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The Tangled Web of Medicaid

and Mental Health Services    



 Sasha Pudelski

Public schools increasingly rely on Medicaid reimbursement to provide mental health services to eligible students.

More than 70 percent of school-age children who receive treatment for a mental disorder do so through the schools they attend, with Medicaid reimbursement covering the costs of treatment for a wide range of services for students with emotional, behavioral and mental health needs.

Medicaid reimbursement for mental health services in school districts is state-specific, and not all states allow Medicaid reimbursement for mental health services. But the number of participating states is increasing. A 2011 survey by the National Alliance for Medicaid in Education found that all but one of the 23 states responding authorized local school districts to receive reimbursement for mental health services for Medicaid-eligible students.

Complicated Billing
However, the use of Medicaid for funding such services through schools can be a challenging process for several reasons, says Rick Jacobs, a Chicago-based consultant who works with states and school districts on Medicaid reimbursement.

First, Jacobs says, districts must identify mental health professionals who are appropriately credentialed both to provide services in their schools and to bill Medicaid for the services they offer. Some mental health professionals able to work with students may not satisfy the credentials required to bill under their state’s Medicaid regulations, while others may not be credentialed to work in a school setting. Only 33 states currently allow for some type of reimbursement for selected services to Medicaid-eligible students that are provided by appropriately credentialed school psychologists.

Second, Jacobs points to the complicated documentation required to bill Medicaid when school districts seek Medicaid reimbursement for mental health services. The documentation, in combination with the confidentiality of student records and the notes mental health providers generate, can create conflicts between two separate federal statutes, HIPAA and FERPA, and confusion over what information must be disclosed to claim Medicaid reimbursement.

Lastly, he says, federal and state Medicaid policies and coverage rules change frequently, which makes it difficult for mental health providers and school districts to keep up with the different requirements.

AASA’s Push
Unfortunately, school districts cannot receive Medicaid reimbursement for all of their low-income students who need or would benefit from mental health services in their schools. For such services to be reimbursed by Medicaid, they must be both medically necessary and specified in a child’s individualized education plan or individualized family service plan as a related service.

In contrast, a community health clinic that treats the same low-income student could receive Medicaid reimbursement for providing similar services based on medical necessity alone. This stumbling block contributes to children “falling through the cracks,” Jacobs says, and not receiving the same services in schools that are available in the community.

Despite the complexities involved, some districts rely on Medicaid reimbursement as a major funding source for school-based health and mental health services.

For decades, AASA has worked to improve and protect the ability of schools to receive Medicaid reimbursement, most recently pressuring the U.S. Department of Education to improve parental consent regulations required to bill Medicaid. Because Medicaid is the largest and most comprehensive source of health care for low-income children, who are at greatest risk of developing social and emotional problems, schools cannot miss an opportunity to use the program to support and expand services for this population. AASA will continue to work with our federal partners, as well as the National Alliance for Medicaid in Education, to improve Medicaid reimbursement processes for schools.

Sasha Pudelski is government affairs manager at AASA. E-mail: spudelski@aasa.org


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