Despite a federal rule change that allows states to bill Medicaid for school-based physical and behavioral health services provided to all Medicaid-enrolled students, many states struggle to overcome the persistent and complex billing challenges associated with receiving Medicaid reimbursement for delivery of these critical services.
To access additional Medicaid funds to expand school-based behavioral health services, Michigan established the Caring 4 Students (C4S) program, which strengthens partnerships between its Medicaid agency, providers, and educational entities and streamlines Medicaid billing policies and procedures. This case study explores how Michigan overcame some of the challenges states face when seeking Medicaid reimbursement for school-based behavioral health services. It also describes how Michigan retooled the C4S program during the pandemic to ensure the services continued to reach students through telehealth.
The majority of children who receive behavioral health care access these services in school settings. According to the School-Based Health Alliance, 70 percent of children who receive mental health services access them at school. As an increasing number of children experience worsening behavioral health due to the pandemic, the need for these support services is even greater. Also, with the pandemic forcing many schools to offer reduced in-person teaching or fully remote learning, they have had to adapt and provide more behavioral health services through telehealth.
While states can fund school-based behavioral health services in a variety of ways, a number of states have leveraged federal Medicaid dollars to help fund behavioral health services for students with Medicaid coverage. In federal fiscal year 2016, estimated Medicaid spending for both school-based and administrative services totaled $4.5 billion.
Historically, schools were restricted in their ability to receive federal Medicaid reimbursement for physical and behavioral health services provided to Medicaid-enrolled students. The “free care rule” prohibited schools from seeking Medicaid payments for services provided to Medicaid-enrolled students if the services were provided for free to all students, such as no-cost health screenings. While the rule contained an exception for services identified in Medicaid-enrolled students’ Individuals Education Plans (IEPs), it limited schools’ ability to obtain Medicaid reimbursement for services provided to students with Medicaid coverage who did not have IEPs. However, as a result of the “free care rule” policy reversal in 2014, states have the opportunity to bill Medicaid for physical and behavioral health services delivered to all Medicaid-enrolled students, including students without IEPs.
Despite the rule change, some schools still face challenges in obtaining Medicaid reimbursement for services provided to Medicaid enrollees, either due to state-level policy barriers or other issues, such as the administrative complexity of the billing process. School staff often may not have the expertise or resources to implement Medicaid billing procedures, and often need assistance and training from state education and Medicaid agencies. Also, some states with budgets impacted by the pandemic may be limited in their ability to invest in an expansion of services.
Development of C4S
To help increase students’ access to behavioral health services, in 2019 Michigan capitalized on the flexibility provided by the reversal of the free care rule by creating the C4S program through a state plan amendment (SPA) that leverages the Early, Periodic, Screening, Diagnosis, and Treatment (EPSDT) benefit. Through the C4S program, Michigan schools can now receive Medicaid reimbursement for services delivered to Medicaid-eligible students if they are covered under EPSDT, delivered within a provider’s scope of practice, and billed in accordance with state Medicaid billing procedures.
In addition to federal Medicaid dollars, implementation of the C4S program was bolstered by state funding, which included a $16.5 million allocation by the state legislature in the fall of 2018 to provide direct medical services to students that must be billed to Medicaid whenever possible. State officials subsequently acted quickly to submit a Medicaid SPA by December 2018, and after approval by federal officials, the state launched the C4S program in October 2019.
Nearly all 587 school districts in Michigan fall under the authority of an intermediate school district (ISD), which conducts various administrative functions for the schools. Michigan has 56 ISDs, as well as two independent school districts, and the ISD system structure allows all schools, regardless of how small they are, to participate in the C4S program because the reimbursement claims are administered by the ISDs. The state considers the ISDs to be the main provider entities within the C4S program, as clinicians participating in the program report their services under each ISD’s provider identifier number.
State officials characterize the C4S program as a three-legged stool – consisting of Medicaid, the ISDs and the Michigan Department of Education (MDE) – all closely coordinating together to support the behavioral health needs of students. Even prior to the reversal of the free care rule, Michigan ISDs worked closely with the state Medicaid agency to provide IEP services for Medicaid-enrolled students. The strong relationship between Medicaid and the ISDs can be credited, in part, to a payment agreement that provides ISDs with 60 percent of federal Medicaid reimbursement for school-based services. To provide schools the support needed to manage the service expansion through C4S, ISDs receive 95 percent of the federal share for services covered under the program and the state Medicaid agency receives the remaining five percent to cover administrative costs.
Challenges and Solutions
Lack of behavioral health providers: In addition to expanding the scope of Medicaid reimbursable health and behavioral health services, the C4S program also expanded the type of providers who can claim reimbursement for delivering services to Medicaid-enrolled students. While funding from the legislature allowed the state to hire new mental health staff, the C4S program still needed additional providers because similar to many states, Michigan was already facing shortages within its mental health workforce.
In response, Michigan’s Medicaid officials employed a creative approach to ensure there were enough providers to support the expansion of school behavioral health services. Recognizing the potential of utilizing other categories of providers, such as physician assistants, nurse practitioners, behavior analysts, and marriage and family therapists, state officials incorporated them and others into the list of allowable providers. Including these additional provider types expanded the behavioral health workforce pool and helped the state address the lack of providers, particularly in rural areas of the state.
Overall complexity of reimbursement process: State Medicaid agency officials indicated that some school districts were initially hesitant to participate in the C4S program because they were concerned about the potential administrative burden that might be involved with implementing the Medicaid reimbursement process. These concerns have been addressed by establishing strong communication channels among the three entities (Medicaid, ISDs, and MDE) to clarify processes and procedures and provide ample opportunities for staff training sessions.
Given the complexity of the reimbursement process, the state Medicaid agency works particularly closely with the ISDs to provide them with answers to specific questions. Training on implementing the reimbursement processes occurs frequently, both at an annual conference and on a regular basis because of the frequency of staff turnover in the schools and consequently the need to train new employees about the procedures and how to account for time spent providing services.
One key aspect of the Medicaid reimbursement model is that the state uses a process that is based on paying for part of the salary of a particular staff position, rather than reimbursing for the actual services themselves. Given that providers do not spend all of their time engaging in reimbursable activities, in order to determine the amount of their salaries that can be reimbursed by Medicaid, state officials must estimate the portion of time they spent on providing medically eligible services to Medicaid-enrolled children. To do this, each month state officials ask for responses to a Random Moment Time Study (RMTS), which is a federally approved method to assess how providers spend their time. The RMTS data is incorporated into an algorithm containing a number of other factors, and this calculation forms the basis of the Medicaid reimbursement model.
State officials reported there are still some challenges associated with helping providers understand how to evaluate their time spent providing services when they respond to requests for RMTS data, due to some providers’ lack of familiarity with the RMTS process as well as the accelerated pace of implementation of the C4S program. However, state officials indicated that they expect these issues can be addressed with additional training.
Provider and general reimbursement issues: One challenge the state encountered during the initial stages of C4S implementation was due to an existing rule within MDE, which stipulated that if a provider’s salary was partially funded by general education dollars that individual was not permitted to work with special education students. State Medicaid officials worked with MDE to eliminate that rule, and this has resulted in the ability to more effectively and efficiently allocate providers’ time and allow them to serve more students.
Another key to the state’s success in increasing Medicaid reimbursement for behavioral health services provided in the schools was to address the reimbursement rate applied to school psychologists. There are four different pools of staff providers serving students — direct services staff, personal care services staff, targeted case management staff, and administrative and outreach staff. Prior to implementation of C4S, the school psychologists were categorized as part of the administrative outreach pool, resulting in a low Medicaid reimbursement rate. State officials were able to work with the Centers for Medicare & Medicaid Services (CMS) to change that designation so they were instead recognized as part of the direct service staff pool, which significantly increased their reimbursement rates.
Michigan state officials also anticipated a potential administrative challenge related to provider reimbursement. If the state used two separate Medicaid state plans to implement the program — one for special education students and another for general education students — this would create reimbursement complications because it would silo providers into serving only one student population group. By instead submitting a SPA for the C4S program that added in coverage of the general education students, this allowed providers to serve both groups of students. The state also worked closely with CMS on the overall reimbursement methodology to maximize the program’s potential for leveraging federal Medicaid funds, which included keeping the students with IEPs separate from the general education students in the state’s calculations because of their differing Medicaid eligibility rates.
Transition to online school services due to COVID-19: Michigan officials had to quickly adjust policies and processes in response to the statewide shift to online learning in the spring of 2020 due to the COVID-19 pandemic. State officials had heard anecdotally about an increased need among students for behavioral health services due to stresses associated with the pandemic, and they anticipate that this demand may continue to grow. Recognizing the need to increase access to behavioral health services for students who may be in crisis, the state waived the requirement that a plan of care must be in place, allowing schools to bill Medicaid up to 30 days without an existing plan of care.
State officials quickly broadened their telehealth policies to include an audio-only provision, and while that will most likely be discontinued when the pandemic ends, they indicated that they plan to sustain many other telehealth provisions post-pandemic.
Also, while telehealth services were implemented fairly rapidly, state officials reported that changing the billing processes was not as easy. School closures caused nearly all RMTS moments to show no reimbursable activity, because providers were not providing medical or behavioral health services during the initial stages of the closure. State officials explained that while this did result in a notable loss in reimbursement, the enhanced Federal Medical Assistance Percentage (FMAP) provided by the Families First Coronavirus Response Act would help cover much of this decrease. Also, CMS allowed the state to use an average of RMTS responses from the last two quarters for their RMTS when schools were closed, because of the significant declines in time spent providing care, and state officials indicated that federal approval to do this helped significantly.
The state is also seeking to ensure equitable access to behavioral health services by focusing on addressing issues for students who lack access to devices that can be used for telehealth services. State officials recently submitted a SPA to federal officials to obtain reimbursement for providing students in need of devices with access to iPads and computers that would be owned and managed by the schools. They indicated that if the proposal is approved, they plan to continue reimbursing for devices beyond the pandemic period.
Overall successes: The C4S program has not only achieved one of its overall goals of increasing students’ access to behavioral health services, it has also helped bring in needed additional funds to the schools. There had already been some psychologists in the schools, but it was not until implementation of C4S that Michigan was able to obtain Medicaid reimbursement for any qualifying services provided. Also, despite needing to navigate the challenges associated with the pandemic, state officials considered it a success that there has been an approximate 6 percent increase in the amount of federal Medicaid reimbursement being directed to schools through the C4S program.
The Future of C4S
State officials said they anticipate that C4S’ initial successes will continue and that the program will likely expand further, as not all ISDs were able to implement the program fully during its initial stages. As school hiring begins to increase post-pandemic and as providers and ISDs become more familiar with navigating the RMTS responses and overall reimbursement process, state officials indicated they expect the program to grow steadily in the coming months.
The National Academy for State Health Policy (NASHP) would like to thank state officials from Michigan for their time and contribution to this publication. Support for this work was provided by the David and Lucile Packard Foundation. The views expressed here do not necessarily reflect the views of the foundation.
 Mental Health webpage on the School-Based Health Alliance webpage, https://www.sbh4all.org/school-health-care/health-and-learning/mental-health/.
 Stephen W. Patrick et al, “Well-being of Parents and Children During the COVID-19 Pandemic: A National Survey. Pediatrics October 2020, 146(4). https://pediatrics.aappublications.org/content/146/4/e2020016824
 Medicaid and CHIP Payment and Access Commission (MACPAC), “Medicaid in Schools.” April 2018. https://www.macpac.gov/wp-content/uploads/2018/04/Medicaid-in-Schools.pdf
 Heather Clapp Padgette, Candace Webb, Phyllis Jordan, “How Medicaid and CHIP Can Support Student Success through Schools.” Georgetown University Center for Children and Families, April 2019. https://ccf.georgetown.edu/2019/04/24/how-medicaid-and-chip-can-support-student-success-through-schools/
 While the C4S program serves all students, the state can only receive Medicaid reimbursement for services provided to Medicaid-eligible children. Also, the C4S program also expands school nursing services, but this case study focuses on the program’s behavioral health services.
 Also, the non-federal share of Medicaid spending for school-based services is provided by schools through certified public expenditures.