Most children in the US spend a significant portion of their week – and young lives – in schools. For families juggling work, childcare, transportation, and basic needs, allocating time and resources for appointments, counseling, and preventive care can be challenging.

Leveraging the school setting for mental and physical health needs alleviates some of that burden on families, while meeting kids where they are to ensure they get the care they need for healthy development. Additionally, allowing families to seek services through the school setting can be an effective way to increase access and reduce stigma sometimes associated with seeking out services, particularly related to mental health. This is where Medicaid school-based services (SBS) come in.

While Medicaid has long supported the provision of SBS, reimbursement was traditionally limited to services documented in a student’s Individualized Education Plan (IEP) or Individualized Family Service Plan (IFSP). However, a 2014 change to the so-called “Free Care Rule” clarified that schools could seek Medicaid payment for medically necessary services provided to Medicaid-enrolled students regardless of whether those services were part of an IEP/IFSP. This policy change significantly improved access to high-quality services for students nationwide.

In recent years, this flexibility has become particularly important in the provision of mental health services. National data show that about 20% of adolescents ages 12–17 in the U.S. have a diagnosed mental or behavioral health condition, with prevalence rising significantly over the past decade. Suicide is among the leading causes of death for youth between 10 and 19 years old, with suicidal ideation rates increasing in recent years, particularly for girls. Given these concerning trends among youth, the early identification and treatment of mental health concerns is critical. Schools – and the dedicated teachers, administrators, and healthcare professionals who work in them – provide an important avenue for identifying, assessing, and referring treatment for mental health needs that may otherwise go unnoticed and unmet.

Nearly one in five U.S. students utilized school-based mental health services during the 2024-2025 school year. Medicaid provides an opportunity for schools to draw down federal funding for services they may already be providing, thereby offsetting costs that can be reinvested in accordance with the school’s and student population’s needs and priorities.

To date, 25 states have expanded their school-based Medicaid programs to cover services outside the IEP/IFSP, as permitted by the 2014 Free Care rule. This enables reimbursement for a range of behavioral health services like psychological assessments, counseling, and substance use treatment. In addition, CMS’s 2023 guidance on school-based settings reaffirmed behavioral health as a core component of services schools can provide under Medicaid. While there has been substantial growth in the awareness and provision of mental health SBS, schools, providers, and state agencies will need to work together to meet the moment and effectively navigate funding, workforce, and implementation challenges.

The Link Between Children’s Mental Health and Child Welfare Involvement

Child welfare-involved youth have disproportionately high rates of mental health needs, with up to 80% having significant mental health challenges compared to approximately 18-22% of the general youth population. Untreated mental health challenges can contribute to family instability and school disengagement, increasing the likelihood of child welfare involvement.

Research also indicates that mental health service utilization rises significantly after child welfare involvement occurs, which can suggest that many children receive support only after crises escalate. Well-timed interventions delivered in the school setting have the potential to impact the trajectory of a child’s development and the family’s stability.

How Schools Can Help with Early Identification and Intervention

Because children spend so much time in school, educators and staff are uniquely positioned to observe early changes in behavioral or emotional regulation. In fact, school settings often serve as a first site of detection for behavioral health challenges. This means school staff may be able to identify needs before they escalate, connecting families to supports earlier in the trajectory of need.

Although schools can provide early detection, the capacity to help children once issues are identified is key. Findings from recent data show that about one-third of U.S. schools felt they could not effectively provide mental health services, due to barriers such as funding constraints and shortages of mental health providers. As such, this expanded role for schools beyond their traditional educational purview will require support from external partners to ensure schools and their staff do not become overburdened.

The Role of Community-Based Providers

Support from community-based providers is essential, as schools may lack the appropriate internal clinical expertise or capacity, particularly given persistent workforce shortages.  For instance, although the recommended student-to-school counselor ratio is 250:1, the national average is 376:1.

Schools can contract with community-based providers to enable them to deliver services in schools and bill Medicaid for services, as appropriate. This arrangement expands service capacity without requiring schools to hire full clinical teams or pay for services directly.

School-based services can also be delivered through School-Based Health Centers (SBHCs), which typically have physical locations on a school’s campus and integrate primary care, mental health, and preventive services onsite. FQHCs sponsor more than half of SBHCs and this trend continues to grow. In 2021-2022, FQHCs sponsored 63 percent of SBHCs, compared to 51 percent in 2016-2017 signaling a growing trend.

Through these varied arrangements, schools and external providers are collaborating to strengthen the tie between schools and the broader community. By leveraging Medicaid as a source of sustainable funding for these arrangements, we are seeing an increasingly integrated response to the growing mental health needs of students. In turn, this minimizes barriers to families’ access to services and allows for multi-system (e.g., healthcare, child welfare, education) coordination. However, meaningful engagement requires intentional design. Schools and providers must partner with families in culturally responsive ways, to ensure that caregivers are informed partners in their children’s mental health planning rather than passive recipients and/or beneficiaries of services.

Implications for State Agencies and Policymakers

State agencies and policymakers play a pivotal role in aligning systems to support comprehensive school-based mental health care. Policies must connect Medicaid, child welfare, behavioral health, and education systems to create coherent pathways for funding, delivery, and accountability.

Despite meaningful progress, significant opportunities for improvement remain, as about half of states have not yet expanded their Medicaid school-based service programs under the Free Care Rule. In addition to expanding their SBS programs, state agencies can support schools and providers by:

• Securing federal approval for services in alignment with its student body’s needs.
• Leveraging federal opportunities, such as the Rural Health Transformation Fund, to support SBS.
• Issuing policy guidance and technical assistance to ensure schools are aware of the full scope of services and potential revenue offered by Medicaid.
• Communicating with providers who may be operating solely within the child welfare and/or behavioral health space, but who may be able to provide school-based services.
• Pursuing tailored, creative approaches to addressing specific barriers to care – such as state-funded school billing systems or stakeholder engagement to inform policy design.

A Shared Opportunity to Strengthen Child and Family Well-Being

School-based mental health services are an integral part of a state or school’s strategy to promote early intervention, access, and family-centered care. By building strong collaborations between schools, providers, and state agencies, we can create a system of care where needs are identified early, treated effectively, and supported holistically.

Coordinated, trauma-informed approaches not only improve student mental health but also strengthen families and communities, helping ensure that every child has the opportunity to thrive.

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