Huge Win for School Medicaid Programs as CMS Changes Restrictive Free Care Policy

The federal Centers for Medicare and Medicare Services (CMS) has issued a letter to all State Medicaid Directors withdrawing their prior guidance on the free care policy, Medicaid Payment for Services Provided without Charge (Free Care). This is welcome and exciting news for school districts that participate in their state’s school-based Medicaid billing program, many of whom have been waiting since a 2004 Department Appeals Board (DAB) decision first concluded that the free care policy was an inaccurate interpretation of Medicaid statute.

Prior to this new guidance, the free care policy prevented schools from billing Medicaid for otherwise eligible health services if those same services were provided to non-Medicaid beneficiaries at no cost. This included services that are typically provided to the general education population, including Early Periodic Screening, Diagnostic, and Treatment (EPSDT), preventative, health, and mental health assessments and treatments.

Schools will now be able to bill Medicaid for these same services as allowed by their specific state Medicaid plan. Because each state has a unique plan for providing Medicaid services to its population, the impact of this new policy will vary from state to state and depend on several factors, including: provider eligibility, covered service types, and whether the state’s school billing program includes general education health services (a federal carve-out has allowed schools to bill for services provided to special education students as prescribed in each student’s Individualized Education Plan (IEP)).

While it will be up to each state to roll out this new policy, the CMS State Medicaid Director letter makes clear that “Medicaid reimbursement is available for covered services under the approved state plan that are provided to Medicaid beneficiaries, regardless of whether there is any charge for the service to the beneficiary or the community at large.” It also appears that this new policy is effective immediately in states that meet the conditions for billing set forth in the Letter, although some states have alerted schools that they need time to process the news and roll out their own guidance.

The Letter goes on to outline CMS’ perspective on Third Party Liability (TPL) requirements for schools and similar agencies, stating that schools are not considered legally liable third parties for the purposes of federal reimbursement through Medicaid billing programs. It goes on to state that this guidance, “does not create any exception to requirements to pursue TPL from legally liable third parties, such as private insurance plans… but it allows states to determine that public agencies with general responsibilities to ensure health and welfare are not considered legally liable third parties.” We are hopeful that additional clarification on the precise interpretation, scope, and impact of this language will be forthcoming as it does not appear to address the chief barrier faced by schools in attempting to bill other legally liable third parties, such as private insurance, before allowing them to bill Medicaid.

We will continue to track this momentous development as state’s begin to roll back their free care policy restrictions and schools begin billing for the breadth of eligible health services that are provided to their Medicaid students.

Read More

Read the CMS State Medicaid Director Letter, Medicaid Payment for Services Provided without Charge (Free Care)…

Read our complete Issue Analysis of the free care policy…

View a timeline of the free care issue prior to the recent CMS withdrawal of the policy…

Read our complete Issue Analysis of Third Party Liability barriers to school Medicaid billing…