DEPARTMENT OF HEALTH  & HUMAN SERVICES  
Centers for Medicare & Medicaid Services  
7500 Security Boulevard, Mail Stop S2-26-12  
CENTERS FOR MEDICARE & MEDICAID SERVICES 
Baltimore, Maryland   21244-1850   CENTER FOR MEDICAID & CHIP SERVICES 
 
CMCS  Informational Bulletin  
 
 
DATE:   August 18, 2022   
 
FROM:   Daniel Tsai, Deputy  Administrator and D  irector   
  Center for Medicaid and CHIP Services 
             
  
SUBJECT:  Information on School-Based Services in Medicaid: Funding, Documentation and 
 
Expanding Services. 
         
       
School-based services (SBS), which are Medicaid-coverable services provided to children and 
           
adolescents in a school setting, play an important role in the health and well-being of children 
         
and adolescents, particularly for those enrolled in the Medicaid program.  The Early and Periodic 
             
Screening, Diagnostic and Treatment (EPSDT) is a Medicaid benefit that mandates coverage of 
     
services described in section 1905(r) of the Social Security Act (the Act), which include a range 
        
of services including medical, dental, personal care, and long-term services and supports, 
 
regardless of whether the particular services are covered under the state plan. 1 
 
             
Although schools are primarily providers of education, the school setting provides a unique 
           
opportunity to enroll eligible children and adolescents in Medicaid and the Childrens Health 
           
Insurance Program (CHIP), furnish Medicaid-covered services, including behavioral health 
              
services (mental health and substance use disorder (SUD) services) to eligible children, and help 
       
children who are enrolled in Medicaid access the services they need.  Schools are uniquely 
       
positioned to increase health equity and to help ensure that all children have access to necessary 
               
health care services.  This includes services provided through a formal Individualized Education 
       
Program (IEP) and Individualized Family Service Plan (IFSP) under the Individuals with 
Disabilities Education Act (IDEA), or other plan and services provided outside of those plans 
                                                             
1Section 1905(r)(5) of the Act  -  Such other  necessary health care, diagnostic services, treatment, and other  measures  
described in section 1905(a) to correct or ameliorate defects and physical and mental illnesses and conditions 
   
discovered by the screening services, whether or  not such services are covered under  the State plan.  
Nothing in this title shall be construed as limiting providers of early and periodic screening, diagnostic, and 
       
treatment services to providers who are qualified  to provide all of the items and services described in the previous  
sentence or  as preventing a  provider that is qualified under the plan to furnish one or more (but  not all) of such items  
or services from  being qualified to provide such  items  and services as part of early and  periodic screening,  
diagnostic, and  treatment services. The Secretary shall,  not later than July 1, 1990, and every 12 months  thereafter,  
develop and set  annual participation goals for each State for  participation of individuals who  are covered under  the 
State plan under this  title in early and periodic screening, diagnostic, and  treatment services.  
 
 
   
  CMCS Informational Bulletin    Page 2  
 
where the services are made available without charge to  the beneficiary,  including when the  
services are available without charge to  other students not enrolled  in Medicaid.2    
 
CMS  and the US Department  of Education  (ED)  are  supportive of school-based  health programs  
and,  where possible, we encourage states to  ease administrative burden  placed on  school-based  
health  providers  to promote  their participation  in the Medicaid program and thereby  increase 
access to Medicaid-covered services  for Medicaid-enrolled students, while also  maintaining  
fiscal and programmatic  integrity  of the  Medicaid  program.   We are  issuing this  informational  
bulletin to  remind states  of the applicable federal regulations and policies related  to Medicaid-
covered  SBS3, and  to help  states and school-based providers  implement, maintain  and expand  
their school-based programs  in the  most efficient manner possible.   Specifically, this  bulletin 
directs  states to  relevant existing guidance  and strategies to consider,  in the form of a checklist,  
which is intended  to assist  states in developing proposals that are consistent with federal  
requirements and policies.   The  checklist  highlights existing state flexibilities and  best practices  
for  maximizing Medicaid  coverage for  services  furnished to beneficiaries  in  schools.   
 
This guidance  is one  of several steps CMS  is taking  to support access to Medicaid SBS.   Section  
11003 of the Bipartisan Safer Communities Act (P.L. 117-159) builds upon the efforts CMS has  
underway, and specifies several actions  for  the Department  of Health and Human Services  
(HHS)  to take in support  of this goal.   In the coming months,  CMS  intends to  issue  additional 
guidance and resources  for states,  including the release of an updated SBS guide  that will 
provide  more detailed information regarding payment for  Medicaid-covered  services  furnished  in 
schools.   This updated SBS guide will encompass  an update to  the existing Medicaid School-
Based  Administrative Claiming Guide and Medicaid and Schools Technical  Assistance Guide  in 
accordance with Section 11003 of the Bipartisan Safer Communities Act.  While this CIB  
addresses school-based  health services under Medicaid,  including M-CHIP, the  upcoming guide  
will also address CHIP  issues related  to school-based services.   Additionally,  the Bipartisan 
Safer Communities  Act requires  CMS,  in collaboration with the  US  Department of  Education,  to 
establish a technical assistance center  to support State Medicaid agencies,  local educational  
agencies and school-based entities seeking to expand their capacity  for providing Medicaid SBS,  
by reducing administrative burden, supporting such entities  in obtaining payment for providing 
Medicaid SBS, and providing guidance with regard  to  utilization of  various  funding sources.    
 
Background  
Since the inception of the Individuals with Disabilities Education Act (IDEA) in 1975,  SBS have  
become an important and growing  resource for Medicaid-enrolled IDEA eligible children and  
their  families  in the provision of  medically  necessary services.  The 1988 amendment  to IDEA,  
included  in the Medicare Catastrophic Coverage Act, clarified that Medicaid  funds could be used  
to pay  for Medicaid-coverable services that are part  of the eligible childs IEP. IEP services are 
delivered without cost  to the childs  family. It is  important  to note  that IEP/IFSP services, such  
as speech therapy, are designed to assist a childs success  in school or  to advance their  
development.  A child with an IEP may also need  Medicaid-covered services, such as speech  
                                                             
2  www.medicaid.gov/federal-policy-guidance/downloads/smd-medicaid-payment-for-services-provided-without-
charge-free-care.pdf   
3  Unless stated  otherwise, all references to Medicaid beneficiaries also include  beneficiaries  enrolled in 
 
Medicaid-expansion CHIPs. 
   
  CMCS Informational Bulletin    Page 3  
 
therapy,  for medical reasons.  Thus, State Medicaid agencies are encouraged  to work  with  
schools and  families to ensure that both the special  education and  medical  needs of the child are 
addressed.   
 
SBS  have become an  important and growing resource for Medicaid-enrolled children  to  get the  
health care they  need.  CMS  is  committed to  increasing  access to health care services  and quality  
education  in ways  that can narrow disparities  in rates of care, promote achievement, and build a 
reliable system of support for every  young person.   This recognizes research that consistently  
demonstrates a positive link between scholastic attainment and  improved health outcomes  while  
also acknowledging that  the educational environment is an  optimal  place to promote wellbeing.   
We encourage state Medicaid agencies  looking  to advance SBS  to partner with  State Education  
Agencies (SEAs),  Education  Services Agencies  (ESAs),  Local Education  Agencies  (LEAs)  
including charter schools that are LEAs,  public  boards of education or  other public authorities  
within a state that maintain administrative control  of public elementary or secondary schools  in a 
city, county, township, school district,  or  other political subdivision of  the  state.    
 
Medicaid  covers many services provided through schools  to students enrolled  in Medicaid.   This  
includes services provided by  school-based  health centers, which can significantly  improve key  
health and  educational outcomes among students.   State Medicaid agencies, SEAs,  ESAs  and  
LEAs  can  work together to explore opportunities  to obtain  payment  for  Medicaid-covered  
services  for Medicaid-enrolled students.   Many services such as  immunizations, health  
screenings, oral health care, substance use disorder  treatment, and  behavioral  health care can  be 
covered by  Medicaid  in schools  and may be  eligible  for  Medicaid  coverage and  payment.  As  
discussed  in  further detail  in the managed cared section of this CIB, states are encouraged  to  
ensure proper coordination of services  and care.   
 
Federal  law  allows states  to set payment rates for  Medicaid-covered  services  in a manner that is  
consistent with section 1902(a)(30)(A) of the Act  and its implementing  regulations  in 42 C.F.R.  
447.  Below, we provide  a basic overview of the parameters for  Medicaid  coverage  and 
payment  of  services  furnished  in schools: 
  There is  no benefit category  in Medicaid called  school-based services.  SBS  are
o
Medicaid-covered  services that are provided  in  school settings  by qualified Medicaid
providers enrolled  in the Medicaid  program. 
  To receive payment for providing Medicaid covered services, SBS providers  must be 
o
enrolled  in the Medicaid program and  must  meet specific federal and state requirements 
regarding provider qualifications  for participation  in the Medicaid program. 
  To be eligible  for payment by  Medicaid, services must be  included among those  listed in
o
Title  XIX  of the Act, such as those described  in  section 1905(a)  of the Act, and coverable 
under the State plan (or waiver of such plan). 
  Like services  furnished elsewhere,  Medicaid-covered  services provided in schools  must 
o
meet applicable statutory and regulatory requirements. 
  Generally, the Medicaid statute requires Medicaid  to be the payer of  last resort.  
o
  Section 1903(c)  of the Act  provides that  Medicaid may  cover  services  in an IEP or IFSP
o
under the IDEA.  IDEA requires special education  be delivered at no cost  to  the childs 
family. Families  must not be subject  to copays or  other fees.   
 
   
  CMCS Informational Bulletin    Page 4  
 
School-Based Health Services Checklist  
The following  checklist  includes  strategies and  guidance  state  Medicaid  agencies  can  follow to  
implement  or enhance SBS.  
 
1.  Medicaid Free Care Policy4  
 
In State Medicaid Director Letter (SMDL) #14-006,  CMS  announced a new policy regarding  the  
availability of  Medicaid payment for services covered under a states Medicaid plan to an  
eligible Medicaid  beneficiary when the services are made available without charge to  the 
beneficiary (including when the services are available without charge to members of the 
community at  large).  Such services sometimes are referred to as free care.  Before 2014,  
Medicaid payment generally  was  not allowable for services that were available without charge to  
the beneficiary, with  limited exceptions.  However, SMDL #14-006 withdrew the previous free  
care policy  and announced that Medicaid payment would be  available  for Medicaid-covered  
services  furnished to Medicaid beneficiaries, regardless of whether there is any charge for  the 
service to  the beneficiary (or  to a member of the community at large).   This policy  is  not limited  
to  services identified in an  IEP; however, generally  applicable Medicaid coverage and payment  
requirements  must be  met, including that services must be  furnished by a qualified, Medicaid-
participating provider.  
  
For example,  a qualified and Medicaid-enrolled  audiologist that  comes  into  the school and  
provides  hearing assessments  for  the entire student body can  now bill Medicaid  for those 
services whether or not  other  third-party payers are also billed  for the hearing assessment.   
Likewise,  if a school nurse administers fluoride treatment  to  the entire student body, so long as  
that nurse or  the school  is enrolled as a Medicaid provider,  the fluoride treatment could  be 
eligible for Medicaid payment.    Some states have not  taken the opportunity to incorporate these 
types of activities  in their payment methodology specific to school-based services  in their  
Medicaid  program, as discussed  in  section eight of  this  informational  bulletin.  Providers  in the  
community that provide Medicaid services,  and  bill under their own licensure,  can bill for  
services directly according to  the state plan specified Medicaid  fee schedule.  However, most  
often, an employee or contractor  of the school  is acting as the provider with the school  
submitting a bill to Medicaid, and states have payment methodologies  specific to  the school  
setting and those states may need to consider submitting a plan amendment  to include the non-
IEP/IFSP services  in the payment methodology.    
 
Since the issuance of SMDL #14-006, approximately sixteen states5  have received approval of  
State Plan  Amendments (SPAs)  to  allow Medicaid payment for covered services  furnished in a  
school setting  by  a Medicaid participating provider.  CMS encourages states  to  promote the use 
of  schools as a setting  in which  to provide Medicaid-enrolled children  and adolescents  with  
medically  necessary  Medicaid-covered services,  where  appropriate to  the students needs and the 
                                                             
4  See  State Medicaid Director Letter #14-006, Medicaid Payment for Services Provided without Charge (Free 
Care) (Dec. 15, 2014),  https://www.medicaid.gov/federal-policy-guidance/downloads/smd-medicaid-payment-
for-services-provided-without-charge-free-care.p  df 
5  California, Nevada, Arizona, Colorado, Minnesota, Missouri, Louisiana , Michigan, Kentucky, Florid a, Georgi a, 
South Carolina, North Carolina, Connecticut,  Massachusetts, and  New Hampshire  
   
  CMCS Informational Bulletin    Page 5  
 
capabilities of the setting and practitioners, thereby promoting access to needed care and  
promoting health equity.   
   
CMS reminds  states and stakeholders of the following:  
   
  Medicaid payment  is available for covered services that are provided to Medicaid  enrolled 
o
beneficiaries, regardless of whether there  would otherwise  be  any  charge for  the service to 
the beneficiary (or  to a member of the community  at large).   
  Medicaid payment can  be made (and  federal  financial participation  is available)  for 
o
Medicaid-covered  services,  including those  identified  in students  IEPs, IFSPs,  and 
individual  service plans  per section 504 of the Rehabilitation Act of 1973, commonly  called a 
Section  504 plan.  
  Covered services may include, but are not limited to,  EPSDT services  like screenings, 
o
vaccinations, check-ups,  and  other  EPSDT  services.  See number  3. Providing EPSDT 
Services below  for more information.6  
  Services  not in a childs IEP can also be covered  including  behavioral  health services and 
o
nursing services, such as  nutrition services,  medication  monitoring, and counseling. 
  Services provided to Medicaid-enrolled students must  satisfy applicable  medical  necessity
o
criteria, be  coverable under  a Medicaid coverage  authority  (e.g.,  the Medicaid state plan or a
section 1115 demonstration project),  and  be  furnished by a qualified,  Medicaid-participating 
provider.  
  Covered  services  may  be delivered to all Medicaid-enrolled children in school settings,  not 
o
just those with a special education plan documented  in an IEP, IFSP, or  Section  504 plan.   
 
2.  Ensuring Every Medicaid-Eligible Child is Enrolled and  Has Access to  Services 
 
CMS encourages  all states  to ensure  that  every eligible  child  is enrolled  in  Medicaid  coverage 
and able to  receive  covered  SBS.  Research strongly  suggests  that when  young people have 
health coverage  and receive necessary and preventive health care,  their academic and other  
important life outcomes  improve.  One study,  for example,  found that  compared with children  
who were uninsured,  children who  were enrolled  in Medicaid  were  more  likely to do better  in 
school, miss  fewer school days due to illness or injury, finish  high school, graduate from college,  
and earn  more as adults.7   One study  found  that,  although access to health coverage  for uninsured 
individuals  has increased  as a result  of  the  Patient Protection and  Affordable Care Act  
(Affordable Care Act),  the number of children who  are eligible  for,  but not enrolled  in  Medicaid  
remains high.  In 2019, 2.3 million children were eligible  for,  but  not enrolled  in  Medicaid  or  
CHIP.8   Schools can be a valuable resource for states  to  help  ensure  that Medicaid-eligible  
children and  families are enrolled and connected  to Medicaid-covered services:  
 
                                                             
6  https://www.hhs.gov/guidance/document/epsdt-guide-states-coverage-medicaid-benefit-children-and-
adolescents. 
  
7  Cohodes, S. et  al. (2014). The  Effect of Child Health Insurance  Access on Schooling:  Evidence from Public 
Insurance Expansions. (No. w20178). National Bureau of Economic Research  
8  Haley, J. et al. (2021). Uninsurance Rose amon g Children and Parents in 2019. Urban Instit ute. 
https://www.urban.org/sites/default/files/publication/104547/uninsurance-rose-among-children-and-parents-
in-2019.p df 
 
   
  CMCS Informational Bulletin    Page 6  
 
  LEAs can use school registration processes to help eligible students and  family  members 
o
enroll  in  Medicaid or CHIP,  or  if  ineligible, to  apply for  financial assistance  for a plan 
through  the Health Insurance Marketplace.   States should  look to outreach and  enrollment 
resources such as the Connecting Kids to Coverage National  Campaign to assist in 
accomplishing enrollment and coverage goals.  9  Expenditures  for administrative activities  in 
support  of these school-based services,  including outreach, may  be claimed as costs of 
administering the  Medicaid  state  plan.   States can receive  federal  financial participation 
(FFP)  at the applicable  administrative match rate for  outreach and enrollment activities. 
  While Medicaid-enrolled students  do not  need an IEP  to  receive coverage  for  SBS, states 
o
should establish a process to determine coverage for particular  services, including, for 
example, whether applicable medical  necessity criteria are met. Any medical necessity 
criteria  or  other  utilization management controls that  a state implements  must be consistent
with 42 CFR  440.230, and  should not establish unreasonable or arbitrary  barriers to 
accessing the required coverage.  
  Medicaid  is  focused on whole child care, and we encourage integrating and coordinating
o
any care provided  in school  with care provided  across other  settings and within the  family 
unit.   A care  plan developed in the school  should  consider how  care provided  in a school-
based setting,  including,  for example,  behavioral  or other  care interventions,  may be 
supported outside of school and within the  family  setting.  School-based providers should
coordinate  with primary care and other community-based providers as well as members of 
the household who may be able to  reinforce and provide continuity of care.  For more 
information on creating a coordinated system of care, please see guidance from the Substance
Abuse and Mental Health Services  Administration  (SAMHSA), The Comprehensive 
Community  Mental Health Services  for Children with Serious Emotional Disturbances 
Program.10  
  Screening  and diagnostic services provided  in  schools  may  indicate the need  for further 
o
evaluation of a childs health, and the child should  be appropriately referred  for diagnosis 
and treatment without delay. Ultimately, the goal of the  EPSDT benefit  is to assure  that 
children get  the health care they need, when they  need  it    the right care to  the right child,  at 
the  right time,  in the right setting. 
 
3.    Providing EPSDT Services  
 
The Medicaid program  provides most  enrolled children and adolescents  with a unique  benefit  
known as the EPSDT benefit.  EPSDT provides a comprehensive array of prevention, diagnostic,  
                                                             
9  The  Connecting Kids to Coverage National Campaign  is  a national outreach  and enrollment initiative originally  
funded under the  Children's Health Insurance Program Reauthorization Act (CHIPRA), the Affordable Care Act  
(ACA),  and the Medicare Access and CHIP Reauthorization  Act of 2015 (MACRA).  This program  motivates  
families  to enroll and  renew their  children  in  Medicaid and CHIP  and provides outreach guides  and  toolkits that can  
help states conduct successful outreach  activities.   More  information about  this program here:  
https://www.insurekidsnow.gov/campaign-information/index.html  and https://www.medicaid.gov/state-resource-
center/downloads/kids-coverg-outreach-enrolmnt-retention-strategies.pdf         
10  The  Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances  
Program, Report to Congress 2017, was written by staff  at  Westat pursuant  to a contract (contract  number 283- 12-
1105)  under the direction of the Child, Adolescent and Family  Branch, Center for Mental Health Services,  
Substance Abuse and Mental Health Services Administration, U.S. Department of  Health  and Human  Services.  
https://store.samhsa.gov/sites/default/files/d7/priv/cmhi-2017rtc.pdf    
   
  CMCS Informational Bulletin    Page 7  
 
and treatment services  for  most  low-income  individuals under age 21.   As specified in sections 
1902(a)(10)(A) and 1905(a)(4)(B)  of the Act, EPSDT is a  mandatory benefit,  which is  defined in  
section 1905(r)  of the Act.  Section 1902(a)(43)  of the Act requires that states must inform all  
EPSDT-eligible beneficiaries of the availability of  these services, as well as provide or arrange 
for the provision of EPSDT  screening services when requested, and arrange for corrective 
treatment as indicated based on the screening services.  States are encouraged  to leverage schools  
as providers of services  in  meeting EPSDT coverage obligations.  
  Section 1905(r)  of the Act  defines the EPSDT benefit to include certain  minimum screening, 
o
vision, dental, and hearing services, as well as [s]uch other necessary  health care, diagnostic
services, treatment, and  other  measures described  in section 1905(a)  of the Act  to correct or 
ameliorate defects and physical and  mental  illnesses and conditions discovered  by  screening 
services,  whether or not such services are covered  under  the  State plan.   
  Most beneficiaries  under age 21 are entitled to EPSDT services, regardless of  whether they 
o
are enrolled  in a managed care plan or receive services  in a fee-for-service (FFS) delivery 
system.   
  Determinations  of medical necessity  are made by the state or, under delegated authority, by 
o
the  managed care  plan and  must be made on a case-by-case basis,  considering  the individual 
child's  or adolescents  particular  needs and guided by  information  from the childs  health 
providers.  
  Hard, fixed, or arbitrary  limits on coverage for services (e.g., based on dollar amounts, 
o
standard deviations  from the norm, or lists of specific diagnoses) are not permitted; however, 
states may  set reasonable limits  based on criteria such as  medical  necessity or appropriate
utilization control,  see 42 C.F.R.  440.230(d). 
  Medicaid-covered  services  furnished  in  schools  must fit under an applicable state plan 
o
benefit category or waiver  or demonstration  authority,  and  must be furnished by a Medicaid-
participating provider who meets  the provider qualification requirements  associated  with the 
particular  benefit. 
  If a state pays  for services of a particular provider type,  that Medicaid provider type  should 
o
meet  certification, registration, credentialing, education, training, and other state-specific
requirements  consistent with the rules of the  benefit category.  
  Providers of therapy services (physical therapy, occupational therapy, speech therapy, 
o
audiology) must meet  federal  provider  requirements in  42 C.F.R.  440.110,  regardless of the
section 1905(a)  benefit category under which these services are covered.  
  States should work with  SEAs  and LEAs to determine specific federal  and state requirements 
o
regarding provider qualifications  specific to  participation  in the Medicaid program, 
procedures for  enrollment  with  the  state Medicaid agency, and the scope of practice laws  for 
provider types  furnishing SBS. 
  CMS shares with states  the same goal of ensuring that Medicaid services provided  in the
o
schools are of high quality, and states should establish qualifications of school providers 
consistent with those of providers  in the community.  
  Medicaid-participating practitioners in school-based settings  are also subject  to  the screening 
o
requirements in section 1866(j)(2) of the Act and 42 C.F.R.   455.400    455.470.   See 
section 1902(a)(77) and (kk)  of the Act.  
   
  CMCS Informational Bulletin    Page 8  
 
  Claims  for payment for Medicaid-covered  items or services that were ordered  or referred  for 
o
a beneficiary  must  include the National Provider Identifier (NPI)  of the physician or  other 
professional who  ordered  or  referred such  items or services. 
 
4.  Medicaid  SBS  through Managed Care11 
 
About 76 percent  of Medicaid  beneficiaries (over 61.7 million) are enrolled  in  managed care.12  
CMS encourages  states that use managed care delivery  systems  for Medicaid-covered services  to  
work with  managed care plans  (MCPs) including managed care organizations (MCOs), prepaid 
inpatient health plans (PIHPs),  and prepaid ambulatory health plans (PAHPs), as well as  schools,  
to aid in the provision of  and payment for  SBS.  
 
  States may  elect  to deliver some services through  the MCPs and retain some services under 
o
fee-for-service delivery.  
  An MCP contract must clearly describe which services are included, with enough  specificity 
o
to avoid confusion about what  the benefit  includes  and whether the MCP  is responsible  for 
covering  it to ensure that eligible individuals under age 21 have access to  the full EPSDT 
benefit.   
  Any EPSDT services not covered under the MCP  contract remain the responsibility of the
o
state Medicaid agency, and states must ensure that  EPSDT-eligible  individuals under age 21 
have full access to  the EPSDT benefit.   
  When designing and implementing a  managed care delivery system, states should include 
o
schools as  integral partners to promote the effective and efficient delivery of services  in 
school-based settings. Where managed care is already established,  states should  include 
schools during MCP  re-procurement and contracting processes to  provide  states with 
opportunities to shape new, or revisit existing, MCP requirements. 
    States should  consider requiring  MCPs  to establish relationships, strengthen partnerships,  and 
o
coordinate care with school-based providers,  including school-based  health centers,  in
managed care contracts  and/or  through  managed care performance standards. These 
expectations can be established  in a variety of ways, including through performance
improvement projects, MCP incentive programs, and quality  improvement initiatives, as
appropriate. 
  To improve care  coordination  activities  between MCPs and  ensure  access to covered 
o
services, states should consider: 
  Developing  formal arrangements,  such as  including school-based clinics  in  MCP 
provider network  requirements: 
  States may  establish specific network adequacy requirements, such as requiring 
that  MCPs contract with all,  or a specified percentage of,  qualified school-based 
providers. 
                                                             
11  www.medicaid.gov/federal-policy-guidance/downloads/cib010517.pdf  This figure  includes comprehensive MCOs 
and limited  benefit plans (PIHPs and PAHPs) and excludes PCCMs. Medicaid  Managed  Care Enrollment and  
Program Characteristics, 2020.  
12  This figure includes comprehensive MCOs and  limited benefit  plans  (PIHPs and PAHPs) and excludes PCCMs.  
Medicaid Managed Care Enrollment and Program  Characteristics, 2020.  
https://www.medicaid.gov/medicaid/managed-care/downloads/2020-medicaid-managed-care-enrollment-report.pdf   
   
  CMCS Informational Bulletin    Page 9  
 
  In areas where there are several MCPs operating, LEAs  might need to contract 
with several different plans to ensure Medicaid payment is available for services 
furnished to  all students  who are Medicaid  beneficiaries. 
  Establishing  referral  and treatment  protocols  between schools  and the MCPs other 
contracted providers  for  instances  in which care needs exceed the capabilities of 
providers  in the  school-based setting. 
  Promoting  school participation  in MCP  quality assurance and utilization review 
programs.  SBS  can help MCPs achieve Federal and state-specific quality  metrics  for their
Medicaid populations, including many  child-specific measures  (e.g., child vaccination 
rates and well-child visits). 
  Facilitating the development  of coordination of care programs between schools and 
MCPs  in which,  for example, schools provide MCPs  with written  medical  reports  when
care is provided  in the school-based setting,  and  when care  is needed beyond the school-
based setting and a referral  has been provided.   MCPs  can notify  school-based providers
of completed referrals  (i.e., a child  has received services  for which  the school has referred 
them).  
  Facilitating coordination between  MCPs and  cooperating  on back-to-school health 
coverage  enrollment events, health fairs,  and  vaccination efforts.  
 
5.  Providing  Medicaid  Services  in  Schools  via a Telehealth Delivery Systems 
 
CMS encourages states  to consider telehealth options as a delivery  mechanism to  increase  access  
to care  in schools.  States have broad flexibility to  cover and pay  for Medicaid services delivered  
via telehealth,  including to determine which telehealth  modalities  may  be used to deliver  
Medicaid-covered services.  
 
  States are encouraged  to facilitate appropriate care within the Medicaid program using 
o
telehealth technology to deliver services covered by the state.   
  CMS allows states the flexibility  to design and establish  program parameters defining when 
o
and  how services are covered when delivered via  telehealth and encourages the use of 
flexibility inherent  in federal Medicaid  law to create innovative payment  methodologies  for 
services that incorporate telehealth  technology. 
  States should review the range of providers and practitioners authorized to bill 
Medicaid  in their state, including those delivering  services  in school settings.   Not 
every provider, practitioner,  or direct support professional  can deliver every  service
via telehealth.   However, states are encouraged  to  maximize the use  of telehealth, 
including  in school-based settings, to address the service needs of students and 
mitigate gaps in service continuity. 
  States should establish which services can be delivered  appropriately  via one or more 
telehealth modalities.  
  States should consider whether a providers professional scope of practice precludes 
them billing  for a service delivered  via telehealth, and whether  any changes to  that 
scope of practice are warranted.    
  States are not  required to submit a  SPA  or an amendment to  a  waiver  or demonstration 
o
authority  to pay  for services delivered via telehealth  if payments for services  furnished via 
   
  CMCS Informational Bulletin    Page 10  
 
telehealth are made in the same manner as when the service is  furnished  in a face-to-face 
setting.   
  A state would need an approved state plan,  waiver, or  demonstration  payment methodology 
o
(and thus,  might need to submit a  SPA  or  an  amendment to  a waiver  or demonstration) to 
establish rates or payment methodologies  for telehealth services that differ  from those
applicable for the same services  furnished  in a face-to-face setting. 
  States are strongly encouraged to include costs associated with providing services  via
o
telehealth within  Medicaid payment  methodologies and ensure rates are adequate to facilitate
access to  telehealth services.  
  Supplementary costs associated with the site  where the beneficiary  is  located may  be
o
incorporated into fee-for-service rates  or separately reimbursed as an administrative cost by 
the state when a Medicaid service is delivered, as specified  in  an approved state plan, waiver,
or demonstration  payment  methodology that specifies the supplementary costs and 
circumstances when those costs are payable.   
  It is  important for states  to adopt clear and consistent  guidelines for  paying  for Medicaid-
o
covered services that are furnished  via  telehealth technologies  to Medicaid-eligible children 
and adolescents,  and  to ensure Medicaid-participating  providers  are aware of the guidelines.  
 
For more information about state flexibilities to cover and pay  for Medicaid services delivered 
via telehealth, see the Medicaid and CHIP Telehealth Toolkit.  
 
6.  Clear and Consistent  Documentation  Guidance to  LEAs  through Outreach  and
Education 
 
Federal regulations  require that providers  maintain documentation that covered Medicaid  
services  have been provided to beneficiaries.  However,  CMS  understands that most school-
based settings are not  traditional  health care providers with  a sophisticated billing infrastructure 
in place.   Recently, a number of  HHS Office of Inspector General (OIG)  audits  have  noted that  
schools have not been adequately documenting the services provided  in school settings.  In 
particular,  these findings have noted a lack of  clear and consistent  billing  requirements listed in  
state  provider billing manuals.     
 
Current  Documentation Requirements:  
 
  Minimum Claim Documentation Requirements13  in Medicaid  for each claim  for FFP  include:  
o
  Date of  Service 
  Name of Recipient 
  Medicaid Identification Number 
  Name of Provider Agency/Person Providing the Service 
  Nature, Extent  or Units of Service 
  Place of Service 
  Other Requirements: 
o
                                                             
13  Section 2500.2 of the State Medicaid Manual.  
 
   
  CMCS Informational Bulletin    Page 11  
 
  For services provided under IDEA, states must  maintain records of  a signed IEP/IFSP 
documenting  that the  school-based provider provided services pursuant to  the 
IEP/IFSP.14 
  For  transportation services provided under an IEP/IFSP, states must document that 
the transportation  was  to  and/or from  a medical appointment and required  in the
IEP/IFSP. 
  Examples of the  types of documentation and  materials that can be used  or combined as the
o
Minimum Claim Documentation  described above and  should  help  states in  meeting  the 
various documentation requirements needed to create a proper audit trail.  These
documentation materials  can include:  
  Attendance Records  15 
  Prior Authorizations 
  Medical Records 
  Clinical  notes  of the service performed16  
  Service Claims 
  Time Study Logs   
  Payroll Records and Contracts 
  Transportation Logs17 
  
  The state must ensure compliance with applicable federal audit and documentation 
o
requirements, including but not limited to,  regulations  described  at:  
  42 C.F.R.   431.107 Required provider agreement 
  45 C.F.R.   447.202 Audits 
  45 C.F.R.   75.302 Financial  management and standards  for financial  management 
systems 
 
Potential  Best Practices and Approaches  for Meeting Requirements for Documentation:  
 
To ensure clear and consistent billing and documentation standards and to help alleviate burden  
on school-based providers, states should:    
 
  Review and update their provider  billing manuals to make sure the billing and documentation 
o
requirements for providers are clear and concise, and  reasonably  can be  met by providers 
furnishing services  in school-based settings. 
  Conduct front-line training to school-based providers on Medicaid documentation standards 
o
and audit processes. 
  Ensure LEAs have adequate funding to support necessary Medicaid billing infrastructure and
o
training.   When such  investments and activities are undertaken as Medicaid administrative
activities, federal matching funds  can be available. 
                                                             
14  Section 1903(c) of the Social Security Act.  
15  Attendance records can generally be used to document the student was  present on the day a Medicaid service was  
rendered or the student was present on a day they were included in transportation logs as  receiving transportation to  
receive a  needed Medicaid service.   
16  Written IEP/IFSP  alone is  not an adequate  record of Medicaid services provided.  
17  Transportation logs can be used, in conjunction with  attendance logs,  to show that  a student was in school on  the 
day in which  the student was  transported off-site to medical care.   
   
  CMCS Informational Bulletin    Page 12  
 
  Consider  increasing Medicaid payment rates for services provided  in school-based settings to 
o
account for higher overhead costs associated with services provided  in  school  settings,
including staffing and training needs at  the LEA or school. 
  Track services provided in  school-based settings using MMIS systems.   These claims  are
o
important  to document  that covered services were actually delivered to an eligible
beneficiary  and can  be used to  trigger  interim payments to LEAs under a cost-based 
Medicaid payment  methodology.  
  Work directly with CMS and the  US Department of  Education  to align state and  federal 
o
documentation requirements, where feasible. 
School-based providers  must maintain  adequate documentation to allocate costs  to  the Medicaid  
program.  For instance, providers using a Medicaid Enrollment Ratio (MER)  to allocate costs  to  
Medicaid  for services  furnished pursuant  to an IEP  or  IFSP  must maintain  adequate 
documentation to support  the use of the MER.   The MER is an allocation statistic that is the 
result of all children at  one specific time in the school that has an IEP/IFSP divided  by  the total  
number of  Medicaid enrolled children  in the same school, at  the same specific time,  that  have an  
IEP/IFSP.   
 
MER  =    # of  Medicaid-enrolled children in the school with an IEP/IFSP   
                                                     Total  # of  children in the school  with  an IEP/IFSP  
 
Adequate documentation would include an LEA-specific record  of both  the number of children  
enrolled in  all  IEPs/IFSPs and those enrolled  in Medicaid with IEPs/IFSPs.    
 
7.  Evaluate Random Moment Time Study (RMTS)  Methodologies  
 
When using a cost-based methodology,  states are required to use statistically  valid  
methodologies to allocate costs  for SBS per 45 CFR 75.430(i)(5).   Allocation  methodologies  
may  include, but are not limited to, random  moment sampling (i.e., via RMTSs), worker day  
logs, case counts,  or  other quantifiable measures of  work performed.  A time study  is a cost  
allocation  methodology used to ascertain the portion  of time spent on activities that are related to  
various programs.   Federal regulations  permit the use of "substitute systems"  for allocating  
salaries and wages to  Federal awards  in place (or in addition to) work records as specified  in 45  
CFR 75.430(i)(1), when employees work  on  multiple activities or cost  objectives.  Any  such  
system must meet acceptable statistical  sample standards and be approved by CMS.    
 
Regulations  in  45 CFR 75.430 require that charges  to federal awards  must be based on records  
that reflect  the actual work performed.  Those records must:   
 
  Be supported by a system of  internal controls that  provide  reasonable assurance charges are
o
accurate, allowable, and properly  allocated,  
  Reflect the total activity  for which the employee is compensated,  
o
  Encompass both federally assisted and all other activities  for which the employee is 
o
compensated, and 
  Support  the distribution of the employee's salary or wages among specific activities or cost 
o
objectives.  
 
   
  CMCS Informational Bulletin    Page 13  
 
When a  RMTS  is used,  the only staff who can be exempted from  mandatory participation  in the 
RMTS  are those  whose  activities are entirely (100%) for  the direct benefit of the Medicaid  
program, or entirely (100%) for the benefit of some other program or payer.   The RMTS must  
reflect all of the time and activities (whether allowable or unallowable under Medicaid)  
performed by employees performing activities  in  support  of the Medicaid program.   The RMTS  
must carefully document all work performed  by the staff subject  to  the RMTS over a set period  
of time  and  include all days on which school  is  in session.   
 
Because  the time study  must capture 100%  of the time spent by staff participating in the RMTS,  
activity  codes  must be designed to  reflect all  administrative activities and direct services that  
may  be performed, regardless of whether activities are reimbursable under Medicaid.  The  time  
study  methodology  is used to capture the time spent  on administration, direct services, and all  
other activities.   To avoid duplication of costs claimed, the same RMTS should be used to  
allocate costs  of  both administrative activities and  direct services.    
 
When designing  an  RMTS, states and stakeholders should consider the following:  
 
  The HHS Office of Inspector General (OIG)  has  expressed concerns about  staff  participating 
o
in the RMTS given any advance notice of their assigned random  moment,  and  the potential 
bias that could be created  by providing advance notice. To avoid such concerns,  participants 
in the RMTS  should record  their responses at  the exact time of their assigned random 
moment (i.e.,  the participant should  not be notified  until the exact  time and date of his or her 
moment and should complete the random  moment activity documentation at  that exact 
time).18   CMS  also recommends  no prior notification to staff participating  in an RMTS but 
has approved RMTS methodologies that allow  staff  participating in the RMTS up to  2 
business days to respond with  information about  their activity at  their assigned random 
moment  to accommodate circumstances  in which a  participating  staff member may not  be 
able to respond immediately to  the RMTS request.  This policy  is  intended to help ensure the 
reliability of the RMTS results.  CMS believes that  the more time that has passed  from the 
sampled  moment,  the more  likely the participants recall of  his or her activity  performed 
during  the assigned  moment may  be compromised. 
  Oversight and  monitoring of the RMTS system are  the responsibility of  both the state and the 
o
individual claiming entity (e.g.,  the LEA) to ensure compliance with state and federal 
requirements.  Sufficient resources should be allocated  to ensure that  only those costs  that are 
properly allocable to  the Medicaid program are claimed  for Medicaid payment.   
  The state and/or claiming entity (e.g., LEA) should have a system of controls  in place to 
o
ensure the  compliance with applicable laws and regulations. 
 
8.  Work with LEAs to Determine Payment Methodology Options that Work Best  to
Promote School-Based Services.  
 
The vast majority of school-based providers are reimbursed under the  Medicaid  state plan  at their  
actual cost  to render  Medicaid  SBS.  This is because  many  localities and states finance SBS  
through the use of  Certified Public Expenditures (CPEs)  which  are  based on  local governments  
                                                             
18  HHS Office of Inspector General Audit  (A-02-17-01006),  issued November 8, 2019.   
https://oig.hhs.gov/oas/reports/region2/21701006.asp   
   
  CMCS Informational Bulletin    Page 14  
 
funds  to support  the actual cost  of  providing services.  When using CPEs,  public entities  must  
account for and  certify that they spent funds on Medicaid covered  items or services that are 
eligible for  federal matching funds.   In these cases, schools may submit  interim  bills to states  that 
are reconciled  to  the providers  incurred Medicaid SBS cost.  However, states have additional  
options to finance SBS.  As schools are often units  of state or local governments,  in addition to 
CPEs,  states have the option to finance Medicaid payments through  the use of permissible 
Intergovernmental Transfers (IGTs)  as well as CPEs and appropriations  from state general  funds.   
States are encouraged  to consider  financing SBS through  IGTs and/or  state general  fund  
appropriations  and to pay providers using a rate methodology  if a  certified  cost  process is too  
burdensome  for schools and LEAs to complete.   
 
Options to Financing the Non-federal Share of Medicaid Payments:  
 
Medicaid  is  jointly  financed  by the federal and state governments, with  most Medicaid service 
expenditures  matched at  the  state-specific, statutorily defined  federal  medical assistance 
percentage.  Section 1903 of the Act and  implementing regulations  in 42  C.F.R.  433.51 
describe  allowable sources of the non-federal share and specific mechanisms that may  be used  by  
units of state and local governments to participate  in  financing the non-federal share.  Such 
allowable sources  include:  
 
  State legislative appropriations    
o
  States can use general revenue fund appropriations  to pay school-based providers 
for services rendered.   Typically, with this  funding,  the state will pay a rate (e.g., 
under the states  fee schedule)  for school-based services.   However, the
appropriation from the state general revenue  fund  must be under the 
administrative control of the state Medicaid agency  and, once payment is  made to 
the provider, the provider generally  must retain 100 percent  of the payment. 
Retention of  less than 100%  could  trigger a net applicable credit  with return of 
associated FFP to CMS. See section 1903(d)(3)  of the Act for information 
regarding overpayments.  
 
  Intergovernmental Transfers (IGTs)   
o
  Units of state  or local government, including but not limited to public schools and 
LEAs, can participate in the financing of the non-federal share of Medicaid 
expenditures through IGTs, provided all  applicable requirements are met.   
  When IGTs are used to support payments to school-based providers, the public 
school or LEA  must make the IGT(s)  to  the state  Medicaid agency  before the
Medicaid agency pays the school-based providers  for services  furnished, as IGTs
are  transferred from other public agencies (including Indian tribes) to  the State  or 
local agency and under  its administrative control  in accordance with 42 C.F.R.  
433.51(b). If IGT funds are transferred  after  a Medicaid payment is paid to the 
provider,  then the provider  may  not be receiving or retaining the  full  Medicaid
payment rate for services under the state plan.  
   
  CMCS Informational Bulletin    Page 15  
 
  Once payment  is  made to  the school-based provider,  the school-based providers 
generally  must retain 100 percent of the payment.  Retention of  less than 100% 
could  trigger a net applicable credit  with return  of associated FFP to CMS. 
 
  Certified Public Expenditures (CPEs)    
o
  CPEs refer to a unit of state or local governments  expenditures  for the  provision 
of Medicaid-covered services to beneficiaries.  The unit of state  or local 
government  must certify the actual amount of  the expenditures  that were incurred 
providing allowable Medicaid services to  the state Medicaid agency.  Based on 
the state Medicaid agencys claim  for FFP, the federal government provides the
FFP associated with  the  certified expenditures to  the state Medicaid agency.   
  Units of state  or local government, including but not limited to public schools and
LEAs,  can participate in  financing the non-federal  share through CPEs, provided
all  applicable requirements are met. 
  Provider payments supported by CPEs  must be  made according to a reconciled
cost payment  methodology  in the approved state plan, which is explained in more 
detail below. 
  The  state Medicaid agency  is  not required to pass the federal share of the certified 
expenditures down to  the school-based provider,  and  CMS acknowledges that  the 
state may choose to direct some or all of this FFP to  the school-based provider.  
However,  CMS strongly encourages states  to pass on  the federal  share of any 
costs  claimed  as expenditures  for which the non-federal share  is supported by a 
CPE certified by a public school or LEA to the school-based  providers, as
additional funding and investment will  help to support additional  efforts  to 
improve the delivery and administration of SBS.   Please note that federal  funds 
cannot be used  to match other federal  funds, except as authorized by  federal  law, 
see  42 C.F.R.  433.51(c).   
 
Options  for Paying  School-Based Service Providers    
 
Section 1902(a)(30)(A)  of the Act requires that states assure that payments are consistent with  
efficiency, economy, and quality of care and are sufficient to enlist enough providers so  that care 
and services are available under the plan at least to  the extent that such care and services are 
available to  the general population  in the geographic area.  As such, states have considerable 
flexibility in how the provider payment rates are set.  Generally, states options to pay SBS  
providers include:  
 
  State plan rates established  for services provided outside of school settings:  
o
  States may use the existing state plan payment rates  for  the same services 
provided  in settings other  than the school-based setting  when those services are
provided by practitioners  in schools, as these practitioner  rates are approved under 
the Medicaid state plan as economic and efficient  payments  for  Medicaid 
services.  
  State Medicaid agency  may  also opt  to develop unique payment rates for school-
based providers that more closely reflect  the costs  incurred by such providers. The 
   
  CMCS Informational Bulletin    Page 16  
 
state will  be asked to document  the rate calculations  for  these services  in the 
school settings and assure that  those rates are consistent with efficiency,  economy 
and quality of care.  
  Cost-based rates specific to schools:  
o
  States may use cost-based rates  that are not reconciled to  the actual cost  of 
providing services.   
  For instance, states can use prior year cost  reports  from LEAs to establish current 
or future cost-based rates.  
  States may  also consider the salaries of the individuals providing care and 
overhead associated with the services provided to  establish  a general cost per 
service amount for services provided  in school-based  settings. 
 
  Actual Cost of Providing Medicaid-Covered Services to Beneficiaries (required  for 
o
CPEs)  
  To determine the portion of the actual cost  of  furnishing SBS that can be certified 
to  the state Medicaid agency  for use as non-federal share, states generally require
school-based providers to use a uniform cost  report.   
  The amount that may permissibly  be certified by a public school or LEA as a CPE 
is the portion of the incurred cost  that is properly  identified and allocated to 
Medicaid via the school-based providers cost report.  
  The state must develop a cost identification and allocation  methodology that 
meets the requirements of 45 C.F.R.  Part 75 and  the school-based providers  cost 
report must appropriately  identify and allocate all  direct and  indirect costs 
associated with the provision of Medicaid-covered services provided  in school-
based settings.  
  Through the cost report,  the school-based provider must first identify 100 percent 
of all actual  direct  and  indirect costs  to be allocated  to  the Medicaid program cost 
objective(s) and to  other cost  objectives.  
  To ensure proper identification of  costs, most school-based providers use audited 
financial  statements as the first step  to develop their cost reports.  The audited 
financial  statements will  include an adjusted  trial  balance. This adjusted  trial 
balances  lists all the expenses  incurred and the applicable revenues received  by 
the school-based provider. These balances are then  transferred to the cost  report to 
be apportioned  and allocated until Medicaids portion of allowable cost is 
identified.  Cost  reports must clearly  include the  following: 
 
  Clear and understandable cost report instructions. 
  Direct Cost Identification  - 45 C.F.R.  75.413(a)  defines  direct costs as 
those costs  that can be identified specifically  with  a particular  final cost 
objective, such as a Federal award, or  other internally or externally  funded 
activity, or  that can be directly assigned to such activities relatively easily 
with a high degree of accuracy.  Costs incurred  for  the same purpose in 
like circumstances  must be treated consistently  as either direct or indirect 
(facilities & administration) costs. 
   
  CMCS Informational Bulletin    Page 17  
 
  Indirect Cost Identification    Indirect (facilities & administrative (F&A)) 
costs (45 C.F.R.  75.2;  see also   75.414) means those costs incurred for 
a common or joint purpose benefitting  more than one cost  objective, and 
not readily assignable to  the cost  objectives specifically  benefitted, 
without effort disproportionate to  the results achieved. Indirect cost pools 
must be distributed to benefitted cost  objectives on bases that will produce
an equitable result  in consideration of the benefits  derived. 
  Indirect Cost Rate  - Appendix VII to Part 75 - States and Local 
Government and Indian Tribe Indirect Cost Proposals  19  
  States have options  for determining the allocation  of 
o
indirect costs, using the following procedures: 
-  Use an approved  federally-recognized  indirect cost 
rate negotiated between the subrecipient and the
Federal Government. 
-  Develop an allocation of  indirect costs  to  the total 
direct cost using a  methodology approved by 
CMS.20 
-  Use a rate negotiated between the pass-through
entity (in this case, the state Medicaid agency) and 
the subrecipient  of the federal grant award (in this 
case, the school-based  provider), in compliance
with 45  C.F.R.  75.352.  
-  Use a de minimis  indirect cost rate as provided  in 
45 C.F.R.  75.414(f).  
Once the states and/or provider elects  the method of  indirect cost  
finding, the selected indirect cost  rate is  multiplied by the total  
direct cost amount to determine the allowable indirect cost.     
  Apportionment of cost to identify  Medicaids portion of allowable  cost,
may  include: 
  Application of  Random Moment Time Study statistics to personnel 
cost.  (See previous section) 
  Application of other applicable allocation statistics based on the
nature of the cost  or  the item being allocated.  For instance,  where
medical services occur in a dedicated space  in the school,  a square
footage statistic can be used to identify the portion of 
facilities/indirect  cost  that  should  be allocated to Medicaid  relative
to  the rest  of the school building. The cost  of electricity to  that 
room, for example, could be allocated based upon the percentage
of square footage in that dedicated room relative to  the square
footage  of the rest  of the school.   
                                                             
19  Appendix VII to Part 75 - https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-A/part-75/appendix-
Appendix%20VII%20to%20Part%2075   
20  One such methodology is described in  the  Certified Community Behavioral Health Clinic Cost Report Instructions  (OMB  
#0398-1148) published on December  14, 2015, Chapter  7.   https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-
documents/ccbhc-cost-report-instruction.pdf   
   
  CMCS Informational Bulletin    Page 18  
 
  Application of a statistic to allocate  to  cost to  specific  payers,  such
as  Medicaid.  (See previous discussion regarding  the MER.) 
  Certification Statement    A form on which the portion of the public 
schools or LEAs cost  of  furnishing SBS that is properly allocated  to 
Medicaid  is certified by the public school or LEA  to  the state Medicaid 
agency  for use as the non-federal share of Medicaid expenditures. 
  It is  highly  recommended that states  which  use  CPEs or reconciled  cost 
methodologies  develop  interim payments for  Medicaid-covered services provided 
to beneficiaries  in school-based settings.  These  interim payments can then be 
reconciled and  settled based on  actual  costs  that are  identified and allocated via
the cost report.     
9.  Third-Party Liability for Medicaid SBS 
Generally, the Medicaid statute requires Medicaid  to be the payer of  last resort, which  means  
state Medicaid agencies are required to  take reasonable measures to identify and recover  
payments  from third parties that are liable to pay  for services  furnished  under the state plan.   
Section 1903(c)  of the Act, however, permits an exception to  the Third-Party Liability (TPL) 
requirements in that, for Medicaid covered services  listed on a Medicaid eligible childs  
IEP/IFSP, Medicaid  is  primary  for IDEA-related services.  This  means that Medicaid will pay  
primary  to the  ED  for Medicaid-covered services  listed in a childs IEP/IFSP  even if  a liable  
third party is likely liable.  After the state Medicaid agency  makes the primary payment on a 
claim  for an IEP/IFSP service,  it will then seek to  recoup that payment from any  liable third 
party  (this is known as pay and chase). This removes the burden of seeking TPL for services  
from the school provider and places  it  on the state Medicaid agency.  
 
With respect  to  services  that are not part  of a childs IEP/IFSP,  the IDEA exception does not  
provide any exemption  from pursuing other  liable third-party payers, such as private insurance,  
before billing Medicaid.  This is known as cost avoidance  and generally occurs when a state  
Medicaid agency rejects a claim  because of a known or suspected  TPL.  Therefore, for  these 
children, schools or  their school-based providers  must meet federal and state Medicaid provider  
requirements, including billing the beneficiarys  third-party health insurance first  (where 
applicable),  before billing Medicaid, to determine the extent  of the  insurers payment liability.    
 
Whether or not an individual  has an IEP/IFSP under  the IDEA,  the state Medicaid agency  may 
suspend or  terminate efforts  to seek reimbursement from a  liable third party  if they determine  
that  the recovery would  not be cost-effective per the requirements set forth  in 42 C.F.R.   
433.139.   Additionally, states may exempt certain  items or services  from TPL requirements when  
submission of claims for  those items or services would always result  in denial  because  they 
generally  are not health care services covered by  health  insurers. The state must have clear and  
convincing documentation of non-coverage by  insurers. If a state has adequate documentation of  
non-coverage, there is no need to further verify  by  submitting claims  because there would be no  
liable third party and Medicaid TPL rules would not come  into play. The controlling regulation  is  
found at 42 C.F.R.  433.139(b)(1), which  states  that "[t]he establishment of third-party liability  
takes place when the agency receives confirmation from a provider or a third-party resource 
indicating the extent of third-party liability."  
 
   
  CMCS Informational Bulletin    Page 19  
 
  States may  suspend or  terminate efforts  to seek reimbursement from a  liable third party  if 
o
they determine that  the recovery could  not be cost-effective pursuant  to 42 C.F.R. 
433.139(f),  including for IDEA  or 504-plan services.  This  could ease administrative burden 
at schools. 
  States may  exempt certain  items  or services  from  TPL requirements when submission of 
claims  for those items or services would always result  in denial. 
  State may elect not  to identify or follow up on specific diagnosis and trauma codes, based 
on experience that  the codes are not productive of recovery  from third parties.  
  State  Medicaid agencies do not need to submit a  SPA  or  TPL Action Plan to change the 
codes subject  to diagnosis and/or  trauma code editing.   However,  CMS still requires that 
the state plan reflect how frequently the  state  Medicaid agency  completes diagnosis and 
trauma edits and also outlines a procedure for identifying the trauma codes that yield the
highest third-party collections and giving priority to following up on  those codes.   State
Medicaid agencies set  threshold amounts for recoveries and  may accumulate billings 
until it would  be cost-effective to seek payment.  
  A state may  specify  in  its state plan the threshold amount  or  other guideline to use
in determining whether to seek payment from a  liable third party or describe the
process it uses to determine whether recovery would be cost-effective.  The state
must submit documentation to CMS supporting that  recovery would not be cost-
effective below those thresholds. 
  A state may  specify  in  its state plan a dollar amount  or period of time  for which 
the state Medicaid agency will accumulate billing with respect  to either an 
individual  Medicaid  beneficiary or a particular third party. 
  State education agencies can elect  to pay a third partys  liability using  its own  funds. 
o
  States may use  billing agents or  other contractors  to assist with  billing. 
o
Conclusion 
As noted above,  the Bipartisan Safer  Communities Act  directs CMS to provide additional  
guidance to states in the near  future related to Medicaid-covered  SBS.  For example,  CMS  in 
consultation with  the  US Department of Education and other relevant  federal agencies,  will issue  
updates to  the  Medicaid School-Based Administrative Claiming Guide and the Medicaid and 
Schools Technical  Assistance Guide.  In addition, CMS, in consultation with the  US Department  
of Education,  is tasked with establishing a Technical  Assistance Center for Medicaid-covered  
SBS.  Finally, the BSCA directs CMS to issue $50 million  in discretionary grant funding to states  
in support  of implementing,  enhancing, or expanding the provision of  medical assistance through 
school-based entities under Medicaid or CHIP.    
 
CMS  is available to provide technical  assistance to states  to best implement their programs.  
 
States interested in receiving technical assistance should email CMS at:  
SchoolBasedServices@cms.hhs.gov.