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School of Public Health

& Health Services

Department of Health Policy

Center for Health Services Research & Policy

To: Rita Vandivort, SAMHSA
From: Sara Rosenbaum
RE: Medical necessity under the EPSDT program: when is coverage required?
Date: December 10, 2002
This monthly memorandum considers the question of when a health care intervention would be considered medically necessary under the Medicaid EPSDT program. Specifically the question is as follows: if a child is screened and considered to be at risk for mental illness onset (but there is not yet an actual diagnosis), would care be considered medically necessary were a provider to make a formal “at risk diagnosis”? In my view, the answer to this question is “yes” in light of the program’s fundamental purpose, which is to ameliorate physical and mental conditions at the earliest possible time.
The EPSDT benefit, which is defined at 42 U.S.C. §§1396d(a)(4)(B) and 1396(r) has prevention at its core. The modest legislative history of the program indicates that the purpose of the 1967 amendment was to ensure intervention at the earliest possible point in a child’s health care, when the potential to avert long term disability is the greatest.
The second component of the definition was designed to capture the legislative history of EPSDT, as well as approximately 30 years of agency guidelines and judicial “gloss” regarding the program.
Departmental history on the nature and purpose of EPSDT dates back to 1966, before enactment of the original EPSDT amendments. The Program Analysis Group that was assembled within HHS in 1966 to develop a child health initiative for President Johnson identified preventable mortality, bad teeth, and chronic handicapping conditions as the principal targets for a combined federal initiative that ultimately culminated in the enactment of the 1967 amendments to both Title V and Title XIX. Joseph Wholey, The Absence of Program Evaluation and an Obstacle to Effective Public Expenditure Policy: A Case Study of Child Health Care Programs (Urban Institute, Washington D.C., 98-121-24, 1969). A major “subordinate objective’ of the initiative was to “reduce the incidence of preventable handicapping conditions and the prevalence of uncorrected handicapping conditions. Id at p. 454 (emphasis added) Specific conditions to be prevented or treated were mental retardation, vision, hearing and speech defects, and mental and emotional disorders. Thus, the complete prevention of handicapping conditions was targeted as an early goal, quite apart from the treatment of existing conditions.
This theme of preventing conditions in order to achieve normal growth and development has continued throughout the life of the program and has been consistently recognized by courts in EPSDT litigation. HCFA also has emphasized both the preventive and treatment nature of EPSDT. Most notable perhaps, was the agency’s seminal 1981 Action Transmittal regarding developmental assessments (Transmittal No. 80-93). This transmittal expanded upon earlier explanations of the program’s purpose and intent and clarified the agency’s concerns regarding the preventive nature of EPSDT and the transcendent goal of normal growth and development. The developmental assessment guidelines underscored that the fundamental purposes of their issuance (as well as the entire EPSDT program) were to ensure “a child’s overall growth and development” MAM 80-93, p. 3, and to promote treatment before a condition became handicapping, not merely to “treat or ameliorate” a diagnosed condition. This theme of access to treatments that promote normal growth and development and not merely those that treat illnesses and conditions was carried through into subsequently issued regulations (see e.g., Preamble to final regulations at 44 Fed. Reg. 29420, (May 18, 1979): “Since 1967 the federal government has tried to design, implement and enforce a program that would assure comprehensive, preventive health care for Medicaid children”).
In order to capture this Departmental intent, it is essential to understand the EPSDT program as containing not only a “treat and ameliorate” dimension, but also a “promote growth and development” purpose. This latter purpose goes to the heart of treating before a condition needs to be “ameliorated” and can still be prevented. The medical and health services needed for the treatment of emerging problems associated with delayed physical or mental health development or nascent mental health problems thus should be covered if they fall into recognized coverage categories such as “other preventive” health services. Other services, such as early childhood education and enriched child care programs or additional stimulative play activities would lie outside of the scope of Medicaid and would be available through referral and case management only.
I have also included in this memorandum a lengthy excerpt from a previous analysis of EPSDT I prepared that pulls together the legislative history to the program in one place. I thought that it might be helpful to your work. Please let me know if you have questions.

Appendix: Excerpt from Expert Statement in Carrie v Mehnke

Overview of EPSDT

Benefit Origins and Subsequent Legislative and Regulatory History

Early and Periodic Screening, Diagnosis and Treatment (EPSDT)1 services were added to the Medicaid statute in 1967.2 The purpose of the amendment was to ensure that Medicaid eligible children would be entitled to comprehensive health services needed to identify and treat physical and mental conditions before they became serious. The Medicaid amendments were part of a broader package of reforms to both Title V of the Social Security Act and Medicaid.

The legislative history to EPSDT indicates Congress’ concern regarding states’ failure to identify and treat as early as possible “crippling” conditions in children. One of the main impetuses for the reforms was a study completed in January 1964 and titled “One Third of a Nation: A Report on Young Men Found Unqualified for Military Service.” The study, conducted by the President’s Task Force on Manpower Conservation, found that one out of every two young men called up for selective service was unqualified and furthermore, that poverty (and its effects on physical and mental health) was the major underlying factor.
In its Report to Accompany H.R. 12080, the House Committee on Ways and Means explanation of its amendments to the Title V Crippled Children’s Program3 and accompanying Medicaid amendments provided in pertinent part as follows:
Early identification of health defects of children: States will be required to make more vigorous efforts to screen and treat children with disabling conditions. Though all states have crippled children’s programs, there are substantial differences in the rate of children served among the states * * * . Many handicapped children or children with potentially crippling conditions fail to receive needed care because their conditions may not be included in state programs. Other states have not carried on aggressive programs of early identification of children in need of treatment because of lack of funds to provide the necessary care and treatment. Your committee believes that the new plan requirement coupled with increases in funds authorized will help states will early identification of children in need of correction of defects. Organized and intensified casefinding procedures will be carried out in well-baby clinics, day care centers, nursery schools, Headstart centers * * * , by periodic screening of children in schools, through followup visits by nurses to the homes or newborn infants, by checking birth certificates for reports of congenital malformation and by related activities. Title XIX [Medicaid] would be modified to conform to this requirement under [Title V].

H. Rep. 544 [to accompany] H.R. 12080 at pp. 126-127.

The original EPSDT amendments thus consisted of two components: amendments to Title V to require casefinding and early intervention; and amendments to Medicaid to ensure coverage of “early periodic screening, diagnosis and treatment.” Outreach, casefinding, and service support would be furnished through Title V health workers, while actual payment for all health services (screening, diagnosis and treatment) would be paid through Medicaid.4 By July, 1972, participating states were to serve all children under 6 and by 1973, all children under age 21 were to be served.5
The subsequent history of EPSDT reveals an effort on the part of Congress to both strengthen the treatment mandates and provisions relating to state duties to actually find, screen, and treat children.
a. In 1972, concerned that the Nixon Administration had not taken steps to implement either the Medicaid or the Title V amendments, Congress further amended the statute to impose a financial penalty on federal AFDC payments to states that failed to “inform all families * * * receiving aid to families with dependent children * * * of the availability of child health services, provide or arrange for the provision of such screening services in all cases in which they are requested, or arrange for corrective treatment * * * the need for which is disclosed by such child health screening services.” This so-called AFDC penalty statute was codified at §403(g) of the Social Security Act, 42 U.S.C. §603(g).6

b. In 1981 Congress repealed the “AFDC penalty statute” but formally moved the outreach, scheduling and transportation requirements of the program into the Medicaid statute as a specific condition of federal financial participation and thereby extended these requirements to all Medicaid-eligible children, not merely those receiving AFDC. 42 U.S.C. §1396a(a)(43).7
c. In 1989, Congress broadened the medical assistance component EPSDT to remedy what had been one of the most serious limitations of the program: the failure of some states as part of their Medicaid plans to cover medically necessary treatment for which federal financial participation was available. The 1989 amendments made such expansive treatment (which had previously been optional) a requirement for all states; it extended to all medically necessary care that fell within one of the federally recognized coverage categories of statutory definition of medical assistance, 42 U.S.C. §1396d(a), regardless of whether such services were covered in the case of persons over age 21. 8For the first time, the 1989 amendments described with particularity the full complement of preventive, diagnostic and treatment service benefits to which all Medicaid-eligible children under 21 are federally entitled. Congress amended the statute to define the EPSDT benefit package with particularity9 to consist of: (1) periodic health screening services at professionally reasonable intervals “to determine the existence of physical or mental conditions;” (2) interperiodic (i.e., as needed) exams in addition to periodic screens; (3) screening contents which consist of “at a minimum a comprehensive health and developmental history (including assessment of both physical and mental health development”, a “comprehensive unclothed physical exam,” “appropriate immunizations” [to be furnished in accordance with the schedule subsequently established under the 1993 Vaccines for Children program,10 “laboratory tests (including lead blood level assessment appropriate for age and risk factors,” and “health education (including anticipatory guidance);” (4) at professionally reasonable intervals, vision services to diagnose and treat “defects in vision” and to include eyeglasses; (5) at professionally reasonable intervals, dental care including at a minimum “relief of pain and infections, restoration of teeth, and maintenance of dental health;” (6) at professionally reasonable intervals, hearing services and treatment, including hearing exams; and (7) “such other necessary health care, diagnostic services, treatment and other measures described in §1905(a) to correct or ameliorate defects and physical and mental illnesses discovered by the screening services whether or not such services are covered under the state plan.” 42 U.S.C. §1396d(r).

d. In 1989 Congress also amended the statute to establish EPSDT participation goals to ensure full participation by all eligible children requesting services.11
The federal regulatory implementation history of the program is similarly complex. After a lengthy delay, federal regulations were initially promulgated by the United States Department of Health Education and Welfare in 1972. These regulations were replaced by broader rules in 1979 that set clearer standards, particularly with respect to the required content of the program.12 These regulations were updated in 1984 in order to remove references to the AFDC penalty statute and to effectuate other minor changes in program requirements.13 These regulations remain in effect today, supplemented by extensive interpretive guidance on all phases of the program including the outreach, health care, and administrative support dimensions of the program.14
The Key Elements of EPSDT

Taken as a whole, the statute, implementing regulations, and extensive program guidance suggest that EPSDT should be understood as consisting of four separate but highly related sets of activities: (a) the identification of children who need periodic or interperiodic EPSDT screening, diagnostic or treatment services; (b) coverage of -- and coverage standards for – the screening, diagnostic and treatment services to which children are entitled under the program; (c) arranging for the provision of health care in the case of children who need and request services as well as the provision of scheduling and transportation services; and (d) the coordination of Medicaid covered services with other necessary services that lie outside of Medicaid but that are needed.

CMS regulations and guidance relating to outreach and casefinding of children require that state Medicaid agencies “provide for a combination of written and oral methods designed to inform all EPSDT eligible individuals (or their families) about the program.”15 Information must be “clear and nontechnical” and must explain the “benefits of preventive health care, the services available under the EPSDT program and where and how to obtain those services, and that services * * * are without cost to eligible individuals, except for any enrollment fee, premium, or similar charges that may be imposed on medically needy recipients, and that necessary transportation and scheduling assistance * * * is available * * * upon request.”16
States must also “effectively inform” individuals who are blind or deaf or who cannot read or understand the English language.”17 Informing must take place within 60 days of Medicaid enrollment and at least annually thereafter.18 Transportation and scheduling services are specific requirements of the program.19 Where, as in Tennessee, responsibility for the provision of EPSDT screening, diagnostic and treatment services is shared between the state and its managed care contractors, informing to be effective would need to include an explanation of which EPSDT medical assistance and administration services are available through a child’s managed care plan and which are available directly from the state agency.
CMS regulations clearly delineate the minimum elements of the EPSDT screen.20 In addition, guidance provided by CMS clarifies the minimum content of preventive dental care (including periodic examinations, oral prophylaxis and application of fluoride treatments)21 and developmental assessment services.22
Because the word “early” modifies not only screening, but also “diagnostic and treatment” services,23 the program’s treatment requirements, as noted, are unusually strong. The purpose of EPSDT is preventive and remedial; its central goal, reflected in its history, is to promote age appropriate growth and development through aggressive identification of children with health problems and early intervention. Both screening and treatment services must be furnished in accordance with strict timelines that allow an outer limit of initiation of treatment within an outer limit of six months from the time services are requested.24 Where treatment is needed at an earlier point in order to be timely and appropriate in light of the child’s condition, the special standards that guide the program presumably would require an earlier provision of treatment in order to ensure that a child’s growth and development is not impaired. Thus, where a child’s health needs are immediate, the preventive standards that govern the provision of care under the program would require a more rapid intervention. Regardless of the outer bounds of timeliness that are specified in rules, HCFA’s manual specifies that state plans must ensure that “health problems are diagnosed and treated early, before they become more complex and their treatment more costly.”25
Case management and coordination with health and social services that a child needs but that are not covered by Medicaid is a requirement of the program.26
Children in foster care and other out-of-home placements, as well as children whose families are receiving preventive services through the child welfare system clearly could be considered particular targets for a program such as EPSDT because of their higher prevalence of physical and mental illnesses and conditions and the greater health and social risks they face. Numerous studies have concluded that EPSDT is especially important to children receiving child welfare services and have recognized the particularly complex and sensitive nature of serving these children.27 Given the health profile of children in or at risk of out of home placement, studies suggest that special priority must be given to services aimed at the early identification and treatment of mental illness and developmental disabilities and delays. Furthermore, because children in the child welfare system typically are receiving services from multiple agencies, a core element of their health care must be active case management to ensure continuous access to the full range of needed services. Assessment, diagnostic and treatment for mental and developmental disabilities, as well as case management related to the medical management of children with complex health problems, all are mandatory services for children under EPSDT.28 For this reason, a well performing EPSDT program is viewed as integral to the care of children in the child welfare system.

1 Until 1997 the program was known as Early and Periodic Screening Diagnosis and Treatment. Congress renamed the benefit as “early and periodic screening, diagnostic and treatment” that year as part of the Balanced Budget Act, Pub. L. 105-33, §4702. No explanation for the change was offered.

2 Pub. L. 90-248§302(a). The EPSDT amendments became effective July 1, 1969.

3 In 1981 the Title V program was restructured to combine into a single block grant the maternal and child health services program, the crippled children’s program, and a series of smaller categorical grant programs related to child health. Pub. L. 97-35, §2181.

4 The assumption on Congress’ part was that most poor children reached through Title V worker case-finding would in fact be Medicaid-eligible. In fact, Medicaid eligibility turned out to be a more serious problem than originally anticipated. Children’s Defense Fund, EPSDT: Does it Spell Health Care for Poor Children? (Washington D.C., 1977). The problem of eligibility was not addressed to a comprehensive degree until Congress enacted a series of Medicaid eligibility reforms beginning in 1984 to expand mandatory Medicaid coverage to all poor children. Sara Rosenbaum, “Medicaid Expansions and Access to Health Care,” The Medicaid Financing Crixix: Balancing Responsibilities, Priorities and Dollars Diane Rowland, Judy Feder and Alina Salganicoff, ed. (AAAS, Washington D.C., 1993).

5 See legislative history imposing a 1% penalty on federal AFDC payments in light of evidence that states were failing to furnish services to children. Children’s Defense Fund, EPSDT: Does it Spell Health Care for Poor Children (Washington D.C., 1977).

6 44 Fed. Reg. 29420 (May 18, 1979)

7 Pub. L. 97-35 §2181(a).

8 Pub. L. 101-239, §6403

9 In my experience, there is no portion of the Medicaid statutory benefit entitlement that is drafted with the level of particularity found in EPSDT.

10 Pub. L. 103-66, §13621.

11 §1905(r) of the Social Security Act, 42 U.S.C. §1395d(r) as added by Pub. L. 101-239, §6403. These goals are described with particularity in State Medicaid Manual §5360 [reprinted in ]CCH Medicare/Medicaid Guide para. 14,551.17. The goals are designed to achieve within 5 years (by FY 1995) 80 % of the expected number of initial and periodic screening services for the number of EPSDT eligibles reported based on the periodicity schedule recommended in the American Academy of Pediatrics Guidelines for Health Supervision and the average period of eligibility in each state.

12 44 Fed. Reg. 29420 (May 18)

13 49 Fed. Reg. 43654 (Oct. 31, 1984).

14 These guidelines are found in the state Medical Assistance Manual, letters and transmittals, and various handbooks and guidance materials issued by the Health Care Financing Administration, which administers EPSDT. [Reprinted in] CCH Medicare/Medicaid Guide, para. 14.551 (annotations). In recent years, HCFA has published numerous State Medicaid directors letters clarifying federal policy in the area of Medicaid and child health services. See, e.g., Letter from Tim Westmoreland to State Medicaid Directors regarding Access of Low Income Children to Necessary Dental Care (Jan. 18, 2001); Letter from Tim Westmoreland to State Medicaid Directors regarding Childhood Lead Poisoning (April 28, 2000); Letter from Tim Westmoreland to State Medicaid Directors regarding State Action to Assure that Medicaid Beneficiaries with Asthma, Particularly Children, Have Appropriate Medical Care (Jan. 19, 2001).

15 42 C.F.R. §441.56(a)(1).

16 42 C.F.R. §441.56(a)(2).

17 42 C.F.R. §441.56(a)(3). Guidance issued in 2000 by the HHS Office for Civil Rights clarify the tests used by OCR to determine Title VI compliance in the case of communication with persons whose primary language is not English. See also Letter from Tim Westmoreland to State Medicaid Directors Regarding Policy /Guidance on Medicaid for Persons with Limited English Proficiency (August 31, 2000).

18 42 C.F.R. §441.56(a)(4).

19 42 C.F.R. §441.62.

20 42 C.F.R. §441.56(b).

21 State Medicaid Manual §5124 (B)(2) [reprinted in] CCH Medicare/Medicaid Guide para. 14,551.17.

22 State Medicaid Manual §5123.2(A) [reprinted in] CCH Medicare/Medicaid Guide para. 14,551.17.

23 42 U.S.C. §1396d(a)(4)(B).

24 42 C.F.R. §441.56(c).

25 State Medicaid Manual §5010 (B) [reprinted in] CCH Medicare/Medicaid Guide para. 14,551.17.

26 42 C.F.R. §441.61; State Medicaid Manual §5230 [reprinted in] CCH Medicare/Medicaid Guide para. 14,551.17.

27 See, e.g., National Academy for State Health Policy, Opening the Toolbox: Resources for States Seeking to Improve Health Care for Children in Foster Care (Portland, ME); National Academy for State Health Policy, State of the States Survey in Delivering Health Care for Children in Foster Care: Findings of a State Survey (Portland, ME) ; National Academy for State Health Policy, Monitoring the Quality of Health Care Provided for Children in Foster Care (Portland, ME); National Academy for State Health Policy, Health Care Protocols and Standards for Treatment of Children in Foster Care (Portland, ME). The 1997 Balanced Budget Act amendments related to managed care deem children receiving foster care and adoption assistance or in out of home placements as having a special status where the use of managed care is concerned. These special rules apply to children in non §1115 demonstration states. 42 U.S.C. §1396u-2(a)(2). In the case of states operating under §1115 waivers, a 2000 report issued by HHS indicates a special concern on the part of the Department for state management of children with special needs, including children in foster care, out of home placements, and special needs adoptions. HHS, Report to Congress; Safeguards for Individuals with Special Needs Enrolled in Medicaid Managed Care.

28 42 U.S.C. §1396d(a) and (r)(5).

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