States Should Better Leverage Medicaid to Fund Substance Use Services in Schools

Earlier this year, the Chicago-based national nonprofit Healthy Schools Campaign published a report on how Medicaid—the public health insurance program for low-income people in the United States—can help fund substance use services in schools. The report, which found that half of the states limit Medicaid funding for these services to a small number of students in schools, recommends 10 actions that all states can take to ensure that their Medicaid programs cover a full range of school-based substance use prevention, early intervention, and treatment services.

School districts have used Medicaid for decades to pay for health-related school-based services for children receiving special education services under the federal Individuals with Disabilities Education Act. Then, in 2014, the federal government clarified that Medicaid could be used to cover school-based medically necessary services—which include mental health and substance use-related services—for any Medicaid-enrolled student, not just those in special education programs. The expansion was powerful, potentially opening up coverage of services more than tenfold. Estimates find that in 2020, for example, at least 2 million Medicaid-enrolled children received special education services out of a total of 35 million children on Medicaid, leaving as many as 33 million more children who could be reached by mental health and substance use-related services, if needed. Yet many states have not taken advantage of this opportunity.

This interview with Jessie Mandle, national program director of Healthy Schools Campaign, and Lena O’Rourke, founder of the for-profit O’Rourke Health Policy Strategies and a consultant on the report, has been edited for length and clarity.

Courtesy of Subject

Courtesy of Subject

Q: What made you decide to write this report?

Jessie Mandle: At Healthy Schools Campaign, we try to improve health equity by investing in school health. One way that we do this is by thinking about how states, in partnership with the federal government, can maximize federal funds for student health services; Medicaid programs are key to improving child health and well-being. So that was one impetus for the report. Another was that this is an incredibly important moment for states to create a strong ecosystem for prevention, early intervention, and treatment of substance use disorder (SUD); addressing and preventing SUD are a priority for federal, state, and local governments right now.

Lena O’Rourke: States can do more to maximize the federal funding that’s coming in to support student health services, and specifically substance use services. If they don’t, they’re leaving money on the table.

Q: The report addresses Medicaid payment for school-based substance use prevention, intervention, and treatment. For each of these categories, could you describe the types of services that Medicaid can pay for?

O’Rourke: States can pay for a broad array of school-based substance use prevention, early intervention, and treatment services under Medicaid’s Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit—which guarantees children any medically necessary prevention, diagnostic, or treatment service, including mental health and substance use-related treatment, even if the state deems the service to be optional to adults. So in a school, substance use-related services could include screenings and assessments and one-on-one early intervention services delivered by school psychologists and counselors. Treatment, counseling, and mental health services can be delivered by providers such as a school psychologist under the scope of their license.

Q: Yet some states aren’t reimbursing for substance use-related services in schools. Why not?

O’Rourke: Since 2014, the Centers for Medicare & Medicaid Services (CMS) has made it clear that all covered services to Medicaid-enrolled kids can be reimbursed.

Half (25) of states limit Medicaid reimbursement for school-based services to students receiving special education services. These students are given an individualized education program (IEP), which is a written plan laying out specialized education and related services that will be provided to meet their needs, which might include medical needs like physical or occupational therapy. In these states, a school can’t get reimbursed for any service to any Medicaid-enrolled kid who doesn't have an IEP.

So we think the first and biggest thing that states should do is to clarify that all qualified services provided in school for Medicaid-enrolled students should be eligible for reimbursement.

Q: What’s priority number 2?

Mandle: Priority number 2 is ensuring that states expand comprehensively, allowing Medicaid to cover all medically necessary services and all qualified health providers—such as school nurses, social workers, and others—in a school setting. If a health service is delivered in a school to a Medicaid-enrolled student by a qualified Medicaid provider, then the school should be able to get Medicaid reimbursement for the services.

While some states cover only specific medically necessary services or certain providers in a school setting, we think they should instead cover the widest array of services and providers possible.

In addition, school districts should be reinvesting their Medicaid reimbursement into health services, including prevention for substance use. That’s really key. Often the majority of those dollars go into something like a school’s general fund instead of directly into services that include substance use prevention and early intervention.

O’Rourke: In the states that have removed the IEP restriction in school Medicaid, covered all medically necessary services, and expanded their list of qualified providers, preliminary data suggests that schools see an increase in federal Medicaid reimbursements.

And, importantly, states should deliver clear guidance to schools on how to cover services that are culturally and linguistically appropriate and evidence-informed. Students don’t just need any services; they need the right services. And the state can play a major role in that. It’s not enough to just have Medicaid reimbursement. We’d really like to steer the ship toward the services that are most appropriate for the student who’s receiving them.

Q: When it comes to substance use prevention, schools find it’s difficult to get additional initiatives—such as universal health education, programs that promote mental wellness, and classes on coping skills­—covered by Medicaid. Why is that?

Mandle: This is one challenge. These kinds of group programs are an important part of prevention. But Medicaid reimbursement is just not set up that way; it usually pays one service that benefits one individual, one Medicaid-enrolled child, or one group of enrolled children.

Additionally, Medicaid is typically set up to cover clinical interventions. There’s a lot more that’s needed to ensure that evidence-based, health-related services are also eligible for Medicaid reimbursement in school settings—even if they’re not clinical interventions.

O’Rourke: New guidance out of CMS gives states a fair amount of flexibility to offer services to a group of students. And I believe states will come up with some elegant solutions so that a school district could get reimbursed for those services.

The most helpful thing a state can do now is to look closely—in partnership with the Department of Education and with school districts—to see what their Medicaid program is already covering and what the state believes are the right interventions. The situation allows for creative problem-solving, to line up the barriers to reimbursement—such as the challenges associated with services provided to one child—and then quickly knock them down one by one. States just need to start doing it.