AP Carter Howard watches a cartoon during his asthma treatment at his home in Northbrook, Illinois. The Obama administration’s reversal last month of a 17-year-old policy should mean more Medicaid dollars for school-based health programs for combating chronic diseases, such as asthma. (AP)

A recent federal policy reversal, long-sought by states and health care advocates, could enable schools to take a lead role in managing chronic childhood diseases and result in the hiring of many more school nurses.

The change, announced quietly and unexpectedly last month by the Centers for Medicare and Medicaid Services (CMS), will allow public schools to receive Medicaid money for health services they provide to eligible students for the first time since 1997.

Once several financing and bureaucratic hurdles are cleared, advocates believe the new policy will improve the coordination of care provided to children with conditions such as asthma, diabetes and mental illness. It will be especially important, they say, for low-income kids who are less likely to have comprehensive medical coverage.

The policy change had been sought for at least 10 years by states and advocacy groups working in the area of children’s health. CMS declined to comment, beyond the letter it sent to state Medicaid directors announcing the decision.

“It’s still so early, a month into the rule changes, but this represents a tremendous opportunity to address children’s health needs,” said Mary-Beth Malcarney, an assistant research professor at the George Washington University School of Public Health, whose work was used by the coalition of advocacy groups that pushed CMS for the change.

The issue arose in 1997 when the Health Care Financing Administration (HCFA)—now CMS—said Medicaid would no longer pay for services provided free to the general public. For example, if a school district provided free vaccinations to all its students, that district could not bill Medicaid for immunizing Medicaid-eligible children, even though Medicaid would cover the immunization in a doctor’s office or community health center. Exceptions were allowed for some children with disabilities.

Schools could work around the rule by charging non-Medicaid children for the same services, generally by billing their private insurers or, if they had no insurance, charging their families directly. But that placed a burden on the schools, which are not equipped to handle insurance billing. Also, many private insurers do not recognize schools as providers of medical care.

‘Free Care Policy’

HCFA’s reasons for enacting the so-called “free care policy” have become hazy over time. Before the policy, government auditors had frequently cited school districts for improper Medicaid billing. There was also a view at the time that Medicaid was somehow being victimized when non-Medicaid eligible children were receiving the same services for free.

Oklahoma went to court to change the free care policy, eventually winning in a case heard by the Department of Health and Human Services Departmental Appeals Board in 2004. The appeals board decision should have been binding on CMS, but the agency continued to enforce the free care policy outside Oklahoma and even reinforced the rule in subsequent editions of the State Medicaid Manual.

CMS similarly brushed aside a subsequent legal victory by the San Francisco Unified School District over the free care policy.

In some places, private foundations and funders stepped in to help school districts continue to offer some health care services. In many districts, however, health programs withered away.

Through the years, advocates for children’s health, particularly those concerned about childhood asthma, continued to urge CMS to abandon the policy. Malcarney said they were helped by a growing conviction in public health that medical services need not be delivered exclusively through a clinician’s office, but also in places where people live, work, play and learn.

“Children don’t park their chronic diseases outside the school doors,” said Donna Mazyck, executive director of the National Association of School Nurses (NASN), one of the member groups in the Childhood Asthma Leadership Coalition. “If they have asthma outside school, they have asthma inside school.”

President George W. Bush’s administration was not interested in reversing the free care policy, but advocates found the Obama administration to be more sympathetic, given its stated desire to improve the delivery of health care in communities and not just in clinics and doctors’ offices.

Members of the coalition said they felt they were making headway with CMS, but they were nevertheless surprised when the agency sent the letter to state Medicaid offices on Dec. 15 announcing that it would no longer enforce the free care policy. So far, there has been no opposition to the change.

“The goal of this new guidance is to facilitate and improve access to quality health care services and improve the health of communities,” Cindy Mann, the CMS director, wrote.

Managing Chronic Conditions

Now that the policy has been changed, advocates see an opportunity to develop programs in the public schools to help children understand and manage chronic conditions, especially asthma. The American Lung Association says asthma is the third-leading cause of hospitalizations and emergency department visits among children and is a leading cause of school absenteeism.

The prevalence of asthma is nearly 50 percent higher in low-income areas compared to other places. A study in the journal Preventing Chronic Disease found that Medicaid-eligible children made nearly 630,000 asthma-related emergency room visits in 2010 at an average cost per visit of $433.

With the disappearance of the free care policy, advocates hope Medicaid dollars will enable schools to establish asthma management programs. Those programs would be managed by school nurses—raising the possibility of another benefit from the policy reversal.

The school nurses’ association says that only 45 percent of the country’s public schools have a full-time nurse on staff. Those nurses are usually paid through school budgets, but the association is hopeful that the new policy will make Medicaid dollars available for hiring many more school nurses.

“We believe that health care in school should be paid for the way it is paid for outside of schools, which will lead toward better integrated care, access to care, and lower cost,” said NASN’s Mazyck.

Hurdles Ahead

Despite the optimism surrounding the demise of the free care policy, achieving all the possible benefits won’t be easy. A number of states adopted their own policies to work with the free care policy, and those rules will have to be overturned.

An even greater challenge is that since 1997, some state Medicaid programs have switched from fee-for-service plans to managed care, in which Medicaid pays a set fee for each Medicaid beneficiary to cover all services that are provided. States that want to draw down Medicaid dollars for school-based health services will have to devise new financing arrangements to make the changes work.

“It would be helpful for CMS to issue additional guidance around how such services should be coordinated with managed care,” said Joe Reblando, spokesman for Medicaid Health Plans of America, a trade association representing Medicaid health plans. “For example, if the services need to be contracted for in states where managed care is offered in order to avoid duplication of payment, this would be extremely useful information for both schools and Medicaid health plans.”

Finally, while advocates foresee a primary role for school nurses in the management of chronic diseases, the kind of medical care school nurses are allowed to deliver without the supervision of a physician is a state-by-state decision. States hoping that school nurses can play a role in managing chronic diseases may have to revise laws and policies governing the responsibilities of school nurses.