“Free Care” Rule


“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 of 2014, the Centers for Medicare & Medicaid Services (CMS) issued a letter to state Medicaid directors announcing a policy shift that allowed states more flexibility in their school-based Medicaid programs: 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 didn’t interfere with healthcare provided for free. Rather, the original policy had prohibited Medicaid reimbursement for school health services if the same services were provided free of charge to the general student population unless the services were specifically included in a student’s Individual Education Plan (IEP) or Individualized Family Service Plan (IFSP), or delivered through the Maternal and Child Health Block grant.

Even though the federal policy shift opened the door to greater financial support for states and school districts, most states did not immediately take advantage of it. Many states had codified the original CMS policy, stating that districts could only seek reimbursement for health services delivered under a student’s IEP or IFSP. Several had formalized the original policy in state law.

As of October 2023, more than two dozen states have successfully expanded their school-based Medicaid programs, most through a state plan amendment, with more states working to do so. The School Medicaid Programs Map shows where each state is in the process.

Increasingly, states and school districts see expanding school-based Medicaid programs as an opportunity to bring in additional resources to expand access to health services for vulnerable students. And, as school districts consider how to meet the increased demand for mental health services in schools, policymakers are considering every available option to build capacity at the state and local levels.

Learn more about the opportunity for states, the steps states need to take to implement the federal policy change and the successes of states that have done so.