January/February, 2006 FORUM Article

 Highlighted Resources:
• O.C.E.C.D. Training Descriptions (PDF : 64k)

CAFS Program Funds Dry Up; Who Pays For Services Now?

Overview and Background

The Community Alternative Funding System (CAFS) is Ohio's payment system used to cover specific habilitation services for Medicaid eligible individuals.

The Ohio Department of Mental Retardation and Developmental Disabilities (ODMR/DD), through an inter-agency agreement with the Ohio Department of Jobs and Family Services (ODJFS), operates the Community Alternative Funding System (CAFS), also referred to as the Habilitation Center Program, under a federally approved Medicaid state plan. The approved plan defines the requirements for service delivery and coverage.

The CAFS program pays for day program services for people enrolled on a Home and Community Based Waiver or for people who live in Medicaid MR/DD (ICF/MR) facilities, and therapy services for children in special education classes in Ohio's public schools. As such, there are three main types of CAFS providers currently: county boards of mental retardation and developmental disabilities, public school districts, and some private providers. All CAFS providers are certified by the Ohio Department of Mental Retardation and Developmental Disabilities as Habilitation Centers.

Ohio's CAFS program began in 1989 and was designed as a financing mechanism to "draw down" federal Medicaid money into Ohio to help pay for services which were already being provided by county boards of MR/DD. Since its inception, the CAFS program has paid out nearly $2.5 billion, about $1.5 billion coming from the federal government.

The Ohio program was approved prior to The Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), which included a number of provisions designed to slow the growth in Medicare spending. As a result, Ohio's program was "grandfathered" in. It was then expanded to include services being provided under Individualized Education Plans (IEPs) to some children in Ohio's special education classes, particularly as many county boards transferred school-aged programs back to the public school districts. More recently, the state sought further amendments to its state plan by requesting reimbursement rate changes and the elimination of nutrition services. This request brought the state's plan under scrutiny.

Notice of Non-Compliance

Unfortunately, the federal Centers for Medicare and Medicaid Services (CMS) notified the Ohio Department of Job and Family Services in August 2004 that the state of Ohio was out of compliance in the structure and processes that served as the framework for the CAFS program. Areas of non-compliance cited by CMS include the following specific categories:

Free Choice of Provider: Federal law requires that recipients have free choice of any qualified willing provider. CMS asserted that CAFS services in schools limit the recipient's access to services provided by private providers.

Habilitation Center Certification and Contracting Requirements: CMS stated that providers cannot be required to contract with an entity other than the single state agency (ODJFS) prior to billing for Medicaid services.

Cannot Require Plans of Care for State Plan Services: CMS stated that plans of care such as Individualized Service Plans (ISPs) or IEPs cannot be a requirement for coverage of Medicaid state plan services.

Comparability- Eligibility Cannot be Limited to Only Those Individuals with MR/DD: CMS stated that states cannot limit state plan services to individuals with a mental retardation or developmental disability diagnosis, nor by disease or condition.

Bundling of Services: CMS stated that states may not bill for services at a bundled rate, such as with Active Treatment & Skills Development and Support (SDS) services, when there is a discrete HIPAA code that can be utilized.

Variations in Rates: CMS asserted that the variation and range in rates was unreasonable.

Service Definitions: CMS asserted that the inclusion of Active Treatment, SDS, delegated nursing and delegated psychology in the State Plan Amendments (SPA) and rules was an unallowable expansion to the program.

CAFS Termination

The compliance concerns raised by CMS resulted in the need to either: (a) substantially expand CAFS, which would require a significant increase in expenditures of state funds, or (b) end the CAFS program. Again, fiscal constraints at both the state and local level made further expansion difficult and resulted in the decision by the state to end the CAFS program effective June 30, 2005. Am. Sub. H.B. 66, the state's FY 2006-2007 biennial operating budget, repealed all statues relating to habilitation centers as well as any direct references to the CAFS program.

School District Lawsuit & Settlement Agreement

The proposed elimination of the program quickly prompted lawsuits from several school districts. A June settlement in the lawsuit, however, effectively ended the legal challenge to the state's plans to eliminate CAFS, which had been found by the Centers for Medicare and Medicaid Services to be in violation of federal laws requiring more standardized payment for and access to services for people with mentally retardation and other developmentally disabilities.

The state previously had come to an agreement involving the Department of MR/DD and local boards and providers on how to fund adult services in lieu of CAFS, which CMS wanted shut down by June 30. Instead, the settlement dealt with services provided to children by about 220 school districts that had tapped into the CAFS funding stream for about $67-million in reimbursements in FY 2005. Under the agreement, schools would have received some $20-million, or about 30% of the old rate beginning in FY 2006.

The settlement also spelled out that the interim "bridge" plan, which would be put in place until CMS approved a long-term reimbursement program for Local Education Agency (LEA)-based Medicaid services, would include funding for occupational therapy, physical therapy, speech and audiology, and psychology services. More services and other details were to be included in the long-term plan. One of the key components of the settlement was its definitions of covered services and the requirement that ODJFS pay the highest fee schedule rate for services if more than one applies to a reimbursement submission.

The Ohio Department of Education (ODE) agreed to be a partner with ODJFS in facilitating the implementation of the new program. ODE and ODJFS met with school district representatives throughout the summer to craft both a short-term "bridge plan" and a long-term plan. These two state plan amendments representing the interim and long-term plans for the new Medicaid School Program were submitted on August 1, 2005 for CMS approval.

CMS Rejects Short-term and Long-term Plans

Unfortunately, in November 2005 the Centers for Medicare and Medicaid Services (CMS) denied the State Plan Amendments (SPA) filed for the School Medicaid Program (both short and long term), as not being in compliance with Medicaid requirements, citing the following issues of concern:

1. the services schools are providing are habilitational in nature rather than rehabilitational;
2. lack of "statewideness";
3. comparability of services to all Medicaid eligible children - not just school children;
4. schools cannot be delegated the authority to make prior authorization for service quantities;
5. Medicaid fair hearings would have to be held in addition to IDEA due process hearings;
6. the payment methodology does comply with statutory requirements; and finally
7. CMS did not believe the state did not provide enough information on the methodology used to develop fee schedules.

CMS had recommended the plans be filed under the Early and Periodic Screening, Diagnosis, and Treatment Program (EPSDT) rather than rehabilitation. Filing plans under EPSDT allows the services to be focused exclusively on children and allows CMS some leeway with issues such as rate and program uniformity ("statewideness"). The schools also requested that the plans be filed under the Ohio Department of Health administered EPSDT, but ODJFS continues to be adamant that it be filed under their current rehabilitation program due to concerns that if it is under EPSDT, it may be more difficult to limit costs.

Service Provision Continues

Meanwhile, despite termination of the CAFS program and corresponding funding, schools are still required to provide services per federal requirements and state statutes under the Individuals with Disabilities Education Act (IDEA). Likewise, those in the county board system that are eligible recipients will continue to be able to access services through other programs.

Consumers who are residents of an Intermediate Care Facility for the Mentally Retarded (ICF/MR) will continue to be able to receive the Active Treatment service through their ICF/MR after June 30, 2005. Likewise, consumers who are enrolled in Home and Community Based Services (HCBS) Waivers will continue to be able to receive the Skills Development and Support (SDS) service through certified waiver providers after June 30, 2005.

Those individuals who do not reside in an ICF/MR facility or who are not enrolled on an HCBS waiver may continue to receive professional therapy services through the use of the Medicaid card. These professional therapy services (e.g. OT, PT, Speech/Language) are those currently available to all Medicaid eligible consumers.

For school aged recipients receiving professional therapy services through their schools, the Department of Job and Family Services is exploring short and long term service options in addition to those professional therapy services already available to all Medicaid eligible consumers.

It is important to note, that any individual seeking services from a Medicaid Provider must meet the medical necessity criteria in order for Medicaid to cover the service.

Next Steps and Possible State Response to CMS Denial

The response to the denial from CMS is still being discussed. There are many different avenues being pursued. ODJFS, ODE and the Governor's office have discussed appealing this decision. However, an appeal process is quite lengthy and may not solve the major issues. Currently, ODE is waiting from additional perspective from school district representatives.

The School Medicaid Committee (comprised of statewide association and school district representatives) will be following up with ODJFS regarding filing new State Plan Amendments under EPSDT. This issue is also before the Steering Committee for the initial lawsuit initiated earlier this past spring. As part of the settlement agreement between ODJFS and the participating schools, ODJFS agreed that if filing the plans under the rehabilitative program were denied, they would re-file under EPSDT.

The schools may have to look at further litigation to solve some of these issues. Litigation of course is a costly and time consuming effort, but one that may have to be utilized. At this point, the Steering Committee and its representative school districts are reviewing options.

Conclusion

The close of the CAFS program and the inability to restart it places additional fiscal pressure on special education funding and therefore it is important to stakeholders to encourage the development of new and effective ways to address the problem. This situation compounds special education funding pressures that relate in part to the fact that the state's cost-based special education funding methodology is not fully funded because the weights are funded at 90% and they have not been updated in four years.