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Medicaid and the “Free Care” Policy: Relief for Schools, Benefit for Kids

posted on Tue, Mar 15 2016 11:23 am by Sarah Somers

Kids spend most of their waking hours in school. This means that schools are great places to provide certain health care services, especially screenings and immunizations. Most children from low-income families are eligible for Medicaid coverage. Luckily, schools and districts can be qualified as Medicaid providers and be reimbursed for providing certain health care services. For years, a federal policy prevented Medicaid reimbursement for many services provided in schools, making it a lot harder for schools with limited financial resources to make necessary health care available for kids. But in 2014, the federal Centers for Medicare and Medicaid Services (CMS) reversed the policy blocking reimbursement, which means that schools should be able to provide many more necessary check-ups and treatments to kids who need them.

To help understand what this means, here’s some background on Medicaid for kids. All Medicaid beneficiaries under age 21 are entitled to Early and Periodic, Screening, Diagnostic and Treatment (EPSDT) services. EPSDT includes medical, vision, hearing and dental screening and treatment services. These screenings have to be provided at scheduled times (i.e., once a year for children ages 6-9) or when a health problem is suspected. EPSDT also includes a broad variety of treatments necessary to cover any illness or condition discovered by the screening services.

Medicaid is a good financial deal for states – they get at least 50 percent federal matching funds for all services provided. And, the matching rate is higher for states with a lower per-capita income. To get these federal funds, states need to follow all the federal Medicaid rules, including rules about who can provide Medicaid services. Schools can be licensed as Medicaid providers and receive Medicaid reimbursement for services provided to students. For example, Medicaid can cover vision and hearing screenings or special education-related services for kids with disabilities.

But, for many years, a federal policy prohibited Medicaid reimbursement for services that were available free of charge for everyone in the community. For example, if the school provided free vision screening to all students, it couldn’t bill Medicaid for vision screening it provided to Medicaid-enrolled children. This was sometimes known as the “free care” policy. Without fanfare, CMS announced the reversal of this policy in a December 2014 letter to state Medicaid directors. Now, Medicaid can cover services in schools unimpeded by the free care policy, as long as certain conditions are met:

  • The child is enrolled in Medicaid,
  • The service is covered under Medicaid,
  • The provider meets all federal and state provider qualifications,
  • Reimbursement rates are calculated according to Medicaid requirements,
  • Claims are properly documented and the state conducts proper oversight,
  • Other legally responsible entities are billed for services (like private insurers),
  • Medicaid payments don’t duplicate other payments, and
  • Other Medicaid requirements are met.


This policy clarification is consistent with recent policy guidance on EPSDT and it highlights the important role that school-based health services can play in child and adolescent health care. It also is consistent with the federal agency’s increasing emphasis on prevention and population health. Indeed, CMS says that it issued this policy clarification to “facilitate and improve access to quality healthcare services and improve the health of communities.” School districts, state and local officials, and child health advocates have already begun work to ensure that this goal is fulfilled.

This post was prepared by Sarah Somers, J.D., M.P.H., Attorney at the Network for Public Health Law – Southeastern Region and the National Health Law Program.

The Network for Public Health Law provides information and technical assistance on issues related to public health. The legal information and assistance provided in this post does not constitute legal advice or legal representation. For legal advice, readers should consult a lawyer in their state.

Support for the Network is provided by the Robert Wood Johnson Foundation (RWJF). The views expressed in this post do not necessarily represent the views of, and should not be attributed to, RWJF.

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