School & District Management

Medicaid Changes Could Provide a Big Boost to School Mental Health Services

By Evie Blad — August 12, 2022 6 min read
A boy sits on a small wooden chair, leaning over a small wooden table to color as he talks to a woman who sits across from him on a low grey sofa.
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As the founder of a public residential high school in Baton Rouge, La., Sarah Broome saw Medicaid as a logical way to pay for much-needed student mental health services.

Many students at Thrive Academy came from low-income families and had a history of trauma. Broome wanted to bring in social workers and counselors to lead group therapy and individual treatment.

But, while those services were covered by Lousiana’s Medicaid program, cutting through the red tape to file for payment was much more difficult than Broome anticipated.

“To implement school-based Medicaid, I had to add running a health-care organization to my job,” said Broome, who now works full-time as a school Medicaid consultant. “There are things that are normal in that world that were not normal in my world.”

Obstacles like confusing billing codes and outdated federal guidance have made the school Medicaid billing process so difficult that some administrators don’t even try—leaving money on the table that could pay for students’ much-needed medical and mental health treatments, advocates say.

They hope new federal measures will change that, providing crucial resources to schools to help them navigate the bureaucratic maze and open up a long-term funding stream to help them tackle a widely recognized youth mental health crisis.

Those measures were included in the Bipartisan Safer Communities Act, a legislative package Congress passed after the May 24 school shooting in Uvalde, Texas.

The act requires the federal Centers for Medicare & Medicaid Services to update a technical assistance guide for schools that hasn’t changed since 1997, long before the use of interventions like telehealth, and to provide best practices for navigating complicated billing procedures.

It also provides $50 million in grants for states to implement or expand school-based Medicaid programs, and it directs federal officials to set up a technical assistance center to help states and schools find ways to pay for services.

Medicaid is a big funding stream for schools that is often overlooked

The bill’s changes, a long-time goal of education policy and children’s advocacy groups, center on an eight-year-old policy shift involving what’s known as the “free care rule.” That change was designed to make it easier for schools to charge Medicaid for services not included in students’ individualized education programs, or IEPs, the plans that detail accommodations and services for students with disabilities.

In a 2014 letter, the Obama administration told states that the so-called “free care rule” does not apply to schools. Under that rule, schools previously could not seek Medicaid reimbursements for services provided to Medicaid-enrolled students if they provided those same services for free to other students.

The Obama-era change in guidance aimed to give schools an opportunity to help meet the needs of vulnerable students, organizations like the Chicago-based Healthy Schools Campaign said at the time.

But states were initially slow to align their Medicaid programs with the new federal policy, which meant schools couldn’t take advantage of it. Doing so would require states to adjust their federally approved plans and, in some cases, change state law.

By March 2022, 17 states had adjusted their Medicaid programs in accordance with the “free care” guidance, according to a tracker maintained by the Healthy Schools Campaign.

But, even in those states, some school leaders struggled to take advantage of Medicaid dollars because doing so was too costly and complicated, said Sasha Pudelski, the advocacy director for AASA, the School Superintendents Association. Educational administrators aren’t trained in the complicated world of medical billing, and few states have a designated point person to help them understand it.

Medicaid pays for about $4 billion in school-based services a year, AASA estimates. Though that makes Medicaid the third- or fourth-largest federal funding stream for many schools, it represents less than 1 percent of the massive federal program’s overall budget.

That contrast has translated to very little political will to fix long-standing problems and inefficiencies, Pudelski said.

But the concern about student mental health following the disruptions of the COVID-19 pandemic, coupled with declarations of a crisis by people like U.S. Surgeon General Vivek Murthy, provided a window for action. The Safer Communities Act’s Medicaid provisions will provide incentive for states to update their programs and resources for schools to follow-up, Pudelski said.

“If we don’t take advantage of this opportunity to change this program, it’s never going to happen,” she said.

Even states that have already adopted the “free care” change may be able to free up more dollars by making additional changes, said Broome, the former Baton Rouge school leader.

For example, states could recognize more school-based health and mental health providers as eligible for Medicaid payment. They could clarify what school nursing services are covered by Medicaid, and they could better align documentation required by their education agencies with documentation required by their Medicaid programs.

New funds for mental health services

New Medicaid funds could help schools pay for things like hearing screenings, coordinating care for students, and health services. But advocates see the biggest opportunity in mental health services.

While many necessary health treatments, like physical therapy, are already covered by students’ IEPs and billed to Medicaid, mental health services are often needed by students without such plans.

Long before the pandemic, schools reported concerns about climbing rates of depression and anxiety among students. But it was hard to find the resources to address those concerns.

A March analysis of federal data by Education Week found that nearly 40 percent of all school districts nationally, enrolling a total of 5.4 million students, did not have a school psychologist in the first full year of the pandemic. Just 8 percent of districts met the National Association of School Psychologists’ recommended ratio of 1 school psychologist to 500 students.

Federal data show a similar shortage of counselors and social workers in schools. And the student support staff who are in place are often too busy with tasks like special education evaluations and scheduling to provide direct counseling to students.

“Everybody is in the same boat I was in,” Broome said. “Of course I want to provide mental health [services], but I can’t afford it.”

While COVID-19 relief funds provided by the American Rescue Plan can be used to hire new staff and programs, that money must be obligated by 2024, leaving school leaders with few answers about how to sustain new programs after the money runs out.

But Medicaid could be the solution, Broome said.

After she studied up on the program, Thrive Academy was able to hire two staff social workers, four contract social workers, and two full-time nurses.

That new staff provided individual counseling, group therapy, and intensive trauma therapy.

In the year before those changes, students were brought to the emergency room 30 times for a suicide risk assessment, Broome said. In the year after, just one such visit was required.

“The headache it took me to figure this out, I don’t want any other school leaders to experience this,” she said.

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