II 

110TH CONGRESS 

1ST SESSION S. 578 

To amend title XIX of the Social Security Act to improve requirements 

under the Medicaid program for items and services furnished in or 

through an educational program or setting to children, including children 

with developmental, physical, or mental health needs, and for other 

purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 13, 2007 

Mr. KENNEDY (for himself, Mr. SMITH, Mr. REED, Ms. SNOWE, Mr. HARKIN, 

Mr. BINGAMAN, Mrs. CLINTON, Ms. MIKULSKI, Mr. DODD, Mr. DURBIN, 

Mrs. BOXER, Mr. KERRY, Mrs. FEINSTEIN, Mr. SCHUMER, Mr. LEVIN, 

Mr. AKAKA, Ms. CANTWELL, and Mr. MENENDEZ) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend title XIX of the Social Security Act to improve 

requirements under the Medicaid program for items and 

services furnished in or through an educational program 

or setting to children, including children with developmental, physical, or mental health needs, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Protecting Children’s 

3 Health in Schools Act of 2007’’. 

4 SEC. 2. REQUIREMENTS UNDER THE MEDICAID PROGRAM 

5 FOR ITEMS AND SERVICES FURNISHED IN OR 

6 THROUGH AN EDUCATIONAL PROGRAM OR 

7 SETTING TO CHILDREN, INCLUDING CHIL8 DREN WITH DEVELOPMENTAL, PHYSICAL, OR 

9 MENTAL HEALTH NEEDS. 

10 (a) REQUIREMENTS FOR PAYMENTS.—Section 1903 

11 of the Social Security Act (42 U.S.C. 1396b) is amend12 ed— 

13 (1) in subsection (i)— 

14 (A) in paragraph (22), by striking the pe15 riod at the end and inserting ‘‘; or’’; and 

16 (B) by inserting after paragraph (22), the 

17 following new paragraphs: 

18 ‘‘(23) with respect to any amount expended by, 

19 or on behalf of, the State (including by a local edu20 cational agency in the State or the lead agency in 

21 the State with responsibility for administering part 

22 C of the Individuals with Disabilities Education Act) 

23 for an item or service provided under the State plan 

24 in or through an educational program or setting, or 

25 for any administrative cost incurred to carry out the 

26 State plan in or through such a program or setting, 


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1 or for a transportation service for an individual who 

2 has not attained age 21, unless the requirements of 

3 subsection (aa) are met; or 

4 ‘‘(24) with respect to any amount expended for 

5 an item or service provided under the State plan in 

6 or through an educational program or setting, or for 

7 any administrative cost incurred to carry out the 

8 plan in or through such a program or setting by, or 

9 on behalf of, the State through an agency that is not 

10 the State agency with responsibility for admin11 istering the State plan (including a local educational 

12 agency in the State or the lead agency in the State 

13 with responsibility for administering part C of the 

14 Individuals with Disabilities Education Act) and 

15 that enters into a contract or other arrangement 

16 with a person or entity for or in connection with the 

17 collection or submission of claims for such an ex18 penditure or cost, unless the agency— 

19 ‘‘(A) if not a public agency operating a 

20 consortium with other public agencies, uses a 

21 competitive bidding process or otherwise to con22 tract with such person or entity at a reasonable 

23 rate commensurate with the services performed 

24 by the person or entity; and 


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1 ‘‘(B) requires that any fees (including any 

2 administrative fees) to be paid to the person or 

3 entity for the collection or submission of such 

4 claims are identified as a non-contingent, speci5 fied dollar amount in the contract.’’; and 

6 (2) by adding at the end the following new sub7 section: 

8 ‘‘(aa) REQUIREMENTS FOR FEDERAL FINANCIAL

9 PARTICIPATION FOR FURNISHING MEDICAL ASSISTANCE

10 (INCLUDING MEDICALLY NEEDED TRANSPORTATION) IN

11 OR THROUGH AN EDUCATIONAL PROGRAM OR SET12 TING.—For purposes of subsection (i)(23), the require13 ments of this subsection are the following: 

14 ‘‘(1) APPROVED METHODOLOGY FOR EXPENDI15 TURES FOR BUNDLED ITEMS, SERVICES, AND AD16 MINISTRATIVE COSTS.— 

17 ‘‘(A) IN GENERAL.—In the case of any 

18 amount expended by, or on behalf of, the State 

19 for a bundle of individual items, services, and 

20 administrative costs under the State plan that 

21 are furnished in or through an educational pro22 gram or setting, the expenditure must be made 

23 in accordance with a methodology approved by 

24 the Secretary which— 


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1 ‘‘(i) provides for an itemization to the 

2 Secretary in a manner that ensures ac3 countability of the cost of the bundled 

4 items, services, and administrative costs 

5 and includes payment rates and the meth6 odologies underlying the establishment of 

7 such rates; 

8 ‘‘(ii) has a sound basis for deter9 mining such payment rates and methodolo10 gies; and 

11 ‘‘(iii) matches payments for the bun12 dled items, services, and administrative 

13 costs with corresponding items and services 

14 provided and administrative costs incurred 

15 under the State plan. 

16 ‘‘(B) RULE OF CONSTRUCTION.—Nothing 

17 in subparagraph (A) shall be construed as— 

18 ‘‘(i) requiring a State to establish and 

19 apply such a methodology through a State 

20 plan amendment; 

21 ‘‘(ii) requiring a State with such an 

22 approved methodology to obtain the ap23 proval of the Secretary for any increase in 

24 rates of reimbursement that are estab25 lished consistent with such methodology; or 


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1 ‘‘(iii) prohibiting the Secretary from 

2 reviewing a State’s costs for the individual 

3 items, services, and administrative costs 

4 that make up a proposed bundle of items, 

5 services, and costs as a condition of ap6 proval of the methodology that the State 

7 will establish to determine the rate of reim8 bursement for such bundle of items, serv9 ices, and costs. 

10 ‘‘(2) APPLICATION OF MARKET RATE FOR INDI11 VIDUAL ITEMS, SERVICES, ADMINISTRATIVE

12 COSTS.—In the case of an amount expended by, or 

13 on behalf of, the State for an individual item, serv14 ice, or administrative cost under the State plan that 

15 is furnished in or through an educational program 

16 or setting, the State must establish that the amount 

17 expended— 

18 ‘‘(A) does not exceed the amount that 

19 would have been paid for the item, service, or 

20 administrative cost if the item or service was 

21 provided or the cost was incurred by an entity 

22 in or through a program or setting other than 

23 an educational program or setting; or 

24 ‘‘(B) if the amount expended for the item, 

25 service, or administrative cost is higher than 


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1 the amount described in subparagraph (A), was 

2 necessary. 

3 ‘‘(3) TRANSPORTATION SERVICES.— 

4 ‘‘(A) IN GENERAL.—In the case of an 

5 amount expended by, or on behalf of, the State 

6 for furnishing in or through an educational pro7 gram or setting a transportation service for an 

8 individual who has not attained age 21 and who 

9 is eligible for medical assistance under the 

10 State plan, the State mush establish that— 

11 ‘‘(i) a medical need for transportation 

12 is specifically listed in the individualized 

13 education program for the individual estab14 lished pursuant to part B of the Individ15 uals with Disabilities Education Act or, in 

16 the case of an infant or a toddler with a 

17 disability, in the individualized family serv18 ice plan established for such infant or tod19 dler pursuant to part C of such Act, or is 

20 furnished to the individual pursuant to sec21 tion 504 of the Rehabilitation Act of 1973; 

22 ‘‘(ii) the vehicle used to furnish such 

23 transportation service is specially equipped 

24 or staffed to accommodate individuals who 

25 have not attained age 21 with developVerDate Aug 31 2005 23:30 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S578.IS S578

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1 mental, physical, or mental health needs; 

2 and 

3 ‘‘(iii) payment for such service is 

4 made only for costs directly attributable to 

5 costs associated with transporting individ6 uals who have not attained age 21 and 

7 whose developmental, physical, or mental 

8 health needs require transport in such a 

9 vehicle in order to receive the services for 

10 which medical assistance is provided under 

11 the State plan. 

12 ‘‘(B) RULE OF CONSTRUCTION.—Nothing 

13 in subparagraph (A) shall be construed as 

14 modifying the obligation of a State to ensure 

15 that an individual who has not attained age 21 

16 and who is eligible for medical assistance under 

17 the State plan receives necessary transportation 

18 services to and from a provider of medical as19 sistance in or through a program or setting 

20 other than an educational program or setting.’’. 

21 (b) REQUIREMENTS FOR THE PROVISION OF ITEMS

22 AND SERVICES THROUGH MEDICAID MANAGED CARE OR23 GANIZATIONS.— 


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1 (1) CONTRACTUAL REQUIREMENTS.—Section 

2 1903(m)(2) of the Social Security Act (42 U.S.C. 

3 1396b(m)(2)) is amended— 

4 (A) in subparagraph (A), by inserting after 

5 clause (i) the following new clause: 

6 ‘‘(ii) the contract with the entity satisfies the 

7 requirements of subparagraph (C) (relating to pay8 ment for, and coverage of, such services under an in9 dividual’s education program, an individualized fam10 ily service plan, or when furnished in or through an 

11 educational program or setting);’’; and 

12 (B) by inserting after subparagraph (B), 

13 the following new subparagraph: 

14 ‘‘(C) For purposes of clause (ii) of subparagraph (A), 

15 the requirements of this subparagraph are the following: 

16 ‘‘(i) The contract with the entity specifies the 

17 coverage and payment responsibilities of the entity 

18 in relation to medical assistance for items and serv19 ices that are covered under the State plan and in20 cluded in the contract, when such items and services 

21 are furnished in or through an educational program 

22 or setting. 

23 ‘‘(ii) In any case in which the entity is obligated 

24 under the contract to pay for items and services covVerDate Aug 31 2005 23:30 Feb 16, 2007 Jkt 059200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S578.IS S578

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1 ered under the State plan, the contract with the en2 tity requires the entity to— 

3 ‘‘(I) enter into a provider network service 

4 agreement with the qualified provider or pro5 viders furnishing such items or services in or 

6 through an educational program or setting; 

7 ‘‘(II) promptly pay such providers at a rate 

8 that is at least equal to the rate that would be 

9 paid to a provider furnishing the same service 

10 in a non-educational program or setting; and 

11 ‘‘(III) treat as final and binding deter12 minations by State licensed providers or pro13 viders eligible for reimbursement under the 

14 State plan working in an educational program 

15 or setting regarding the medical necessity of an 

16 item or service. 

17 ‘‘(iii) The contract with the entity specifies the 

18 obligation of the entity to ensure that providers of 

19 items or services that are furnished in or through an 

20 educational program or setting refer children fur21 nished such items or services to the entity and its 

22 provider network for additional services that are not 

23 available in or through such program or setting but 

24 that are covered under the State plan and included 

25 in the entity’s contract with the State. 


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1 ‘‘(iv) The contract with the entity requires, with 

2 respect to payment for, and coverage of, services for 

3 which the entity is responsible for, that the entity 

4 must demonstrate that the entity has established 

5 procedures to— 

6 ‘‘(I) ensure coordination between the State, 

7 a local educational agency and the lead agency 

8 in the State with responsibility for admin9 istering part C of the Individuals with Disabil10 ities Education Act with respect to those serv11 ices for an individual who has not attained age 

12 21 and who is eligible for medical assistance 

13 under the State plan (including an individual 

14 who has an individualized education program 

15 established pursuant to part B of the Individ16 uals with Disabilities Education Act or other17 wise or an infant or toddler with a disability 

18 who has an individualized family service plan 

19 established pursuant to part C of such Act) 

20 which are required for the individual under the 

21 individual’s education program or the individ22 ualized family service plan, or are furnished to 

23 the individual pursuant to section 504 of the 

24 Rehabilitation Act of 1973, and which are not 

25 specifically included in the services required 


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1 under the contract, but are the responsibility of 

2 the State, a local educational agency, or the 

3 lead agency in the State with responsibility for 

4 administering part C of the Individuals with 

5 Disabilities Education Act; and 

6 ‘‘(II) prevent duplication of services and 

7 payments under this title with respect to items 

8 and services covered under the State plan that 

9 are furnished in or through an educational pro10 gram or setting to such individuals enrolled 

11 under the contract.’’. 

12 (2) PROHIBITION ON DUPLICATIVE PAY13 MENTS.— 

14 (A) IN GENERAL.—Section 1903(i) of the 

15 Social Security Act (42 U.S.C. 1396b(i)), as 

16 amended by subsection (a), is amended— 

17 (i) in paragraph (24)(B), by striking 

18 the period and inserting ‘‘; or’’; and 

19 (ii) by inserting after paragraph (24) 

20 the following new paragraph: 

21 ‘‘(25) with respect to any amount ex22 pended under the State plan for an item, serv23 ice, or administrative cost for which payment is 

24 or may be made directly to a person or entity 

25 (including a State, local educational agency, or 


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1 the lead agency in the State with responsibility 

2 for administering part C of the Individuals with 

3 Disabilities Education Act) under the State 

4 plan if payment for such item, service, or ad5 ministrative cost was included in the determina6 tion of a prepaid capitation or other risk-based 

7 rate of payment to an entity under a contract 

8 pursuant to section 1903(m).’’. 

9 (B) CONFORMING AMENDMENT.—The 

10 third sentence of section 1903(i) of such Act 

11 (42 U.S.C. 1396b(i)), as amended by subsection 

12 (a)(1)(C), is amended by striking ‘‘and (24)’’ 

13 and inserting ‘‘(24), and (25)’’. 

14 (c) ALLOWABLE SHARE OF FFP WITH RESPECT TO

15 PAYMENT FOR SERVICES FURNISHED IN OR THROUGH

16 AN EDUCATIONAL PROGRAM OR SETTING.—Section 

17 1903(w)(6) of the Social Security Act (42 U.S.C. 

18 1396b(w)(6)) is amended— 

19 (1) in subparagraph (A), by inserting ‘‘subject 

20 to subparagraph (C),’’ after ‘‘subsection,’’; and 

21 (2) by adding at the end the following new sub22 paragraph: 

23 ‘‘(C) In the case of any Federal financial participa24 tion paid under subsection (a) with respect to an expendi25 ture for an item or service provided under the plan, or 


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1 for any administrative cost incurred to carry out the plan, 

2 that is furnished in or through an educational program 

3 or setting, the State shall provide that— 

4 ‘‘(i) if 0 percent of the expenditure was made 

5 or the cost was incurred directly by the State, the 

6 State shall pay the local educational agency in the 

7 State or the lead agency in the State with responsi8 bility for administering part C of the Individuals 

9 with Disabilities Education Act that made the ex10 penditure or incurred the cost (and, if applicable, 

11 any consortium of public agencies that incurred 

12 costs in connection with the collection or submission 

13 of claims for such expenditures or costs), 100 per14 cent (divided, as appropriate, between such agencies 

15 and such a consortium, if applicable) of the amount 

16 of the Federal financial participation; and 

17 ‘‘(ii) if 100 or any lesser percent of the expendi18 ture was made or the cost was directly incurred by 

19 the State, the State shall retain only such percent20 age of the Federal financial participation paid for 

21 the expenditure or cost as does not exceed the per22 centage of such expenditure or cost that was funded 

23 by State revenues that are dedicated solely for the 

24 provision of such medical assistance (and shall pay 

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1 nancial participation, the percentage due to the local 

2 educational agency in the State or the lead agency 

3 in the State with responsibility for administering 

4 part C of the Individuals with Disabilities Education 

5 Act that made or incurred the remaining percentage 

6 of such expenditure or cost (and, if applicable, any 

7 consortium of public agencies that incurred costs in 

8 connection with the collection or submission of 

9 claims for such expenditures or costs)).’’. 

10 (d) ASSURANCE OF REIMBURSEMENT FOR ADMINIS11 TRATIVE, ENROLLMENT, AND OUTREACH ACTIVITIES

12 CONDUCTED BY LOCAL EDUCATIONAL AGENCIES.— 

13 (1) MEDICAID.—Section 1902 of the Social Se14 curity Act (42 U.S.C. 1396a) is amended by insert15 ing after subsection (j) the following new subsection: 

16 ‘‘(k) Nothing in this title shall be construed as au17 thorizing the Secretary to prohibit the State agency with 

18 responsibility for the administration or supervision of the 

19 administration of the State plan from entering into inter20 agency agreements with local educational agencies under 

21 which such local educational agencies shall be reimbursed 

22 for the Federal share of amounts expended for administra23 tive, enrollment, and outreach activities for which payment 

24 is made to the State under section 1903(a)(7), including 

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1 poses of satisfying the requirements of subsection 

2 (a)(43).’’. 

3 (2) SCHIP.—Section 2107(e)(1) of the Social 

4 Security Act (42 U.S.C. 1397gg(e)(1)) is amended— 

5 (A) by redesignating subparagraphs (B) 

6 through (D) as subparagraphs (C) through (E), 

7 respectively; and 

8 (B) by inserting after subparagraph (A) 

9 the following new subparagraph: 

10 ‘‘(B) Section 1902(k) (relating to inter11 agency agreements with local educational agen12 cies for reimbursement for expenditures for ad13 ministrative, enrollment, and outreach activi14 ties).’’. 

15 (e) CLARIFICATION OF COVERAGE OF EPSDT AND

16 ITEMS AND SERVICES FURNISHED TO A DISABLED CHILD

17 PURSUANT TO SECTION 504 OF THE REHABILITATION

18 ACT OF 1973; DEFINITION OF ‘‘EDUCATIONAL PROGRAM

19 OR SETTING’’.—Section 1903(c) of the Social Security Act 

20 (42 U.S.C. 1396b(c)) is amended— 

21 (1) by inserting ‘‘(1)’’ after ‘‘(c)’’; 

22 (2) by striking ‘‘Education Act or’’ and insert23 ing ‘‘Education Act,’’; 


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1 (3) by inserting ‘‘, or furnished to a child with 

2 a disability pursuant to section 504 of the Rehabili3 tation Act of 1973’’ before the period; and 

4 (4) by adding at the end the following new 

5 paragraphs: 

6 ‘‘(2) Nothing in this title shall be construed as pro7 hibiting or restricting, or authorizing the Secretary to pro8 hibit or restrict, payment under subsection (a) for the fol9 lowing items or services furnished in or through an edu10 cational program or setting, or costs incurred with respect 

11 to the furnishing of such items or services: 

12 ‘‘(A) Medical assistance for items or services 

13 described in section 1905(a)(4)(B) (relating to early 

14 and periodic screening, diagnostic, and treatment 

15 services defined in section 1905(r)) and costs in16 curred for providing such items or services in ac17 cordance with the requirements of section 

18 1902(a)(43). 

19 ‘‘(B) Costs incurred for providing services re20 lated to the administration of the State plan, includ21 ing providing information regarding the availability 

22 of, and eligibility for, medical assistance under the 

23 plan, and assistance with determinations of eligi24 bility and enrollment and redeterminations of eligi25 bility under the plan. 


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1 ‘‘(3) Nothing in this title shall be construed as pro2 hibiting or restricting, or authorizing the Secretary to pro3 hibit or restrict, payment under subsection (a) for medical 

4 assistance furnished in or through an educational program 

5 or setting or costs described in paragraph (2)(B) solely 

6 because— 

7 ‘‘(A) the State utilizes an all-inclusive payment 

8 arrangement in making payments for medical assist9 ance described in subsections (a) or (r) of section 

10 1905; or 

11 ‘‘(B) the State utilizes a cost allocation system 

12 that meets Federal requirements when paying for 

13 the cost of services described in section 1902(a)(43) 

14 or other administrative services directly related to 

15 the administration of the State plan. 

16 ‘‘(4)(A) For purposes of this title, the term ‘edu17 cational program or setting’ means any location in which 

18 the items or services included in a child’s individualized 

19 education plan established pursuant to part B of the Indi20 viduals with Disabilities Education Act or otherwise, or 

21 in an infant’s or toddler’s individualized family service 

22 plan established pursuant to part C of such Act, are deliv23 ered, including the home, child care setting, or school of 

24 the child, infant, or toddler. 

25 ‘‘(B) Such term includes— 


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1 ‘‘(i) any location in which an evaluation or as2 sessment is conducted, in accordance with the re3 quirements of section 1902(a)(43) and subsections 

4 (a)(4)(B) and (r) of section 1905, to determine if a 

5 child is a child with a disability under section 614 

6 of the Individuals with Disabilities Education Act 

7 (20 U.S.C. 1414) who requires an individualized 

8 education program (IEP) under section 614(d) of 

9 such Act (20 U.S.C. 1414(d)) or if an infant or tod10 dler is an infant or toddler with a disability under 

11 section 635(a)(3) of such Act (20 U.S.C. 

12 1435(a)(3)) who requires an individualized family 

13 service plan under section 636 of such Act (20 

14 U.S.C. 1436) and any location in which a reevalua15 tion or reassessment of such a determination is con16 ducted; and 

17 ‘‘(ii) for purposes of subsection (m)(2)(C), any 

18 location in which items or services described in sec19 tion 1905(a)(4)(B) (relating to early and periodic 

20 screening, diagnostic, and treatment services defined 

21 in section 1905(r)) are delivered and costs are in22 curred for providing such items or services in ac23 cordance with the requirements of section 

24 1902(a)(43).’’. 


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1 (f) ASSURANCE OF COMPLIANCE WITH FEDERAL

2 AND STATE REQUIREMENTS.—Section 1902(a) of the So3 cial Security Act (42 U.S.C. 1396a(a)) is amended— 

4 (1) in paragraph (69), by striking ‘‘and’’ at the 

5 end; 

6 (2) in paragraph (70)(B)(iv), by striking the 

7 period at the end and inserting ‘‘; and’’; and 

8 (3) by inserting after paragraph (70), the fol9 lowing new paragraph: 

10 ‘‘(71) provide that— 

11 ‘‘(A) the State will establish procedures to 

12 ensure that— 

13 ‘‘(i) any provider of an item or service 

14 covered under the plan that is furnished in 

15 or through an educational program or set16 ting complies with all Federal and State 

17 requirements applicable to providers of 

18 such items or services under the plan; and 

19 ‘‘(ii) any educational entity that is en20 gaged in the provision of an activity de21 scribed in paragraph (43) or any other ac22 tivity that is directly related to the admin23 istration of the plan complies with all Fed24 eral and State requirements applicable for 

25 payment for such activity; and 


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1 ‘‘(B) the State will not furnish medical as2 sistance for an item or service covered under 

3 the plan in or through an educational program 

4 or setting, or undertake any activity described 

5 in paragraph (43) or any other activity that is 

6 directly related to the administration of the 

7 plan in or through such a program or setting, 

8 unless the entity responsible for providing the 

9 item or service, or undertaking such an activity, 

10 in or through the educational program or set11 ting will be paid under the State plan for the 

12 costs related to the furnishing of such item or 

13 service or the undertaking of such activity.’’. 

14 (g) UNIFORM METHODOLOGY FOR EDUCATIONAL

15 PROGRAM OR SETTING-BASED CLAIMS.— 

16 (1) IN GENERAL.—Not later than 90 days after 

17 the date of enactment of this Act, the Secretary of 

18 Health and Human Services and the Secretary of 

19 Education, acting jointly and in consultation with 

20 State medicaid directors, State educational agencies, 

21 local educational agencies, and State agencies with 

22 responsibility for administering part C of the Indi23 viduals with Disabilities Education Act, shall develop 

24 and implement a uniform methodology for claims for 

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1 trative costs furnished under title XIX of the Social 

2 Security Act in an educational program or setting. 

3 (2) REQUIREMENTS.—The methodology devel4 oped under paragraph (1)— 

5 (A) shall not prohibit or restrict payment 

6 for medical assistance and administrative activi7 ties that are provided or conducted in accord8 ance with section 1903(c) of the Social Security 

9 Act (42 U.S.C. 1396b(c)); and 

10 (B) with respect to administrative costs, 

11 shall be based on— 

12 (i) standards related to time studies 

13 and population estimates; and 

14 (ii) a national standard for deter15 mining payment for such costs. 

16 (h) EFFECTIVE DATE.—The amendments made by 

17 this section shall take effect on the date of enactment of 

18 this Act and shall apply to items and services provided 

19 and expenditures made on or after such date, without re20 gard to whether implementing regulations are in effect. 

Æ 


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