Here's how much funding Austin-area schools will lose after health care coding issue

Austin-area schools will lose out on about $12.5 million annually in federal reimbursements for medically related services for students after an investigator with the U.S. Health and Human Services Department found that for years the state had been incorrectly coding the services under Medicaid.

Despite the state claiming it filed appropriately coded medical costs, the federal agency in its report said, "We reject Texas's argument."

The Austin district will lose out on $6.7 million, the fifth-largest amount of any district in the state.

The funding loss — which is the final decision in a yearslong battle between the state and federal governments — comes at a time when school districts in Texas face budget deficits because the state's public education funding has not kept up with inflationary cost increases, officials have said.

The coding discrepancy turned up in a 2017 federal report, which found a disagreement between state and federal agencies over how Texas cataloged medical services provided in public schools.

Under the School Health and Related Services program, local school districts can get reimbursed through Medicaid for health-related services their employees provide to students at school. The Texas Health and Human Services Commission oversees the program.

The federal audit found that Texas schools had coded certain on-campus services as medically related — and the districts received payments for that work — even though the services didn’t meet the federal requirements for reimbursement, according to the state health commission.

For example, schools can get reimbursed for medically necessary services such as helping students with eating or personal hygiene. However, Texas had coded other services, such as helping students stay in a seat, use writing implements or stay focused on an assignment, as reimbursable by Medicaid, but the federal investigator found that those services don't qualify.

The coding change means Texas school districts will lose about $302 million annually in federal reimbursements, according to the state health commission.

On Oct. 27, the federal Health and Human Services Department's federal appeals board notified the state health commission of its final decision.

The state commission had spent years appealing the Health and Human Services Department's decision, according to the agency.

For Texas school districts, the funding change comes at a time when many are facing budget shortfalls, which many school officials blame on Texas lawmakers for not agreeing on a comprehensive school funding bill during last year's legislative session.

The Austin district, which would have received $17.3 million for the 2021-22 school year for medical expenses before the final order, will now only receive $10.5 million, according to the state health commission.

The Austin district last year adopted a $1.86 billion budget with a $52 million deficit. District officials reported earlier this month that they had cut costs and expect the deficit to shrink to about $31 million by the end of the fiscal year in June.

While the state didn't know when the federal government would issue its final ruling, agencies had been long warning school districts that this change was coming, according to the state health commission.

Austin-area school districts losing out on some federal reimbursements for medical services:

• Austin: $6.7 million
• Del Valle: $2 million
• Hutto: $1.1 million
• Round Rock: $937,000
• Eanes: $448,000
• Elgin: $419,000
• Bastrop: $353,000
• San Marcos: $322,000
• Dripping Springs: $124,000
• Lake Travis: $73,000