Kansas has already agreed to refund the federal government $32 million for misspent Medicaid funding.

Now, legislators are bracing for another dose of paybacks that could cost the state additional millions.

“I think we’re looking at a substantial amount – anything over $25 million is substantial,” said Rep. Brenda Landwehr, a Wichita Republican and chairwoman of the budget subcommittee that oversees the Kansas Department of Social and Rehabilitation Services.

“I won’t be surprised if it’s a lot more than $25 million,” she said.

Something coming

Landwehr and others say they’ve heard persistent rumors that the U.S. Office of Inspector General has raised serious questions over how the state has billed Medicaid for mental health counseling and for foster children living in group homes.

And SRS Secretary Gary Daniels on Wednesday confirmed to the Journal-World that the billings are the subject of ongoing OIG audits.

But until the audits are complete, Daniels said, neither he nor anyone else in state government knows whether – or how much – the state must pay back.

Daniels said he expected the audits would be complete this fall, but OIG isn’t saying.

“The way it works is they complete an audit and they file a preliminary report, which we respond to; then the final report is prepared,” Daniels said. “We’ve not received preliminary reports on either of these topics, so for me to predict a dollar amount would be pure speculation on my part. I won’t do that.”

Still, Daniels said, he doubted the paybacks – if, in fact, they’re ordered – would be “huge.”

Payback time

Medicaid underwrites health care for the poor and is paid for by a blend of state and federal tax dollars.

Last month, Kansas paid the federal government $18.5 million after an OIG audit disputed the formula used to bill Medicaid for services for school children with special needs.

And in May, the state refunded $14.1 million after an audit showed Medicaid had been billed 12 months of services per year instead of the allowed nine months.

Whether the upcoming audits will lead to similar refunds remains to be seen.

Daniels said he’s hopeful they won’t. But at the Centers for Medicare and Medicaid Services’ office in Kansas City, Mo., regional administrator Tom Lenz cautioned, “We have a fiduciary responsibility to assure that taxpayer dollars used to fund the Medicaid program in the state of Kansas are expended appropriately.”

Lenz declined to comment on the ongoing audits.

“States have flexibility in how they design their programs – that means there are going to be gray areas as to how those programs are administered,” Lenz said. “So until we see what’s there, there’s not much anybody can say.”

Possible problems

In May, SRS announced plans to amend the state’s Medicaid plan and apply for waivers affecting payments to mental health programs and group homes for children in state custody.

Both changes, Daniels said, were designed to offset concerns raised in the ongoing audits. “We are trying to be responsive to CMS (Centers for Medicare and Medicaid Services) and to be good partners,” he said. “I think we are.”

The concerns:

l When Kansas privatized most of its foster care system in 1996, a provision was added to the state’s Medicaid plan, limiting a child’s stay in group homes to 140 or 180 days, depending on the level of services provided.

For almost 10 years, stays routinely exceeded 180 days.

In February, SRS ordered case reviews of all children whose stays had exceeded the limit. Child advocates were quick in protesting the reviews, warning that it often takes more than 180 days to treat children who’ve been abused, neglected or are mentally ill.

SRS slowed the review process but has since notified the homes that to be eligible for Medicaid after Jan. 1, 2007, they must become accredited “psychiatric residential treatment facilities.”

“That’s a major expense,” said Earl Kilgore, director of children’s services at Lakemary Center, a school and residential center in Paola for children with severe mental disabilities. “I doubt some of the smaller facilities will make it.”

l For almost 20 years, Kansas has restricted its Medicaid payments for mental health services to the state’s community mental health centers such as Bert Nash Community Mental Health Center in Lawrence.

But under Medicaid regulations, the program must include “any willing provider” – private practitioners, for example.

Increasingly aggressive

“This could be huge,” said Wes Crenshaw, a psychologist with Family Therapy Institute Midwest in Lawrence. “If the special education audits are harbingers of what’s to come – and I don’t know why they wouldn’t be – this could be catastrophic, financially.

“I never understood how special ed got away with billing the way it did, frankly,” he said. “And I have to say I’ve never understood how the community mental health centers have gotten away with what they do.”

At Bert Nash, executive director Dave Johnson said he was aware of the concern but wasn’t sure it would lead to the state having to pay back millions of dollars.

“We have no indication that there’s to be a mental health deferral,” he said.

But Johnson noted that OIG and Medicaid have become increasingly aggressive in their investigations.

“This is going on all over the country,” he said.

Rep. Jerry Henry, D-Atchison, agreed.

“I think we’re dealing with an administration – the Bush administration – that’s trying to control Medicaid costs by going after the states,” said Henry, who serves on the SRS oversight committee with Landwehr.

“The previous administration wasn’t like this – they said, ‘Let’s fix the problem and move on,'” he said. “This administration isn’t like that.”