NASET Q & A Corner
Questions and Answers on Related Third Party Payments and Special Education Services
What are third party payments?
School districts work with public assistance programs, such as Medicaid, to pay for some IEP service costs. In addition, IDEIA outlines how schools can bill the parents’ private health insurance if they consent. Payments for IEP services received by the school system from these sources are third party payments. Examples of third party payors include Medicaid and the parents’ private insurance company (PACER Center: Families and Advocates Partnership for Education, 2011)
What types of services are billed to third parties?
Related services, such as physical therapy, occupational therapy, speech and language therapy and rehabilitation counseling, are often billed to third parties. Usually third parties cover health-related therapies but not educational services. A parent’s public or private insurer may pay for some of the services (PACER Center: Families and Advocates Partnership for Education, 2011).
Will third party payments cost parents anything?
The final regulations implementing Part B of IDEIA require that the school’s use of third party payments won’t cost parents any out of pocket expenses now or in the future. The regulations allow a school district to bill third parties only if:
- it does not cost the parents anything (schools can offer to pay out-of-pocket expenses, such as co-pays or deductibles, in order to meet this requirement —Parents can still say no);
- it does not reduce parental coverage;
- it does not cause the child to lose services needed elsewhere;
- it does not put parents at risk of losing eligibility in other programs [34 C.F.R. 300.154(d)(2)].
Can Medicaid funds be used to pay for health-related services provided under IDEIA?
With limited federal funding for education and growth in eligible populations, states have been under pressure to seek out sources of special education financing beyond state and local tax bases; one such source is Medicaid. An amendment to IDEIA, included in the Medicare Catastrophic Coverage Act of 1988, clarified that Medicaid funds could be used to pay for health-related services provided under IDEIA.
For health-related services provided under IDEIA to be reimbursed by Medicaid, they must be:
- Provided by a participating Medicaid provider
- Medically necessary;
- Included in the state’s Medicaid plan;
- Provided to an individual eligible for Medicaid; and
- Screened for any other third party payment that may be available for reimbursement (MedStat, n.d.)
Can a school district bill Medicaid without the parent’s permission to do so?
No. In order to access Medicaid, the parent’s signed consent to release the personal identifiable information listed in the student, education record is required. Submitting information to Medicaid or any private insurance company without the parent’s permission violates The Family Educational Rights and Privacy Act (FERPA) (Arkansas Department of Education, 2011).
If a student has private health insurance and Medicaid can the school district still bill Medicaid for the related services offered to these students?
Yes, but the district must first bill the private insurance company to determine the extent of the insurer’s payment liability. The private insurance will notify the district when the benefits have been expended (or if they deny payment for school-related services). It is at this time that Medicaid can be billed (Arkansas Department of Education, 2011).
Note: Federal and State requirements state that Medicaid is the “payer of last resort”. This means that third party payments must be pursued before billing Medicaid for IDEA related services. The school would be responsible for paying for this service.
Will a child receive more services if the school can bill a third party?
No. A child’s IEP reflects his or her individual needs and the services to meet those needs. No matter who pays for them, the services, as written into the IEP, remain the same and must be delivered in a timely manner. A child won’t receive more services if a third party can be billed or less if it can’t (PACER Center: Families and Advocates Partnership for Education, 2011).
Does a school need parental consent to use private health insurance?
Under the regulations applicable to Part B of IDEIA, the school needs parental consent to use private health insurance. Each time a school wants to bill the parents’ private insurance it must:
- get parental written consent and;
- remind parents that their child will receive all the services in his or her IEP even if they refuse to consent to the use of their private insurance.
Parents are not required to allow the school to bill their private insurance. They can refuse to consent to this type of third party billing for any reason [34 C.F.R. 300.154(e)].
