This report to the U.S. Senate Committee on Finance evaluates Medicaid reimbursements to schools for health services provided to children. The report addresses: (1) the extent to which school districts and states claim Medicaid reimbursement for school-based health services and administrative activities; (2) the appropriateness of methods states use to establish "bundled rates" for school-based health services and the costs of administrative activities that schools may claim as reimbursable; (3) states' retention of federal Medicaid reimbursement for services provided by schools' practice of paying contingency fees to private firms; and (4) the adequacy of the Health Care Financing Administration's (HCFA) oversight of state practices regarding school-based claims, including safeguards to ensure appropriate billing for health services and administrative activities. Conclusions included that three states (Illinois, Michigan, and New York) accounted for over 60 percent of all health services payments; that payments ranged from a high of $820 per eligible child (in Maryland) to less than 5 cents per child (in Mississippi); that bundled rate methods often fail to account for variations in service needs or document actual services provided; and that HCFA has provided weak direction and program oversight. Appendices include an HCFA letter to state medical directors and comments from HCFA on this report. (DB)