Fighting for Access to Federal Reimbursement of Medicaid-Eligible Services in California Schools

  • May 23, 2013
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One critical avenue to securing increased access to school health-related funding would be a federal clarification that schools are exempt from strict regulations enforcing what is known as the free care rule.

When Colleen O’Reilly, Director of Direct Services Medicaid billing at Paradigm Healthcare Services in San Francisco, was visiting school nurses in San Francisco Unified School District (SFUSD), she was amazed by what she saw.  Together, these nurses are responsible for providing care to thousands of students. But the nurses still knew each student’s name and often times much more.

“Nurses would see a child walk by, and ask about their parent remembering that they had been ill recently,” O’Reilly said. “These nurses knew the personal stories of their kids and they knew their kids by their first names. It wasn’t just this treadmill factory of kids coming in and out.”

The work of school nurses is invaluable, and increasing the number of avenues for funding school health services and personnel can allow them to do more to promote healthier schools and students, thus making a huge impact on students’ lives. One critical avenue to securing increased access to such funding would be a federal clarification that schools are exempt from strict regulations enforcing what is known as the free care rule, which states that Medicaid funds may not be used to pay for services that are provided for free to the entire student population.

A recent Superior Court ruling in California supports that the free care rule should not apply to schools so long as they take the appropriate and required steps to ensure all Medicaid beneficiaries with other health coverage (OHC) are billed prior to billing Medicaid for eligible services, thus safeguarding that Medicaid is the payer of last resort.

Following a disallowance of $305,000 in claims from SFUSD based on the federal free care rule, the district filed a lawsuit against the California Department of Health Care Services (DHCS) on the core assertion that there was no state or federal statute supporting the rule. Prompted by this lawsuit, the California DHCS worked with the federal Centers for Medicare and Medicaid Services (CMS) and successfully negotiated for access to reimbursement for these services in SFUSD.  In February of 2013, when the Superior Court issued their final judgment in the district’s suit against the state, it made clear that state law entitles the district to reimbursement for certain health services provided to regular education Medi-Cal students. As O’Reilly explains, this means that a lot of work school nurses do in SFUSD is now eligible for reimbursement which could mean the saving of jobs and an ability to enhance essential health services to those students who need it the most.

Although state health departments in both Oklahoma and California have now challenged the enforcement of the free care rule in the school setting and won, neither have received guidance on rolling this reimbursement opportunity out to the school districts. Without additional guidance, or a change in the federal guidelines that outline and enforce the free care rule in school Medicaid billing programs, schools remain unable to bill for eligible school health services provided to regular education students with Medicaid coverage (an Individuals with Disabilities Education Act carve-out allows schools to bill Medicaid for educationally-related health services identified in a student’s Individualized Education Program or Individualized Family Service Plan). Removing the free care rule barrier would mean more money for school health services, money that could then be used to hire additional school nurses, mental health providers, and other health personnel. HSC is asking the CMS to clarify that the free care rule does not apply to schools for the purpose of billing Medicaid.

The collaborative work between the San Francisco Unified School District and DHCS in order to bring about the latest development regarding access to federal reimbursement for regular education Medicaid services is exciting progress. Although this development is specific to San Francisco Unified School District, schools in California are anxiously awaiting a statewide roll-out of this decision and the ability to begin billing for similar services.

It is imperative to remember that the ability for schools to be reimbursed for certain health assessments performed by school nurses would alleviate some of the financial pressure for districts and school health professionals. Oftentimes, when a school is caught within a budget, nurses and health services find themselves on the chopping block. Beyond the Local Education Agency (LEA) billing, the recent Superior Court ruling in California supports the value and validates the amount of work school nurses do on a daily basis. “While acknowledging the value of work done by school nurses is important,” O’Reilly says, “offering financial support for these services and the personnel that provide them is as important if not more-so”.  School nurses keep students healthy and often are the ones keeping kids in school. Sometimes, care from a school nurse is the only health care or concern for well-being these students receive. “I don’t know if you can put a dollar amount on that,” O’Reilly said. “Nurses don’t get reimbursed for the value of the emotional support they provide.”

Several California LEAs are scheduled to discuss this issue with the state during the bi-monthly Ad-Hoc Workgroup meeting in June. They plan to discuss the new ruling and potential implementation and related procedures for schools. “If statewide implementation doesn’t happen, I imagine schools will be interested in finding out why and look for direction on how they should move forward.”

We applaud the work of San Francisco Unified School District and DHCS — when we released our Health In Mind report in January, one of our core recommendations for securing funding for school nurses was the clarification of the free care rule.

We encourage school nurses, educators, parents and community members to read the report and stay tuned for future calls to action. Together, moving forward, we can take even more steps for healthier schools and students through the amazing work of school nurses.