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District discloses KDHE Medicaid formula error leading to six-figure overpayment to be repaid
Summary
Superintendent said KDHE used an incorrect formula dating to 2016 that overpaid Medicaid reimbursements to many Kansas school districts, creating an overpayment for USD 383 of "over $300,000" that the district will have to repay and that may increase the special-education deficit.
Superintendent Eric Reed told the board May 20 that an error in a Kansas Department of Health and Environment (KDHE) reimbursement formula had produced overpayments to school districts statewide and that Manhattan-Ogden USD 383's overpayment totaled more than $300,000.
"...it was the mistake found in the KDHE formula on the reimbursement for Medicaid services," Reed said in his superintendent report. He said the wrong formula had been in use since 2016 and that the error affected Medicaid reimbursements for qualifying services that districts bill to Medicaid.
Reed said federal rules require repayment of overpayments and that the state is considering mechanisms to recoup the funds. Among the options discussed was deducting future Medicaid reimbursement amounts to recover the overpayment; district staff are seeking ways to amortize any payback to avoid a single-year cash crisis. Reed said Kansas State Department of Education (KSDE) was coordinating with KDHE and districts to find an approach but warned that planned refunds could enlarge an existing special-education operating deficit.
Board members asked about accountability and where the incorrect figures originated. Reed said KDHE provided the wrong numerator in the formula that flows into the vendor calculation and that the error had been present since 2016. He said there was not yet a clear path to hold a party to account for the historical error and that negotiations were ongoing between agencies.
Reed told the board the overpayment will affect the special-education section of the budget. Board members and staff noted that turning repayment into multiple-year deductions from Medicaid revenues would reduce one-year budget shock, but the district has not yet finalized how the repayment will be handled.
No formal board action was taken at the May 20 meeting; staff said they will update the board as state agencies provide more information.
