Expansion of School Medicaid Reimbursement for Illinois Schools


Historically, Medicaid only reimbursed school health services included in a Medicaid-eligible student's IEP/IFSP. A 2014 change in the federal Centers for Medicare & Medicaid Services (CMS) policy provided an opportunity to expand school-based services to ALL Medicaid-enrolled students. This is known as Free Care Policy Reversal and has provided Illinois an opportunity to submit a State Plan Amendment (SPA) to CMS to remove restrictions in the current Illinois Medicaid state plan. 


Proposed Timeline 

  • Notice of Illinois SPA: Posted April 9, 2021
  • Effective date of SPA: July 1, 2021 
  • LEA Handbook changes: Scheduled for July 1, 2021, subject to CMS approval of SPA 
  • Training for District LEA staff: Throughout summer of 2021 to be ready for fall semester

Change in the Claiming Methodology 

The Illinois Department of Healthcare and Family Services (HFS) is recommending a change from the current rate settlement process to a cost settlement process. Cost settlement is used in 21 states for reimbursement of direct services and calculates the “True / Complete” costs for providing services to Medicaid-eligible students.

Financial Impact 

According to HFS, ALL states that have changed to cost settlement have resulted in a net increase in federal reimbursement. As a result of Free Care Policy Reversal and cost settlement, HFS anticipates an estimated annual increase of $12 - $18 million in federal matching funds for Illinois LEAs. 

  • Billing for direct services will be documented and submitted in the same manner that it is currently. 
  • Administrative Outreach quarterly financial data will need to be submitted to PCG within six weeks of the end of each quarter.

Proposed Addition of Services 

HFS is using this opportunity to add additional Medicaid eligible service providers. The HFS/ISBE Workgroup has recommended adding the following service providers: 

  • Board Certified Behavior Analyst 
  • Registered Behavior Technician 
  • Orientation & Mobility Specialist 
  • School Counselors 
  • Assistive Technology Specialist
  • Teacher of Deaf and Hard of Hearing 
  • Teacher of Students with Visual Impairments
  • Music, Recreation, and Art Therapist 


Embrace® is closely monitoring this situation and will provide clients with timely communications as new information is released regarding the Illinois Medicaid expansion project for school-based services.  

Upon CMS’s approval of the SPA, the Embrace® system will be updated and our team will provide districts and providers with guidance and support regarding the new Medicaid billing opportunities, according to the finalized billing parameters set by HFS.

Questions & Comments 

Please contact: Kimberly Moore, Ed.S., Senior School Medicaid Advisor

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