Clarify guidance on school Medicaid and FERPA exceptions

The Family Educational Rights and Privacy Act (FERPA) (20 U.S.C. § 1232g; 34 CFR Part 99) protects the privacy of student education records and applies to all schools that receive funding from the DOE.[1]

The updated May 2023 CMS guide for delivering Medicaid school-based services introduces an extremely challenging FERPA requirement that threatens to negatively impact schools’ ability to bill Medicaid.[2] As a part of the cost settlement model, local education agencies (LEAs) are reimbursed, in part, based on the percentage of Medicaid-enrolled students at the LEA, also referred to as the Medicaid Eligibility Ratio (MER). The CMS guidance states: “The MER is a ratio of Medicaid-enrolled students (per FERPA who have parental consent to release information to Medicaid) at each LEA (or other claiming entity) divided by the total number of enrolled students.” The addition of FERPA as a requirement will significantly reduce the MER for most districts, resulting in a major decrease in school funding.[2]

However, the FERPA statute itself does not require consent to be included in the MER. Current FERPA regulations allow states a pathway where FERPA consent is not required for the MER. The current guide, as written, would not allow states to follow this pathway.[2][3]

CMS should clarify in writing - through the TA center or other means -  that the requirement to have the free care numerator include only those students who are both Medicaid enrolled and have FERPA consent is not meant to supersede the allowable FERPA exceptions. The DOE should also provide State Education Agencies guidance that audits of the school Medicaid program conducted by the Office of the Inspector General (OIG) fall under the audit exception to FERPA. The DOE should clarify that for the purposes of audits, school Medicaid is considered an education program and LEAs are free to release information to auditors.[3]

Absent this action, Congress should ​update the FERPA statute to allow for school Medicaid exceptions that clearly allow: (1) LEAs to disclose all necessary information to the state Medicaid agency for the purposes of determining Medicaid enrollment; (2) LEAs to provide all necessary information to OIG in the event of an audit – including individual education plans (IEPs); and (3) LEAs to submit necessary billing/claiming information to the Medicaid agency without FERPA consent. The free and reduced lunch exceptions to FERPA set a precedent for this approach. [3]