Issues
Medicaid's Free Care Practice
Back to issuesIssue Summary: Medicaid's Free Care Practice
Public schools provide a range of health services to children in both regular and special education programs. These health services can range from speech pathology, to medication administration, to crisis assessments, and medical emergencies. LEAs rely on Medicaid reimbursements to help offset the costs of administering and providing these health services.
Currently, however, LEA reimbursement for eligible Medicaid services is negatively affected because schools also provide the same services at no charge to students who do not have Medicaid coverage. These students include those who are uninsured and those with private coverage that does not recognize schools as health care providers. Although IDEA services are "carved out" of the CMS free care practice, schools pay a steep price for providing regular education health services to students who do no have Medicaid.
Unsupported by legislation, the free care rule originated as a CMS interpretation of Title XIX of the Social Security Act in the late 1990s. Section 1902(a)(17)(B) of the act requires states to seek reimbursement for health services from third parties before billing Medicaid. Between 1991 and 1997, however, CMS modified its interpretation of this provision. In 1991, states were allowed to bill Medicaid for services provided to eligible students if they had first attempted to bill any other potentially liable third party. In 1997, CMS revised its interpretation again, as written in the 1997 CMS Technical Assistance Guide for LEA Billing. This interpretation states that free care requirements prohibit LEAs from receiving federal reimbursement for regular education health services that are otherwise provided "free" to the general student population. It further states that in order for Medicaid reimbursement to be available for these regular education services, the provider must
- establish a fee for each service that is available,
- collect third-party insurance information from all those served (both Medicaid- covered and non-Medicaid-covered students), and
- bill other responsible third-party insurers before billing Medicaid.
Throughout the 2000s, CMS has required states to implement and enforce this practice, and the subsequent loss of funding has negatively affected schools and their health programs. One school district in California estimated that the free care practice has resulted in a 25% drop in its total reimbursements for school health.
Legal challenges to the practice have thus far been upheld. In 2000, CMS disallowed $2 million in Medicaid reimbursements to the state of Oklahoma for failing to adapt to the new free care practice. The state appealed this loss, and a federal administrative board supported the state's position. On June 14, 2004, the Appellate Division of the Department of Health and Human Services Appeals Board issued Decision 1924, which found that "there is no express requirement in the [Social Security] Act that . . . the provider seek reimbursement from potentially liable third parties for the cost of the same services provided to non-Medicaid eligibles."
CMS, however, has continued to enforce the 1997 free care practice outside Oklahoma. In 2004, a $305,000 payment for health services at San Francisco Unified School District was disallowed. The state of California subsequently challenged this decision, but it continues to enforce the practice while awaiting a formal resolution of the matter.
Related News and Events: Free Care
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National Discussions on Funding for School Nurses and School-Based Health Centers Address Free Care
Paradigm HealthCare Services Apr 17, 2012
As various groups aligned with school-based health work to secure and identify new sources of funding for essential services, finding a solution to restrictions caused by the federal free care interpretation continues to be discussed as an opportunity for providing schools with additional federal support. -
NASBHC Wants to Know Who is Affected by the Inability to Bill Medicaid for Services Provided for Free to Uninsured and Other Students
Paradigm HealthCare Services Jul 01, 2011
The National Assembly on School Based Health Care (NASBHC) is looking for stories from LEAs and states whose health services programs have been negatively impacted by the enforcement of the free care interpretation to support a larger advocacy campaign aimed at reversing this interpretation at the federal level. -
San Francisco Superior Court Rules Against DHCS Withhold of San Francisco Unified School District (SFUSD) on Grounds of Free Care
Paradigm HealthCare Services May 21, 2009
Related Paradigm Publications: Free Care
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Maximizing Federal Funding for Health Care in Schools
Paradigm HealthCare Services Feb 10, 2011
This Advocacy Brief analyzes to major opportunities for improving school-based federal reimbursements through the LEA Billing program in California: 1. allowing billing for medically necessary transportation services as supported by the full extent of the California Code of Regulations, and 2. allowing billing for all necessary services provided to Medicaid-covered students, including regular education health services. -
Policy Brief: Free Care Challenge Update, December 2010
Paradigm HealthCare Services Dec 01, 2010
The Department of Health Care Services (DHCS) is building a case to challenge the federal Centers for Medicaid and Medicare Services (CMS) on a principle known as the “free care rule.” This brief provides an update to this challenge.
Related Library Files: Free Care
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Health in Mind: Improving Education through Wellness
Healthy Schools Campaign Jan 23, 2012
This policy brief examines the need for funding and resource support for the disease management and health promotion services school nurses and allied staff provide daily to the general student population. Note: the recommendations in this brief are draft and will be refined based on stakeholder feedback being conducted by Healthy Schools Campaign. -
Medicaid and School Health: A Technical Assistance Guide
Centers for Medicare and Medicaid Services (CMS) Oct 07, 2011
Published: August, 1997. This guide contains specific technical information on the Medicaid requirements associated with seeking payment for coverable services rendered in a school-based setting. -
SMAA Manual FY 2011-2012
California Department of Health Care Services Jul 01, 2011
Combined / Searchable Version with Bookmarks and Hyperlinks For Easier Reference -
LEA Medi-Cal Billing Option Program Frequently Asked Questions
California Department of Health Care Services Jun 10, 2010
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SMAA Manual FY 2010-2011
California Department of Health Care Services Jun 01, 2010
Combined / Searchable Version with Bookmarks and Hyperlinks For Easier Reference -
DHCS Report to the Legislature, May 2010
California Department of Health Care Services May 30, 2010
Report Period April 2009 through May 2010 -
Medi-Cal Provider Manual Part 2 - Billing and Policy
California Department of Health Care Services May 20, 2010
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2010 CMAA LGA Provider Manual
California Department of Health Care Services Jan 01, 2010
The California County-Based Medi-Cal Administrative Activities Manual (CMAA Manual) intends to help local governmental agencies (LGAs: counties and chartered cities) participate in the CMAA program and maintain proper documentation for their claiming units. This is the original LGA provider manual, last published in 2010 prior to the development and implementation of a new time survey methodology for CMAA claiming expected to be released for FY 2012-13. -
DHCS Report to the Legislature, March 2009
California Department of Health Care Services Apr 01, 2009
Report period: April 2008-March 2009 -
DHCS Report to the Legislature, September 2006
California Department of Health Care Services Jan 29, 2006
Report Period April 2005 to March 2006 (With Additional information for January 2003 through March 2005) -
Department Appeals Board (DAB) Ruling: Oklahoma Health Care Authority and Free Care
Appellate Division, Departmental Appeals Board, Department of Health and Human Services Jun 14, 2004
DAB A-03-79, Decision No 1924; the DAB "concludes that the [CMS 1997 Technical Assistance] Guide's free care principle is not an interpretation of any provision of the [Social Security] Act nor indeed of any regulation implementing a provision of the Act." in the case of Oklahoma Health Care Authority (Oklahoma) appeal of a disallowance of $1,902,390 in federal financial participation (FFP) for the cost of school-based health services (known as EPSDT services) provided in state fiscal year 2000. -
Medicaid School-Based Administrative Claiming Guide, May 2003
Centers for Medicare and Medicaid Services May 01, 2003
The CMS Medicaid School-Based Administrative Claiming Guide provides federal guidance on the proper administration of state-operated school-based administrative claiming programs. The Guide does not supersede any statutory or regulatory requirements. Rather, it clarifies and consolidates CMS’ guidance on how to meet these statutory and regulatory requirements and explains the application of such requirements in the context of current practices.