New Hampshire commission examines Medicaid billing shortfalls as special-education costs rise

A legislative commission formed to study special-education costs under SB 57 heard detailed testimony on Oct. 15 on barriers that keep New Hampshire school districts from drawing federal Medicaid dollars intended to cover medically related school services.

Chairman Rick Ladd, who leads the commission and chairs House Education Funding, said the state’s catastrophic/special-education aid has been under strain: "the commissioner had approximately $34,000,000 for catastrophic aid. We were shallow by another $16,000,000, and that was prorated down to the school districts at around 68%." He noted a later change set a minimum proration of 80% but said the funding gap persists.

Why it matters

Commission members were focused on whether schools are "leaving federal money on the table" because of billing complexity, regulatory changes and local capacity limits — factors that increase pressure on state special-education aid and local school budgets.

The discussion centered on three facts presented to the panel: Medicaid reimbursements to schools have fallen substantially since the pre-pandemic period; federal and state compliance rules recently altered who may sign orders and what costs are allowed; and small districts often lack the staffing or scale to sustain the billing work.

What witnesses said

Henry Littman, Medicaid director at the New Hampshire Department of Health and Human Services, described a national shift in federal policy that will change the state’s reimbursement methodology in state fiscal year 2027. “That methodology is being eliminated ... We’re converting to a different methodology,” Littman said, explaining the state plans to use certified public expenditures and to capture allowable overhead costs for the first time. He told the commission that other states that made a similar shift, such as Colorado, “saw a substantial increase in the amount of federal share that they could draw down.”

Littman also said total Medicaid claims from schools have fallen: “We’re down about 25% from where I think we were pre pandemic.” He gave historical figures showing a decline from roughly $27.9 million in 2016 to under $9 million in recent years.

Dan Korder, who identified himself as a principal at Boothby Therapy Services, described how private contractors supply clinicians (speech pathologists, occupational and physical therapists, school psychologists) to districts that cannot staff full-time positions. He said his company does not provide Medicaid billing software but does use outside billing-compliance services, and that "we pay 8% of revenue received for that service." He estimated Boothby now employs about 200 practitioners working in schools.

Rebecca Ferdette, State Director of Special Education, emphasized the separation between IEP team decisions and Medicaid billing. "That Medicaid decision is not discussed in that meeting at all because the IEP process is that you take all those evaluations," she said. She said clinical determinations are made by professionals and the IEP team determines educational needs; administrative staff later evaluate which IEP-era services may be billed to Medicaid.

Key details and numbers discussed

- State special-education aid (formerly "catastrophic aid") has been underfunded in recent years; an appropriation of roughly $34 million was described as short by about $16 million, leaving districts prorated at about 68% before a statutory floor of 80% was adopted. - Medicaid reimbursements to schools fell sharply: witnesses cited about $27.9 million around 2016, declining to under $9 million in recent filings; Littman said the program was “down about 25%” from pre-pandemic claims levels. - New Hampshire uses a 3.5-times-average-per-pupil cost trigger for catastrophic aid (roughly the $70,000 level discussed in the meeting). Commissioners raised the question of how many students would become eligible if the multiplier were reduced (for example, to 2.5 times); the commission had no data for that scenario. - Federal changes tied to COVID-era flexibilities and later rollbacks affected eligibility and documentation practices; Littman said New Hampshire’s "compatibility" threshold used in eligibility checks is 10% (many states use 20%). - A procurement funded by a federal grant will support a help center and training infrastructure (help desk hours described as Monday–Friday, 8 a.m.–4 p.m.) to help districts implement the new reimbursement methodology. - Private contractors report paying approximately 8% of Medicaid revenue to outside billing/compliance vendors. - Some students in high-cost placements can exceed $100,000 per year; a small number were described as costing more than $500,000 annually.

Discussion points the commission flagged

Members discussed capacity differences among districts: large districts can absorb the administrative burden or host cooperative billing operations, while many small SAUs do not apply because the work and local labor costs can exceed recovered Medicaid amounts. Commissioners also raised concerns about litigation-driven tuition placements, growth in IEP counts statewide (materials cited an overall identification of about 19% of students with disabilities, with some districts up to 26%), and the role of private education funding avenues (EFA/charter programs).

Next steps from the commission

The group asked staff to assemble longitudinal data on special-education spending and related items, including: annual state catastrophic/special-education aid levels and court-ordered placements going back as many years as available (commissioners requested up to 20 years where possible), recent Medicaid-to-schools revenue trends, counts of students with IEPs in charter and EFA programs, and episodes-of-treatment data (which officials said are available for a shorter period). The commission set a follow-up meeting for Oct. 29 at 10:00 a.m.

Ending

Commission members and witnesses described the Medicaid changes as an opportunity if the state can build the right technical supports and training, but they warned it will take time and investment for small districts to capture more federal funds without increasing compliance risk. Several members said the commission will now focus on collecting the statewide data needed to model the fiscal effects of any changes to the state special-education aid formula.