Issue Analysis

On June 26, 2012, following a review of three LEAs participating in California’s Medicaid Administrative Claiming (MAC) program, the federal Centers for Medicare and Medicaid Services (CMS) notified California that they would not be issuing payment for all current and forthcoming claims.

This event became known as the deferral, and it kicked off a multi-year process to reconcile deferred claims and transition California to an entirely new MAC claiming program.

All told, the deferral has impacted over $500 million in school MAC claims dating all the way back to Fiscal Year 2009/10 and through Fiscal Year 2014/15.

A final resolution for all deferred claims is anticipated to be completed in 2018.


  • December 31, 2017—The second round of backcasted claims are scheduled to be due to the state, covering FY 2011/12 claims over $25,000 and all deferred claims from FY 2012/13.
  • August 31, 2017—California LEAs submit the first round of backcasted claims to the state, covering FY 2009/10 and 2010/11 claims over $25,000.
  • October 2015—DHCS receives conditional approval for their backcasting proposal from CMS. Under this proposal, schools will essentially apply 4 quarters of random moment time study results to prior period costs to determine the final allowable cost and reimbursement for all deferred invoices. This process, cautioned by stakeholders as potentially overly punitive, is slated to begin in January 2017 and end in 2018.
  • March 2015—Interim reimbursement payments for deferred claims begin slowly making their way to schools.
  • March 16, 2015—CMS rejected the state's alternative proposal, meaning California schools would continue to operate under the conditions laid out in the original October 7, 2014 settlement agreement with CMS.
  • February 20, 2015—DHCS submitted a proposal to CMS that would bring a fair and swift end to the nearly three year long deferral of the school MAA program. This proposal asked that, in lieu of the October 7, 2014 settlement terms, CMS would pay all deferred claims a final settlement percentage based on the claim amount and eliminate the backcasting requirement entirely. This proposal was supported by data which showed that the negative findings from CMS’ 2012 SMAA audit were in no way representative of the other SMAA programs operating throughout the state.
  • October 7, 2014—Despite thousands of hours expended by schools in a good faith effort to comply with the CMS-approved RTC process, the RTC process failed and was replaced by a settlement offer from CMS. Under this settlement proposal (accepted by DHCS on October 14, 2014), the deferral resolution will involve two parts: 1) an interim payment of a sliding percentage based on the original deferred claim amount — ranging from 100% for claims under $25,000, to just 40% for claims over $50,000 — and 2) a reconciliation of these interim payments with an amount to-be-determined through a yet undefined backcasting methodology. Under the deferral settlement, payments are scheduled to start hitting schools by March 31, 2015.
  • April 30, 2014—The state was anticipated to begin their review no later than April 30, 2014 when RTCs for the first batch of deferred invoices were due. However this new justification process began to break down shortly after California schools submitted their RTC paperwork to DHCS. Review standards had changed from those originally released to schools prior to their completion of the RTC, resulting in more than 90% of RTCs being returned for changes.
  • October 28, 2013DHCS announced a new process, approved by CMS, for schools to justify their deferred invoices and receive payment. This process, known at the Reasonableness Test Criteria (RTC), allows schools a choice between revising their invoices to meet coding percentage and staffing benchmarks (which may result in limited reimbursements) or completing paperwork to justify any overages, contingent on state and federal approval.
  • January 2013—following the approval of 54 certifications, the first certification process stalled, leaving the majority of school districts anxiously awaiting payment on claims reaching as far back as Q4 of fiscal year 2009-10.
  • June 26, 2012—the federal Centers for Medicare and Medicaid Services (CMS) notified California’s Department of Health Care Services (DHCS) that it was deferring payment on unpaid school MAA claims and that the state must change the claiming methodology used for the program. Participating school districts were given the opportunity to certify their pending claims via a deferral certification form released by DHCS, who worked in collaboration with CMS to create the form, in August of 2012.