There are many barriers to providing school health services, including adequate staffing, appropriate equipment and facilities, and funding. But on top of all that, for nearly 20 years, an interpretation of the Social Security Act made it challenging for schools to be reimbursed for health services provided to students who are covered by Medicaid. In December 2014, the Centers for Medicare and Medicaid Services (CMS) quietly changed its interpretation—and while the letter it sent out may be short, the impact could be huge.
The free care rule: A barrier to school health funding
In 1997, CMS released a guide to provide schools and districts with information on how to use Medicaid funding for school health services. An important part of its interpretation became known as the “free care rule.”
According to CMS, Medicaid could only be billed for health services provided to Medicaid students if every non-Medicaid student’s insurance provider was also billed. Districts were left with few choices: (1) pay for all health services, ignoring kids’ health insurance coverage; (2) provide services only to students covered by Medicaid; or (3) chase reimbursement from every non-Medicaid insurer or family. The first option is not feasible, and the second option raises serious ethical questions. CMS gave suggestions on how to make the last option work, but its proposals were unwieldy, expensive and subject to scrutiny from families concerned about privacy.
While the free care rule did not apply to most students with disabilities, it applied to many important services. In fact, some services that Medicaid requires for people under age 21 were cut out by the free care rule, including many dental, hearing, vision and screening services, such as comprehensive physical exams and appropriate immunizations.
A new interpretation could mean more funding for school health
In April 2014, the AFT joined the National Education Association, the Healthy Schools Campaign, Trust for America’s Health, the School-Based Health Alliance, the National Association of School Nurses and the Childhood Asthma Leadership Coalition to ask the Departments of Education and Health and Human Services to clarify the intentions of the free care rule. CMS responded on Dec. 15, 2014, issuing a letter that reinterprets federal law and dismantles the free care rule.
The letter was an important step, but there is more work to be done.
- The letter was only sent to state Medicaid directors. The Department of Education did not send a companion letter. Many people in the education sector may still be unaware of the change.
- Beyond awareness, 20 years of state Medicaid plans and district policies aligned with the old free care rule may need to change.
- Districts and schools interested in providing better or more health services should consider how they want to use the additional funds they might receive from Medicaid reimbursements (e.g., hiring additional school health professionals, changing part-time positions to full-time ones, and strengthening partnerships).
These next steps also raise important questions.
- States will have to consider what is currently included in their Medicaid plan and if changes to the plan will make it easier to provide school health services. They will also have to investigate whether reimbursement is sent for every service or for every person. What works for hospitals and doctors’ offices isn’t necessarily what works best for schools and districts.
- Districts will have to evaluate their current practices and capacity to bill Medicaid. They may need to make new investments in administrative skills and technology to do this work.
- State Medicaid agencies may need to better understand how schools that serve as healthcare hubs can save the program money.