UPDATE: In April 2023, the Centers for Medicare and Medicaid Services approved the Illinois state plan amendment to expand funding for school health services. Read HSC’s press release and view the FAQ to learn what this means for school districts.

Illinois has an important opportunity to expand physical, mental and behavioral school-based health services for the state’s most vulnerable children by making a simple change to its Medicaid policy.

Implementing this change will allow Illinois to draw down additional, sustainable federal funding for school health services that can reduce health inequities and help offset school district budget deficits, at no additional cost to the state.

In September 2020, HSC joined with more than 50 organizations calling on Governor Pritzker to support this policy change and encourage its implementation.

The COVID-19 pandemic has emphasized the critical role that schools play in providing health services to students. The impact of this crisis has demonstrated the stark disparities in our health and education systems, with a profound impact on low-income communities of color. We are seeing first-hand how schools often represent the only source of healthcare— including mental health, dental, vision, chronic disease management, and other crucial services—for children in underserved communities.

It is more crucial than ever to ensure strong student health and wellness policies and programs are in place and schools have the sustainable resources they need to implement these programs. Providing healthcare in schools is one of the best ways to ensure that children are healthy and ready to learn. In addition, increasing access to school health services is a proven strategy for improving healthcare outcomes, including reducing overall healthcare costs and improving the quality of and access to care for vulnerable children.

School health services refer to physical, behavioral and mental health care provided within a school or school-based health center, or through partnerships with local health organizations. 
Service providers may include school nurses, school psychologists, social workers, counselors, occupational therapists, physical therapists and speech-language pathologists.

For nearly 20 years, under a longstanding Medicaid policy known as the Free Care Rule, school districts could bill Medicaid only for health services included in a student’s Individualized Education Program (IEP) and under other limited conditions. 

In December 2014, the Centers for Medicare & Medicaid Services (CMS) clarified this guidance, allowing school districts to receive Medicaid reimbursement for all eligible services delivered to all students enrolled in Medicaid. For districts serving students from low-income families, this gives Medicaid the potential to be a major funding source for school-based health services.

The CMS policy change means that schools now have the ability to seek reimbursement for all Medicaid-enrolled students.

As students with IEPs represent a mere 14 percent of these students in both Chicago and Illinois, moving to expand Medicaid reimbursement to all Medicaid-enrolled students has the potential to make a tremendous impact on struggling school district budgets and the provision of school health services.

Expanding billing for more students — as well as expanding the types of services and providers being reimbursed — could mean more federal revenue to the state and more reimbursement to districts. And since most schools already deliver some of these services (and pay for them with education dollars), bringing in federal reimbursement can replace scarce education money and help stretch resources further.

Benefits of Expanding School Health Services Through Medicaid

Many states are also using this opportunity to get Medicaid to recognize the role of additional providers who are delivering services in schools—and to increase the types of school-based physical and behavioral health services that are reimbursed by Medicaid.

For Illinois to leverage this opportunity to expand its school Medicaid programs, it must first remove related restrictions in its Medicaid state plan by submitting a State Plan Amendment (SPA) to CMS for approval. The Illinois Department of Healthcare and Family Services (HFS) is the state agency responsible for engaging with CMS on behalf of Illinois. This process does not require any state or local legislative changes in Illinois. This proposal to expand access to school health services is a budget-neutral policy change for Illinois.

As of March 2022, 17 states have successfully expanded their school-based Medicaid programs through this opportunity, two states have approvals pending with CMS, and many more are expected to do so in the coming year. HSC is actively engaged with states pursuing these changes. Detailed information on national activity can be found in this regularly updated tracking document and in our national map, which includes data on eligible health services and providers in all 50 states and D.C.

Changing the Medicaid state plan does not create a new mandate for school districts, though it does afford them tremendous opportunity. This policy change is not an administrative requirement for school districts, who are continuously inundated with new mandates. School districts can implement when they are ready, work with other districts to learn collaboratively, and ensure they are able to implement successfully. States are creating thoughtful and innovative rollout plans tailored to their individual needs to ensure implementation is manageable, deliberate, and effective.

It is especially critical that Illinois move to enact this policy change now, due to a key factor in the SPA process: School districts will be able to retroactively bill Medicaid for services provided from the date the SPA is submitted—not the date it is approved. For every day that goes by that Illinois does not submit the SPA, districts are losing thousands of dollars in potential revenue. And as school districts are struggling to ensure they have enough resources to meet budgets for the upcoming school year and provide adequate school health services as remote learning continues, this additional funding can help offset costs and ensure the needs of students are being met.