A Decade of School Medicaid Expansion Boosts School Health Services

Over the past decade, states have been able to connect more children with health services where they already spend the majority of their time: in school.

This is due to a 2014 federal policy clarification that opened the door to additional, sustainable funding for an expanded array of school-based physical, behavioral and mental health services and providers. Congress and the Biden administration have taken additional steps to ensure all states avail themselves of this funding, particularly as more students seek mental healthcare.

Healthy Schools Campaign was an early advocate for expanding access to care, and we have since assisted numerous states in determining how best to increase school health funding.

This month, HSC hosted a webinar looking at state Medicaid expansion at the 10-year mark and convened HSC’s Healthy Students, Promising Futures Learning Collaborative, which includes state Medicaid agency and school district representatives, to brainstorm ways to continue building and sustaining student health services.

But before we highlight what all states can do in the coming years, let’s take a quick look back at what changed and the opportunities now available.

Covering Health Services Outside of a Special Education Plan

“The goal of this new guidance is to facilitate and improve access to quality healthcare services and improve the health of communities.” — Centers for Medicare & Medicaid Services

In December 2014, the Centers for Medicare & Medicaid Services (CMS) issued a letter to state Medicaid directors announcing a policy clarification that would allow states more flexibility in their school-based Medicaid program: Schools could seek reimbursement for all covered services provided to all children enrolled in Medicaid, regardless of whether the services are provided at no cost to other students.

This became known as the “free care” policy reversal — a misnomer of sorts, as the decision did not interfere with free healthcare. Rather, the original policy prohibited Medicaid reimbursement for school health services if the same services were provided free of charge to the general student population. Exceptions were made for services included in a student’s Individual Education Plan (IEP) or Individualized Family Service Plan (IFSP).

The letter made clear that school districts could, in fact, bill for all medically necessary services provided to all children enrolled in Medicaid. This meant a new and sustainable revenue stream that could bring in substantial federal dollars for health services that school districts were already providing and paying for with education budgets.

“The reversal of this policy brought reverberating change to California. The California School Nurses Organization marched forward to codify this law and expand ‘free care’ for all children. It took five years to get our state plan amendment approved, but it was a monumental change for us.” — California School Nurses Organization Member

However, since most states had embedded the original policy in their state Medicaid plan, this opportunity was not quickly adopted. States had to submit a state plan amendment (SPA) to CMS or take legislative action to remove the IEP requirement and expand the state list of covered health services, ideally to include all medically necessary services. (HSC’s state activity tracker shows where each state is in the process.)

States also had to determine which school health personnel are considered qualified for reimbursement by the state Medicaid program. As this HSC report explains, improving alignment between state Medicaid and education standards for school health personnel is critical for fully leveraging federal funding.

BSCA Encourages Action

“[T]he challenges today’s generation of young people face are unprecedented and uniquely hard to navigate. And the effect these challenges have had on their mental health is devastating.” — U.S. Surgeon General’s Advisory

At the end of 2021, a U.S. Surgeon General’s Advisory called attention to the crisis of youth mental health and well-being. In part to help improve children’s access to mental healthcare, Congress passed the 2022 Bipartisan Safer Community Act (BSCA), which President Biden signed into law.

Realizing the essential role schools play in providing physical, behavioral and mental healthcare, the Act called on CMS to update school Medicaid guidance (which it did in 2023) and to provide technical support to help all states increase funding for school health services.

States now had a very specific blueprint to follow, and these actions cemented Medicaid’s role as an important and sustainable funding source for school-based healthcare — and for state health and education budgets overall.

CMS also released $50 million in grants, funded through BSCA, to support states and school districts in designing and implementing changes to their school Medicaid programs. Eighteen states received $2.5 million each to support the school Medicaid program. This has encouraged more states to begin the expansion process in collaboration with state education agencies and school districts.

Financial Benefits for States That Expand School Medicaid

“It has given us opportunities to support our students with services that were already provided, but we have been able to add additional staff like a speech pathologist.” — Nevada School Medicaid Specialist

To date, more than two dozen states have expanded their school Medicaid program (though some have not fully expanded to include all Medicaid-enrolled students and all Medicaid-covered health services and providers). Here’s a look at the financial impact of expanding school Medicaid in three states:

• Illinois expanded its school Medicaid program in 2023 (retroactive to 2021) to cover all medically necessary services allowed under the state’s comprehensive EPSDT benefit provided to all students enrolled in Medicaid. Data shows that during its first year of implementation, expanded billing resulted in Illinois school districts drawing down nearly $17.8 million in additional Medicaid funding. (Read our blog post.)

• New Mexico expanded its school Medicaid program in 2023 to cover all medically necessary services delivered to all Medicaid-enrolled students. According to the New Mexico Health Care Authority, this expansion contributed to a 10.18% increase in reimbursement of more than $6.3 million for school districts statewide as of December 2023, including more than $4 million in IEP services and $2.3 million for nine school districts that reported delegated nursing services.

• Michigan expanded its school Medicaid program in 2019 to allow claiming for all Medicaid-enrolled students and added a number of additional providers, including master’s-level school psychologists and behavioral health analysts. In the first two years of expansion (2020-2021), the state received an additional $12 million for services provided to students without IEPs. And because schools are now allowed to bill for the services of school psychologists, billing for students with IEPs has increased by more than $20 million.

In addition, some states are employing best practices that support the delivery of school health services to students enrolled in Medicaid, including cross-sector data sharing and facilitating partnerships with community-based providers to expand access to and coordination of care.

Next Steps for States and School Districts

Tremendous progress has been made, but it is critical to build on these successes and ensure continued sustainable support for school health services.

States are expected to amend their state Medicaid plans and other relevant policy documents by July 1, 2026, to comply with federal requirements discussed in the 2023 Medicaid Services and Administrative Claiming Guide. Leveraging all reimbursement flexibilities is recommended but optional. CMS’ school-based services website section includes a checklist tool, sample state plan amendments and sample cost reports.

HSC also has developed a 10-step framework to help states maximize Medicaid reimbursement for school districts. The more steps a state takes, the more it can fully leverage funding that can be used to support school health services and personnel.

HSC’s school Medicaid website, healthystudentspromisingfutures.org, features a comprehensive explanation of all 10 policy levers.

Website visitors will also find numerous reports and policy briefs, including an easy-to-follow action guide for school health advocates and a new collection of state tools and resources informed by interviews we did with state education agencies and school districts.

We’re excited by the momentum building across the country to provide all students, especially those from underserved communities, with the health services they need. Have questions? Let me know! You can reach me at jessie@healthyschoolscampaign.org.

Cross-posted at HealthySchoolsCampaign.org.