It is vital that children and teenagers who are at-risk for developing mental disorders be identified quickly and connected with the services they require. Schools can play a vital role in helping to identify such children and adolescents. They can connect with them for appropriate treatment.

Medicaid Payments for School-Based Service

Services provided in schools for mental health are subject to all federal and state laws. EPSDT requirements exempt the state plans that provide school-based services. This is because the benefit requires that states make all medically necessary services available for children under 21 years old.

The reimbursement section contains a description of the payment methods. The provider must be licensed, certified, or meet any other qualifying criteria. In order to document the provision and maintain billing records and create and maintain clinical and billing records as required by other providers, they must also meet state licensing and certification requirements.

3 Ways to Offset the Rising Costs Of Mental Health Services

CMS (Centers for Medicare & Medicaid Services) depends on states for policies and procedures. This is to allow freedom of choice among providers and to avoid duplication of services. Thus, in these ways, the states can use school medicaid-programs to offset the rising costs of mental health services.

Claim-based or fee-for-service-based payment:

Under this approach, the state establishes a fee schedule and any coverage limitations for each service. The provider then submits an application for payment to Medicaid. It does this in the same manner as any medical provider would bill an insurance company.

This process is not common for school-based services. This is due to the fact that most schools don’t have medical claims billing systems that allow them to bill this way. Also, and perhaps more importantly, many state medicaid programs pay for these services at a reconciled price.

Recognized cost reimbursement

Every local education agency uses an expense reporting system to calculate and combine the costs of providing the services. You can carry this out either quarterly or annually. You can further divide these costs between services given to Medicaid-enrolled students or those for non-Medicaid students.

This is a complex task that requires all direct service providers to maintain adequate clinical records to support reported expenditures. It also requires school districts and schools to maintain sufficient cost data as well as service utilization documentation to allow for an accurate allocation to Medicaid in accordance with federal cost principles.

Schools should work with CMS staff and the state Medicaid program staff to devise a cost identification system and allocation process that meets all federal requirements. Also, even though individuals do not submit claims for Medicaid services to request payment, CMS insists that the Medicaid program use their Medicaid Management Information System to track all school-based services. This helps to document the individual services and provides information that one can use to determine the efficiency of the payments.

Collaborations between Community Providers within Schools.

In order to comply with federal requirements regarding the payment and coverage of Medicaid services, schools can establish partnerships with community providers. CMS encourages states that they seek technical guidance on compliance with these requirements before they agree to any collaboration arrangements. These types of collaborations between community providers and schools result in what is known as “school-based hospitals” (SBHCs). An SBHC can only be covered as a facility-service if it operates under a Medicaid benefit that is recognized, such as the FQHC benefit or the clinic benefit. These benefits come with certain requirements which may impact the way that a school is organized as a Medicaid recognized facility benefit.

Legislative Recommendations

  • The American Psychological Association’s aims to promote academic success and the well-being of children in America.  
  • Ensure Medicaid’s ability to make payments for schools for medically necessary services to children via individualized education programs (IEP) and individualized family service plan (IFSP), under the Individuals with Disabilities Education Act, (IDEA)
  • Refuse to support the use of block grant funding or per-capita caps for Medicaid.
  • Support the full financing of the Individuals with Disabilities Education Act.
  • Support the Mental Health in Schools Act. (H.R. 2913), to amend and expand projects in the Public Health Service Act for school-based access to mental health services.
  • Support graduate education in order to increase mental health services at schools. This includes preserving and reauthorizing Public Service Loan Forgiveness Program, Preserving Grad Plus Program, and Reinstating Federal Direct Subsidized Loan Program.
  • To provide comprehensive mental and behavioral services to students, fully finance Title IV, Part 1 of the Every Student Succeeds Act.


Schools and communities are often lacking high quality, comprehensive treatment of children and adolescents. Many areas lack or have insufficient numbers of psychiatrists/psychologists. Moreover, they do not have social workers or other professionals trained in treating children and teenagers. Family caregivers face many challenges when trying to navigate complex systems in order to obtain care. These include long waits, poor coverage, and insufficient services. Thus, a school-based medicaid program combined with a qualified medical billing company such as NEMB Group’s school-based Medicaid billing program offers excellent advantages.


Need more information or have questions on any type of billing we do?

Affiliates of VSS Medical Technologies

Sign up for company updates and latest news from NEMB.

Get In Touch 


888 - 771 - 6115
508 - 297 - 2068

19 Norfolk Avenue
South Easton, MA 02375


©Copyright 2024 New England Medical Billing Group LTD. All rights reserved.