On May 18, 2023, the U.S. Department of Education (USDE) and U.S. Department of Health and Human Services (HHS), made a joint announcement regarding a proposed rule and a much-anticipated guidance update for school-based Medicaid billing. The announcement said that the Biden Administration is “taking action to make it easier for schools to provide critical health care services, especially mental health services, for millions of students across the nation” through a more streamlined Medicaid billing permissions and reimbursement process for students with disabilities.

As a result, the USDE predicts that of the 500,000 new students who are found eligible under the Individuals with Disabilities Education Act (IDEA) Part B each year, nearly 300,000 are likely to be eligible for Medicaid and impacted by the new rule. In addition, HHS is issuing new guidance to make it easier for schools to bill Medicaid.

Specifically, the proposed rule recommends eliminating a provision in the IDEA that requires one-time parental consent before schools file first-time invoices for school-based specialized services for children eligible for public benefits under Medicaid, the Children’s Health Insurance Program (CHIP) or other public insurance and benefits programs. USDE is instead releasing a Notice of Proposed Rulemaking under IDEA that would streamline consent provisions when billing for Medicaid services provided through a student’s individualized education program (IEP). This would result in a uniform process applicable to all Medicaid enrolled children, regardless of disability. 

Importantly, the proposed changes do not alter any of the critical parental consent provisions required by IDEA nor do they impact the parental consent obligations under the Family Educational Records and Privacy Act (FERPA). Additionally, the proposed rule does not alter the requirement that IEP services must be delivered at no cost to the child’s family, the requirement that IEP services cannot diminish other Medicaid-reimbursable services, nor Medicaid’s position as payor of first resort for IEP and Individualized Family Service Plan services. Rather, this regulatory change would help cut unnecessary red tape that schools and districts face in billing Medicaid and meet their obligations to ensure students with disabilities receive a free, appropriate public education in accordance with their IEP.

The comment period for the proposed rule change in IDEA for parental consent for Medicaid billing ends August 1, 2023.

To view the announcement and access the Comprehensive Guide to Medicaid Services and Administrative Claiming – PDF, click here.