WASHINGTON, D.C. — The Council for Medicaid and Medicare Services, a division of the Department of Health and Human Services, proposed rulemaking that would eliminate reimbursement to public schools for transportation of Medicaid-eligible students.

The rulemaking comes as a result of reductions in the President’s 2007 budget, according to the National Student Transportation Association (NSTA).

In some cases, states have used Medicaid funding to reimburse schools for transportation of students receiving eligible services in school. The new rule, however, states that this is not a legitimate use of Medicaid funds because school transportation is not directly related to a visit to a medical provider.

The rule will continue to allow federal reimbursement for transportation from school to a non-school-based medical service provider that bills under the Medicaid program, and it will continue to reimburse states for transportation of pre-school children who receive direct medical services at school if there is no educational component.

The rule, if adopted, will apply to expenditures incurred after Oct. 1, 2008. The rule, which also includes elimination of reimbursement for school administrative costs, is expected to produce $3.2 billion in savings in the first five years, NSTA reported.

To view the proposed rule, click here.