundreds of Millions in Medicaid Funds

New Jersey wrongly billed Medicaid for more than $300 million worth of services that the state provided to students with disabilities between 2003 and 2015, and it needs to pay that money back, says a federal audit released Tuesday from the U.S. Department of Health and Human Services. 

In addition, the federal government is questioning another $300 million in Medicaid that it provided to New Jersey for students with disabilities. HHS says that it wants to work with the state to find out just what portion of that money should be refunded.  

Here's why the education system is involved in Medicaid in the first place: Since 1988, schools have been able to get money from the federal government for certain services that they provide to Medicaid-eligible children with disabilities, such as occupational, speech, or physical therapy. 

The federal government also allows states to bill for services related to evaluating a child who might have a disability—but only for the portion of the evaluation that would determine a child's health-related needs. 

Medicaid provides about $4 billion to schools, making it the third largest federal source of funds for K-12 education. When Congress debated changes to the Affordable Care Act this spring, school advocacy groups fought vigorously against any proposed changes that would cut Medicaid reimbursements

In this complex case, the office of the inspector general in HHS is arguing that New Jersey didn't use the right calculations to determine how much it should bill Medicaid for these services and evaluations. 

But New Jersey and the company it used to handle Medicaid billing, Public Consulting Group, say the audit's findings are incorrect.

In a statement provided to HealthLeaders Media, a spokeswoman for New Jersey's department of health services said the federal report is just the first step in a process. The federal Centers for Medicare and Medicaid Services must evaluate the audit and the state's responses, and if there's still disagreement, the case could eventually end up in federal court, Nicole Brossoie told the news site.

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