School-Based Health Centers – Financing
Issues in Financing School-Based Health Centers:
A Guide for State Officials
September 1995

Prepared by:
Making the Grade National Program Office
The George Washington University
Washington, DC

Rosenberg & Associates
Point Richmond, California

Despite the recent, unprecedented growth of school-based health centers and the related increased support from state governments, the future of school-based health centers is uncertain. Proposed cut-backs in government spending may limit previously available public health dollars and state governments that intend to include school-based health centers in their health care networks for school-age children must now determine how to ensure financing for those centers.

Given the fiscally conservative climate in Washington, DC., states cannot rely on federal grant initiatives, federal protection for cost-based reimbursement, or federal mandates for inclusion of school-based health center programs in Medicaid managed care arrangements. Nor can the states rely on private insurance or other commercial sources to support the centers. The expansion of privately financed managed care and the continuation of ERISA exclusions has eroded opportunities to enlist private dollars in support of school-based health centers. Each state must develop its own approach to supporting the centers. A critical precondition for creating a financial strategy is for each state to address the following basic questions:

  • What is a school-based health center?
  • Whom should the school-based health center serve if the center is to secure public funding?
  • What specific services must be provided?
  • How will these services be paid for and who (or what) will receive payment for the services?

This paper discusses approaches to answering these questions.


Since the first comprehensive school-based health centers were established in the early 1970s, states and localities have increasingly looked to schools as reasonable and innovative sites for assuring access to health care for children and adolescents. Between 1985 and 1992, the number of such programs around the nation grew from 40 to more than 400. According to a national survey conducted by the Making the Grade National Program Office, by 1994 there were 607 school-based health centers in 41 states and the District of Columbia (see figure 1, page 6). Nearly half of these programs are located in high schools and over one quarter are located in elementary schools (Schlitt, et. al., 1995). Fueling the recent exponential growth of the centers has been the development of a number of state government initiatives to support school-based health center programs.

At present, most states fund school-based health centers through grant programs that draw from either Maternal and Child Health (MCH) block grant dollars or state general funds. The Making the Grade survey found that in school year 1993-1994, 32 states allocated an estimated $38.8 million to local governments or health care institutions to support the centers. Twenty-five states allocated $12 million in MCH dollars to school-based health centers, while another group of 25 states appropriated $22.3 million in general fund support for the centers (see figure 2, page 6). Three states designated funds from the US Department of Education’s “Drug Free Schools and Communities” program. Illinois is the only state that commits a portion of its federal Social Services block grant, Title XX, to its school-based health center program. Several states, including California, Florida, Louisiana, Massachusetts, and Missouri, fund their school-based initiatives through special taxes, such as supplemental sales taxes and tobacco excise taxes.

Other major funding for school-based health centers comes from federal grants, private foundations, and local dollars. Since the Making the Grade survey, 27 centers have received grants from the federal Bureau of Primary Care. Private foundation initiatives in Connecticut and Michigan are investing an additional $6 million in centers in those states. The Robert Wood Johnson Foundation will provide nearly $18 million for school-based health centers through its national program, Making the Grade: State and Local Partnerships to Establish School-Based Health Centers.

Local support remains vital. All school-based health centers receive help from their host schools; other local agencies contribute varying levels of support. Twenty-three school-based health centers supported by the Robert Wood Johnson Foundation, through its previous grant program the School-Based Adolescent Health Care Program, reported that one-third of their budgets were provided in-kind by local sources. In Oregon’s Multnomah County, in Fiscal Year 1995, local tax dollars provided $1.4 million or 64 percent of the total operating budget for the ten school-based health centers in Portland.

States that have initiated funding for school-based health center initiatives, in most cases, have asked their health departments to take the lead in program and policy development. In response, the health departments have organized the state grant-making process — writing the grant application guidelines, developing service standards and quality assurance measures, and determining staffing requirements. Within the health departments an individual or office generally has responsibility for providing technical assistance to local programs as well as facilitating the development of state policies to support the centers.

During the early phase of state support for school-based health centers, the states have considered these initiatives small-scale pilot programs whose characteristics were hand-tailored to fit the small number of communities in which the centers were located. However, as demand for the centers increases and they become part of the state’s larger strategy of assuring health care for all children, the policy questions become more complex and require more detailed responses. How should states determine the need for such centers? How can start-up funds for the centers be secured? How will on-going support be obtained? Fundamental premises underlying such questions must be tested: Are the centers to serve all children or only some children? Are there spending priorities for public dollars?

If a state is to assure the availability of school-based health centers as a component of its health care system for school-aged children, the state will need to establish funding priorities by defining where they wish to locate school-based health centers (targeting criteria) and by establishing the services the school-based health centers will provide (service criteria). This paper reviews possibilities for targeting and service criteria and articulates the financing issues that states must confront as they move to fit school-based health center programs into an on-going, soundly-financed system of health care for children.

Dryfoos, JG. Full-services schools: A revolution in health and social services for children, youth, and families. San Francisco: Jossey-Bass, 1994.

Schlitt, JJ, Garfinkel, S. Where the kids are. State government news 1995; 38(6):20-24.

Schlitt, JJ, Rickett K, Montgomery L, Lear JG. State initiatives to support school- based health centers: A national survey. J of Adolesc Health 1995; 17:68-76.

Difficulties in financing school-based health centers through third-party payments

Most school-based health centers have been started and sustained with private and public grant dollars. Funds from patient care reimbursement, whether through private insurance or Medicaid, have only recently contributed measurably to the center budgets (see Table 1, page 8). This limited support from patient care revenues has been due to several factors:

  • Initially, school-based health centers were considered experimental projects that were more appropriately funded by grant dollars.
  • If privately insured students use the health centers, they are likely to have policies with large deductibles and limited coverage for primary health care and mental health services. While nine states and the District of Columbia have passed the Child Health Insurance Reform Plan (CHIRP), which requires insurers to provide coverage for complete preventive health services for children 0 – 19, to date few health centers are reporting significant revenues from private insurance. The potential gains from CHIRP may be offset by the movement of privately-insured families to ERISA-protected, self-insured plans, which need not comply with CHIRP requirements.
  • Adolescents from low-income families are less likely than their younger counterparts to be Medicaid insured. As a result, school-based health centers located in high schools have high rates of uninsured patients (see figure 3, page 9).
  • Not all services provided to Medicaid-insured students are reimbursable due to state-specific Medicaid plan limitations or exclusions.
  • Because patient care revenue potential is perceived as minimal, many school-based health centers have elected not to bill either patients or their insurers for services provided. These school-based health centers and their sponsoring organizations conclude that the cost of billing would exceed the revenues generated.

Despite barriers to billing, those who organize school-based health centers increasingly believe that patient care revenues are essential to funding the centers. Health care reform discussions have contributed to a perception that in the very near future all personal health services — even those targeted to low-income students — will be paid for through a patient care funding mechanism, whether by fee-for-service or pre-paid arrangements. Thus, the critical question: Can these centers fit into the emerging system of health care financing?

The shift from a grants-based strategy towards a greater reliance on patient care revenues is complicated by a concern that a billing or service-focused financing strategy may threaten the unique set of services currently offered by the centers. The centers were established to provide a comprehensive mix of medical and mental health care, health education and preventive services. Health center professionals provide clinical care, sponsor counseling groups, provide classroom education and work with parents, athletic staff and students to encourage a healthier school environment. Many of these activities are not billable, but most health centers believe these activities are among the most important things they do. To tie the work of the center to a traditional reimbursement system is to risk forcing the health center to alter its package of care from a multi-faceted social model to a medical model of care that de-emphasizes mental health and other less billable services.

Lear JG, Schlitt, JJ, Rickett K. Medicaid, managed care and school-based health centers: Report from a Conference. Washington, DC, Making the Grade, The George Washington University, 1995.

Massachusetts Department of Public Health, Bureau of Family and Community Health. School-based health centers: Medicaid standards. Boston, MA: Author, 1994.

             Newacheck PW, McManus MA, Gephart J. Health insurance coverage of adolescents: A current profile and assessment of trends. Pediatrics 1992: 90(4):589-596.

Perino J, Brindis C. Payment for services rendered: Expanding the revenue base of school-based clinics. Center for Reproductive Health Policy Research, University of California, San Francisco, Report to the Stuart Foundations, 1994.

Recent events with major impact on funding strategies for school-based health centers

State and federal governments have utilized a variety of strategies to support health programs targeted on specific populations. These include funding multi-site demonstration programs, establishing preferential payment-for-service formulae, and promulgating rules and regulations that create a favorable environment for the desired services. A number of recent events affect the ability of federal or state governments to use these approaches for the benefit of school-based health centers.

The federal government role in long-term funding strategies is constrained by the collapse of health care reform at the federal level and election of a fiscally-conservative Congress. One component of the proposed Health Security Act that received bipartisan support in both the House and Senate was a section providing for a large-scale federal grant initiative for school-based health centers. Funding for this initiative was to come from cost-saving changes in the plan. Failure of the overall plan eliminated projected savings and the likelihood of a large federal grant initiative. The post-election anti-Washington sentiment and the impact of presidential campaign politics on the Congressional legislative process only increases the difficulties confronting federal efforts. As a result, there is increased pressure on the states to solve their own health care funding crises.

States are facing continued fiscal pressures due to explosive Medicaid growth. In the post-Clinton reform environment, states are facing continued Medicaid budget pressures. In five years state Medicaid expenditures more than doubled, growing from $22.5 billion in 1988 to $53.6 billion in 1993 (see figure 4, page 12). Now many state Medicaid offices no longer have the flexibility to initiate or expand innovative access programs, including school-based health care. Congressional proposals to reduce federal public health dollars and curb Medicaid spending either through block grants or federal spending caps will exacerbate the states’ financial difficulties.

States are responding to fiscal pressures by developing Medicaid managed care programs. As Medicaid spending has accelerated, politically-sensitive state governments are targeting their Medicaid cost-savings on AFDC clients. These beneficiaries are being enrolled in Medicaid managed care plans, primarily through the creation of Section 1115 and 1915(b) waiver programs that, with HCFA approval, permit mandatory assignment of Medicaid beneficiaries to managed care (see figure 5, page 13). Thus, those school-based health centers that have learned how to implement fee-for-service billing systems may find themselves unable to collect payment for services because their Medicaid patients are now enrolled in managed care.

Federal eligibility standards for cost-based reimbursement are increasingly restricted and reduce revenue potential for school-based health centers. One method some school-based health centers have used to increase reimbursement from Medicaid has been to enter into contractual relationships with federally-qualified health care (FQHC) clinics. These clinics receive cost-based reimbursement under both Medicare and Medicaid because they serve communities federally-designated as “medically underserved.” As FQHC satellite facilities, school-based health centers may receive cost-based reimbursement for care provided to Medicaid beneficiaries. With the federal government facing budget limitations, the identification of communities eligible for “medically underserved” status has become more restrictive. Expansion, and indeed, retention of the FQHC programs is increasingly uncertain as managed care programs have spread. Currently, litigation (NACHC v. Shalala) is challenging the right of the US Department of Health and Human Services to waive FQHC entitlements under Medicaid managed care programs.

School-based health centers have not been defined as “Essential Community Providers” and are therefore not automatically entitled to any special treatment that may be accorded “safety net” services. In an effort to retain cost-based reimbursement for programs targeted on the underserved, a number of health care providers have been identified at the federal or state level as “Essential Community Providers” (ECPs). School-based health centers have not been included in any federal or state definition of “essential community provider,” nor are designated essential community providers such as community health centers required to contract with the school-based health centers. Given the legislative and regulatory environment, expansion of ECP designations at the federal and state levels may be difficult.

HCFA appears to be narrowing FQHC and ECP protections. Pending a decision in the NACHC v. Shalala case, the agency maintains that while cost-based reimbursement for FQHC providers is protected under 1915(b) waivers, 1115 waivers give states broader authority to waive all protections for FQHC providers. Moreover, even under a 1915(b) waiver, the state need not protect all FQHCs or ECPs but need only assure that Medicaid beneficiaries retain access to one such provider. Thus, contracts between a school-based health center and a FQHC might not assure participation in a managed care plan or cost-based reimbursement.

The Employee Retirement Income Security Act (ERISA) exempts large numbers of employers from complying with state laws regulating health insurance. ERISA, the federal law governing self-insured employers, precludes states from placing any requirements on self-funded health insurance programs, including managed care. Increasing numbers of employers are self-insuring their employees so that nationally almost half of all privately insured workers come under self-insured plans. As a result, there is a shrinking private insurance market from which states might seek support for school-based health centers via sales or other taxes. While school-based health centers may well be viewed positively by the private sector, ERISA legislation may limit a state’s ability to require its participation in school-based health center initiatives or to control how that participation takes place. Cooperation among private insurers, major employers and government agencies may bring about a partnership to support school-based health centers, but the state’s role in such efforts at this point appears likely to be advisory rather than directive. Note, however, that the April 1995 decision in the New York Conference of Blue Cross and Blue Shield Plans et al. v. Travelers Insurance Co. et al. may increase the ability of states to finance and regulate health care.

Iglehart, JK. Health policy report: Medicaid and managed care. NEJM 1995; 332(25):1727-1731.

National Health Policy Forum, Issue Brief No. 656. ERISA and state flexibility: Exploring options from a state perspective, Fall 1994.

Rosenberg & Associates. Financing adolescent school-related health centers under the proposed National Health Security Act. Author, Point Richmond, CA, January 1994.

Defining a school-based health center: An essential step towards a financing policy

Because federal Medicaid regulations do not define school-based health centers as participating entities within the program, if a state is to develop special Medicaid-related funding strategies for the centers, the state Medicaid program needs to define the centers as a reimbursable ambulatory care provider-type, that is, a particular health care delivery system unit that can be shown to meet specific standards. Examples of ambulatory care provider types include hospital or health department-sponsored out-patient clinics, federally qualified health centers (FQHC), rural health centers, physicians and physician practice groups, and certified nurse practitioners.

There are advantages, particularly related to reimbursement, to designating school-based health centers as a specific provider type. For example, federal law stipulates that FQHCs and rural health centers (RHC) are entitled to reimbursement for the full cost of providing services to both Medicare and Medicaid beneficiaries. This arrangement allows the centers to include in their payment rate the costs of providing non-medical health services (social work and mental health services, case management, outreach, transportation, community health education, etc.) that are not typically reimbursed in a private medical practice. School-based health centers affiliated with FQHCs and RHCs have the potential for realizing cost-based reimbursement through their sponsor.

States as regulators of Medicaid rate payments can also establish a special reimbursement rate for school-based health centers that, similar to the FQHCs, compensates school-based providers for a broad scope of services to Medicaid beneficiaries. To pursue such a strategy, however, the State Medicaid program must define a school-based health center — both by identifying the population to be served and by delineating the specific services to be provided.

(1) Options for targeting criteria: defining the communities to be served by state-supported school-based health centers.

Limited resources preclude the expansion of centers into every community that might desire one. Decisions must be made. Priority-setting among communities (i.e. targeting) might utilize one or a combination of the following factors: income, age, insurance status, and health care access.

(a) Low-income

While all school-age children need a broader set of services than is covered under most health insurance, upper-income communities appear more able to finance their own needs. Parents may be more likely to have full-family employer-based health insurance coverage, as well as the time and money to coordinate the different needs of their children. However, working families with low to moderate incomes may have more limited resources, in terms of both time and money. A state may wish to locate centers in those communities with a significant proportion of poor and near-poor households.

A rationale for using low-income as a targeting criterion is that health services research has documented that low income children experience greater health problems than children as a whole.

  • Children with emotional or developmental problems are likely to be poor, to have multiple persistent problems, to live in identifiable underserved neighbor-hoods, and to face particular barriers to needed services (Starfield B, 1992).
  • The high child poverty rate in the United States substantially increases the health problems of children. The frequency rates for many medical problems are double to triple the norm among low-income children. Child deaths due to diseases are triple to quadruple those of other children, and low-income children have much greater percentages of conditions limiting school activity, lost school days, and severely impaired vision (Starfield B, 1992).

(b) Age

Age may be used as a targeting criterion to improve health care access for a specifically-defined age group that experiences greater access barriers than other age groups, or may have greater needs. Historically, adolescents ages 10-19 have been a primary target group for school-based health care because national data suggest that, as a whole, adolescents are less healthy and utilize health services less frequently than their pre-adolescent peers.

As more communities place school-based health centers in elementary schools, states must carefully assess the political ramifications of targeting populations generally thought to be less in need and better served by traditional health care systems.

Some of the data confirming the health needs of adolescents are as follows:

  • At least 20 percent of adolescents have one serious health problem. These include visual, auditory and dental problems that can seriously impede the ability to perform well in school. Many adolescents also suffer from a diagnosable mental disorder (Office of Technology Assessment, 1991). Mental health problems increase with age: while 12.7 percent of 6-11 year olds are reported as having emotional or behavioral problems, 18.5 percent of 12-17 year olds have these same problems. The highest frequency of problems is reported among males ages 12-17. The most common problems include attention deficit disorders, phobias and anxiety disorders, depression, and learning disabilities (Zill and Schoenborn, 1990).
  • In addition to chronic physical and mental health problems, adolescents have experienced some striking increases in behavior-related problems. Suicide and homicide rates have tripled among young people aged 15-19. One in five adolescents acquires a sexually-transmitted disease by age 21, and teen pregnancies continue at a rate of one million teenage girls becoming pregnant each year (Lear, 1995).
  • Mainstream delivery systems are not geared to adolescents. Adolescents present special problems to caregivers given that their care needs to be confidential, convenient, comprehensive and age-appropriate (Office of the Inspector General, 1993).
  • Adolescents see office-based physicians less frequently than other age groups (Klein et al, 1992).
  • Many primary care physicians do not feel comfortable with adolescents, who are seen as not fitting into a pediatric or an adult care model (Klein et al., 1992).
  • Young people are often “of the moment.” They are likely to seek care at the time it is needed. If medical attention must be scheduled at a later time, a broken appointment is likely to result (Office of the Inspector General, 1993).
  • In many states, Medicaid and other public assistance programs cover few adolescents.
  • Uninsured adolescents are reluctant to burden financially-struggling families with health care costs (Feiden, 1993).

(c) Insurance Status

As employer-based health insurance declines and children of working parents become increasingly less likely to be insured, states may choose to target communities with significant numbers of uninsured school-age children. Recent publications have documented the increased numbers of uninsured children and the implications for health care access:

  • An article in the New England Journal of Medicine showed that uninsured children aged 6-17 were significantly less likely to see a physician for four common conditions for which medical care is considered necessary (pharyngitis, acute earache, recurrent ear infections, and asthma), even when socioeconomic conditions were taken into consideration (Stoddard et al., 1994).
  • Children’s employment-related insurance coverage declined from 64.1 percent in 1987 to 59.6 percent in 1992 (Teitelbaum, 1994).
  • Lack of health insurance crosses boundaries of race, family status and family income. In 1992, almost 8.3 million children were uninsured for the entire year, of whom 6.4 million were white (12 percent of all white children), 1.4 million were black (13.5 percent of all black children), and about 2 million were Latino (25.7 percent of all Latino children, noting that persons of Latino origin may be of any race) [Teitelbaum, 1994].
  • In 1987, most uninsured children lived in poor or near-poor families. Almost half of children from families with incomes below the federal poverty level (FPL) was uninsured for all or part of the year; almost 35 percent of children in families between 100 percent and 200 percent of the FPL was uninsured for all or part of the year (Monheit, 1992). In 1991, the highest percentage of uninsured children was from families with incomes between $10,000 and $19,000 (Kogan, 1991, cited by Teitelbaum).

(d) Inadequate primary care access

Barriers to ambulatory care due to inaccessible or limited numbers of primary care providers may constitute another criterion for community selection. Evidence of access problems for school-age children have been reported in leading medical journals.

  • Investigations by the United Hospital Fund in New York City, which reports on City programs providing innovative AIDS and health care services to high-risk adolescents, indicate that adolescents have problems in accessing care in underserved areas (Feiden, 1993).
  • Hospital admissions in New York City for ambulatory care-sensitive conditions, which suggest inappropriate emergency room utilization and inadequate primary care availability, are significantly associated with area and income for children aged 6-17 (Billings et al. 1993).
  • A recent article in the New England Journal of Medicine by the Medicaid Access Study Group points out that for Medicaid beneficiaries, obtaining ambulatory care outside of emergency rooms is difficult (Medicaid Access Study Group, 1994).

In summary, it might be argued that the children for whom school-based health centers are most useful are adolescents, ages 10 – 19, from low-income families. Many of these young people are without health insurance, and even for those who have Medicaid or some other form of coverage, access to care may be limited by social conditions including the absence of appropriate providers in their community. In addition, the range of care for chronic physical, mental health and behavioral conditions, and the social support to help them manage ongoing problems, is not routinely available through existing health care provider organizations.

States will likely have many more needy communities than can be served by a state-sponsored program. Therefore, it may be important for a state to add additional criteria, such as community support or evidence of parental leadership. States may also choose to rank-order communities in terms of variables such as the availability of local matching dollars, or the perceived likelihood of success. The viability of a state-sponsored school-based health center program will be significantly enhanced by the development of explicit criteria for the kinds of needy communities where the program is most likely to be effective.

(2) Defining school-based health center services

To determine the costs of operating a school-based health center as well as to lay the groundwork for discussions with managed care plans, states must define the required components of school-based health care and identify standards for how services are to be rendered. The School Health Policy Initiative at Montefiore Medical Center, in collaboration with groups of national experts, has developed both a set of operating principles for school-based health centers and an outline of recommended services to be provided by the centers (Brellochs, 1995).

Service criteria typically include a statement of program objectives. An example for a school-based health center might be: “to assist students to function appropriately in their social and educational environment by meeting their physical, social and behavioral needs in a comprehensive primary care center with-in a school-based health program.” Services to achieve this objective can include:

  1. preventive and primary care, including health education.
  2. diagnosis and treatment of illness and injuries, including referral to linked partners, follow-up care, and longitudinal management of chronic problems,
  3. limited on-site laboratory capability;
  4. radiology service through linked providers.
  5. access to appropriate mental health resources.
  6. behavioral health care and social support.
  7. coordination of health and educational concerns.
  1. State standards for school-based health centers are spelled out in documents supporting a number of state grant initiatives. While state Medicaid programs have not yet become involved in the definition of school-based health centers, state health departments have become increasingly so. In the process of initiating grant pro-grams for school-based health centers, the health departments have established program goals, described service and staffing standards, and defined prototypes for replication. Of the 50 states surveyed by the Making the Grade National Program Office, 22 have established state school-based health program guidelines, ranging from suggested to mandated program standards (see Table 2 below). Twelve of these standards, judged by the Program Office to be well-defined and comprehen-sive, are summarized in the appendix. Nine states reported that program guidelines were under development. With few exceptions, states define school-based health centers as vehicles for coordinating and delivering accessible primary physical and mental health services to students. The states’ definition of required or desired services are fairly uniform. The services to be provided include: preventive health care, acute care, routine examinations, immunizations, social services, health education and mental health counseling. Reproductive health services are more frequently suggested than required for centers serving older students. What becomes clear from conversations with state officials is that the process of defining the school-based health center service package is difficult given the value attached to a strong programmatic role for local officials and community groups. Extensive discussions involving a mix of state and local representatives are essential to establish consensus on the service package (Schlitt JJ, et al)

    Table 2. State Guidelines For School-Based Health Centers1
    Required/Suggested Guidelines2
    In Develop-ment3 No
    New Jersey
    New Mexico
    New York
    North Carolina
    Rhode Island
    West Virginia
    New Hampshire
    North Dakota
    South Carolina
    South Dakota
    1 With many states developing new school-based health center initiatives and other states assessing and re-assessing their preferred models, all state guidelines might be considered “works in progress.”2 States in this category have either issued guidelines which must be complied with as a condition of state funding or have developed guidelines that are recommended to communities but are not a requirement for funding.

    3 Some states that have funded school-based health centers using general guidelines are now clarifying their service standards and staffing requirements. These states are moving towards an explicit comprehensive model. A number of states a re elaborating several models for health services in school, ranging from limited services to comprehensive health centers. States that have recently funded school-based health centers are developing their initial standards by drawing upon the experience of older programs.

    4 States that have not developed guidelines for school-based health centers either do not support centers or have a total commitment to local control.

    Billings, JD, Zeitel, L, Lukomnik, J, Carey, T, Blank, A, Newman, L. Impact of socioeconomic status on hospital use in New York City, Health Affairs, Spring 1993.

    Brellochs C, Fothergill K. Ingredients for success: comprehensive school-based health centers. A special report on the 1993 national work group meetings. Bronx, NY: School Health Policy Initiative, Montefiore Medical Center, Albert Einstein College of Medicine, 1995.

    Cartland, JD, Yudkowsky, B. State estimates of uninsured children, Health Affairs, Spring 1993.

    Feiden, K. Health Care for Adolescents: Developing Comprehensive Services, United Hospital Fund, April 1993.

    Klein, JD, Slap, G, Elster, A, Schoenberg, SK. Access to health care for adolescents, Journal of Adolescent Health, Vol. 13, No., March 1992.

    Klein, JD, Slap, G, Elster, A, Cohn, S. Adolescents and Access to Health Care, Bull. NY. Acad. of Medicine, New York, NY., Winter, 1993.

    Klein, JD. Adolescents, Health Care Delivery System Issues and Health Care Reform, Center for Reproductive Health, University of California at San Francisco, 1994 (in press).

    Kogan, M. Unpublished data from the 1991 longitudinal follow-up to the 1988 National Maternal and Infant Health Survey, National Center for Health Statistics, Hyattsville, MD.

    Lear, JG. Health care goes to school: an untidy strategy to improve the well-being of school-age children. In: Social policies for children, Garfinkel I, Hochchild J, McLanahan S, eds. Washington, DC: Brookings Institution, in press.

    Leibowitz, A, Manning, WG, Keeler, EBB, Duan, L, Lohr, KN. Effect of cost-sharing on the use of medical services by children: interim results from a randomized controlled trial. Pediatrics, 1985; 75.

    Monheit, AC, Cunningham, P. Children without health insurance, The Future of Children, The David and Lucille Packard Foundation, Winter, 1992.

    Office of the Inspector General, Recommended guidelines for the standards and operations of school-based clinics in New York State, in School Based Health Centers and Managed Care, Department of Health Services, Office of the Inspector General, December, 1993.

    Schlitt JJ et al. State initiatives to support school-based health centers: a national survey. Journal of Adolescent Health.

    Starfield B. Child and adolescent health status measures, The Future of Children: US Health Care for Children, vol., no. 2(Winter 1992), pp. 25-39.

    Stoddard, J, St. Peter, R, Newacheck, P. Health insurance status and ambulatory care for children”, NEJM, Vol. 330, No. 20, May 19, 1994.

    Teitelbaum, MA. The Health Insurance Crisis for America’s Children, Children’s Defense Fund, March 1994.

    The Medicaid Access Study Group. Access of Medicaid recipients to outpatient care, NEJM, Vol. 330, No. 20, May 19, 1994.

    US Congress, Office of Technology Assessment. Adolescent Health, Volumes I, II and III, Washington, DC.: US. Government Printing Office, 1991. OTA-H-466.

    Zill, N, Schoenborn, CA. Developmental, learning and emotional problems, Advanced Data from Vital and Health Statistics of the National Center for Health Statistics, Hyattsville, MD: US DHHS, November 16, 1990.

    Strategies to fund school-based health centers: Alternative reimbursement models.

    Once the state has defined a school-based health center provider-type by identifying the community to be served and the services to be provided, the state must then address how the school-based health centers will be paid for their services. In so doing, the distinction between local and state perspectives must be considered. The individual school-based health center or its sponsor is responsible for covering its operating costs; the full range of alternatives from contracts with managed care plans to fee-for-service billing to categorical grant initiatives and in-kind contributions must be explored. Regardless of its creativity and energetic pursuit of financing, however, the health center’s access to financial support will be determined, in great part, by decisions at the state level.

    The level of state support for school-based health centers is a function of the combined decisions of all the state agencies that agree to participate in supporting care provided by the centers. It is therefore important that the broadest range of decision-makers sit at the table when determining what resources can be applied to school-based health centers. In general, the key participants will include the Medicaid director, the Commissioner of Public Health, the Superintendent of Schools, the Commissioner of Mental Health and, perhaps, the Insurance Commissioner. If special health care reform offices have been established, their involvement is essential as well.

    To assure stable long-term financing for school-based health center programs, resolution of the following issues is critical: Should payment to the centers be on a fee-for-service basis? How are uninsured students to be covered? How can this program fit with managed care? Should state-supported programs be paid only through Medicaid, and if so, should they serve only the Medicaid-eligible population? Experience has shown that whichever model the state chooses to adopt must be accepted and supported at every level of state government.

    There are a limited number of approaches for paying school-based health centers for the care they provide to designated populations. These include a regulatory approach, a market approach, and a “pooled fund” approach.

    A regulatory approach

    Under this approach, the state through its regulatory process defines the school-based health center provider-type, including the establishment of targeting criteria and services to be provided, and mandates that Medicaid managed care plans (and/ or potentially all licensed insurers in the state) pay the provider-type for services provided to their enrollees at a stipulated rate determined to cover the costs of providing that care.

    This approach is not dissimilar to some existing provisions under managed care. For example, family planning services are often “carved out” from the primary care contracts of Medicaid managed care providers. That is, although family planning is a covered benefit for which the managed care plan is responsible, enrollees may obtain family planning services outside the plan without going through their primary care “gatekeeper.” The managed care organization excludes family planning services from the per capita payment to the primary care provider, and pays the family planning organization on a fee-for-service basis. This is done because all parties want enrollees to have free access to family planning services, which would be less likely to occur if pre-approval were needed from the primary care gatekeeper.

    The regulatory approach has several benefits: it provides stable funding; it defines and codifies the school-based health care model; and it allows the state to determine the scope and breadth of the program. It also fits well within the traditional role of government in serving the low-income population. The necessary technology exists to implement the approach, since the centers will be serving in an established role, that is, they will operate as vendors to managed care plans.

    There are also drawbacks: The percentage of school-age children for whom a school-based health center would receive payment under such an approach must be carefully assessed. Because states may lack adequate regulatory authority over self-insured plans (approximately half of all insured employees and dependents are insured through self-insured plans), the financing of school-based health centers will be largely dependent on Medicaid and other insurance plans regulated by the state. If only a small number of students are covered under Medicaid and other state-regulated plans, funding for the centers from this source will necessarily be limited.

    From the perspective of the school-based health center, the regulatory approach calls for considerable administrative effort. The center will need to identify the managed care plan in which the student is enrolled (in general it is the parent, rather than the child, who is the direct enrollee, making identification sometimes very difficult). The center must then obtain all necessary billing numbers and generate a bill that meets the needs of the managed care plan. The problems faced by Medicaid managed care programs in managing the Medicaid population will be passed on to the center, and are likely to become magnified in the process. Notification of plan enrollment change by the parent may not be accomplished smoothly, and the problem of eligibility may become even more difficult. Representatives of Medicaid managed care plans complain that their greatest problem arises from involuntary disenrollment through loss of eligibility, which often affects 50 percent of their covered population annually.

    Other complex problems may arise in a Medicaid managed care plan, including possible limitations on mental health services providers, and an unwillingness to reimburse for services of clinical social workers, who often play a major role in school-based health care. Moreover, the managed care plan may limit the number of outpatient mental health visits, or may require (as in New York State) that after 10 such visits the patient’s care is shifted to a mental health managed care provider.

    Lastly, to participate efficiently within a managed care system, school-based health centers will need medical billing capability and full understanding of the complexities of health care accounting practices.

    A market approach

    Under the market approach, rather than identifying and certifying the school-based health center as an essential provider-type, the state would define the function of the school-based health center as an essential service. That is, the state would specify that if a managed care organization is authorized to serve an area with more than a certain percent of Medicaid enrollment, it must provide school-based health care services as part of its Medicaid contract.

    Using this approach, it would be possible for managed care organizations to work collaboratively with community schools to ensure a sound, well-organized program. Collaboration, however, is by no means guaranteed. Several centers might be organized by competing plans in schools that are in close proximity to one another. Will the centers serve students who are not enrolled in the sponsoring plan? Indeed, there are a number of potential problems, including neglecting the sensitivities of the school itself. Some schools may not want a center either for political reasons or due to space scarcity. The issue of governance is also likely to be problematic: who would own the center and could it be owned by one plan, or by several together?

    The question of accountability also arises. To whom would the managed care organization be accountable, and for what? Could students vote with their feet and obtain services elsewhere? Hypothetically, unless the managed care organization is held accountable for the services it provides via school-based health center standards, the plans may find it in their best interest to limit resources and make the program extremely unattractive. Without accountability, there will be limited acceptance of responsibility for the needs of the student, and an idiosyncratic program may well develop.

    A “pooled fund” approach

    Under the pooled funding approach, the state assumes direct responsibility for the program, and funds it via a global budget paid directly to each center. The state determines the centers’ operating cost and creates a fund to pay for a specific number of centers by pooling money from a variety of sources. These include Medicaid funds obtained under 1115 waivers, federal maternal and child health funds, state general revenue support, foundation grants, and other related funds available through education and human services. By the state pooling these funds together, matching federal Medicaid funds under the terms of the 1115 waiver could be obtained. The project could then be administered by an appropriate state agency in accordance with defined targeting criteria and service levels as previously discussed.

    In 1991, the New York legislature considered a variation of this approach. As reported by Christel Brellochs, proposed legislation sought “to take advantage of disproportionate share allowance provisions of the federal Medicaid program by designating the $3 million in State funds allocated to school-based health centers as the state contributions to Medicaid. If this amount were matched by local (25%) and federal (50%) shares, approximately $10 million would be generated for the school-based health centers. Combined with the Title V allocation of $3.5 million, a total of $13.5 million would be available to fund school-based or school-linked services.” The proposal was rejected by the New York Senate as a result of end-of-session politicking, but the New York experience suggests the possibility of this approach (Brellochs, 1992).

    The model, however, has not been implemented in any state. As a result, there are a number of issues that will need to be resolved. The state must be able to monitor the management of global budgets by the centers to assure efficient operation. Incentives for optimum utility must be incorporated so that if a center’s utilization rate is lower, it receives a smaller budget. At present, there are limited data available to inform the establishment of an appropriate budget based on utilization (that is, we don’t currently know, in a high school of, for example, 1,000 students, what the normative budget for a school-based health center should be, or what might impact on that budget in terms of making it larger or smaller).

    A major attraction of this approach is that currently-available funds, such as the Maternal and Child Health block grant program and private foundation grant awards such as those from the Robert Wood Johnson Foundation, the Kellogg Foundation, and the William Caspar Graustein Memorial Fund could be used to learn more about how to organize this kind of program and manage global budgets efficiently. It would then be possible to “carve out” the services and finances from state-sponsored Medicaid managed care programs, and continue the program as a direct state-supported operation with an appropriate global budget. The learning period could also be used to continue to build solid community support for the program. This includes working with the schools to assure their perception of ownership and working with community providers to develop sound referral relationships, an essential requirement for collaborating with managed care programs.

    It seems as if we can see the future for school-based health center programs, as for all other health care endeavors, only in a glass darkly. Nonetheless, it seems possible that this kind of globally-budgeted program, funded by the state through pooling a variety of resources, may provide a sound interim step in learning not only how to fund the program for the longer term, but also how to implement it effectively through well-developed targeting and service criteria.

    A comparative analysis of the three long-term financing approaches is summarized in Table 3.

    Table 3. Alternative Reimbursement Models For State-Sponsored School-Based Health Center Programs

    Regulatory Model Market Model PooledFund
    Accountability Must meet state-defined criteria Unclear Managed by state dept. of health
    Payment Mechanisms State-stipulated per-unit rate (fee-for-service) Determined by market State-determined global budget
    Administrative Burdens High for all parties: state, centers and managed care plans Low for states; market determines for managed care plans Mid-level for states; minimal for centers and managed care plans
    Student Evaluation Choice limited to enrollment opportunities under Medicaid managed care Unclear State accountability process must include student assessment
    Brellochs, C. Initial report: School health Medicaid project. Center for Population and Family Health, Columbia University School of Public Health, New York, Report to the New York Community Trust, January 1992.

    Rosenberg, S, et al. Beyond the freedom to choose: Medicaid managed care and family planning, Center for Health Policy Research, The George Washington University, 1994.