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Schools Fear Fiscal, Social Impact of Medicaid Cuts

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Officials of the Chicago public schools are so alarmed at the prospect of losing $35 million in federal Medicaid funding that they are sending students home with fliers that entreat parents to lobby their representatives in Congress.

Similarly, Peter J. Negroni, the superintendent of schools in Springfield, Mass., headed for Capitol Hill last week to try to avert a financial catastrophe for his district--the likely result, he said, if pending Medicaid proposals were to pass.

Reimbursements from Medicaid, the federal health-insurance program for the poor, may be worth as much as $500 million to school districts this school year--an amount that could double to $1 billion next year under current law, according to the American Association of School Administrators. Districts depend on Medicaid funding for services that range from a school nurse's treatment of a fever to hospital-like care for severely disabled children.

Schools also depend on Medicaid in less direct ways: to provide health care for children who might otherwise show up at school sick and to help shore up the increasingly tight state budgets from which schools in many states receive a significant portion of their revenue.

With the Republican-controlled Congress aiming its budgetary ax at Medicaid and other entitlement programs as part of the GOP drive to balance the federal budget by 2002, educators nationwide fear that lawmakers may be about to inflict a serious financial wound. And they are wondering how they will be able to staunch the bleeding.

Limiting Growth

Under current law, Medicaid coverage is guaranteed to anyone who meets the eligibility requirements. Participants must have low incomes and also be elderly, disabled, or in families with children or pregnant women.

Committees in both the House and Senate have drafted proposals that would remove the guarantee of coverage, limit annual growth in Medicaid spending, and turn the money over to the states with relatively few strings attached. The proposals, contained in budget bills, could be considered on the House and Senate floors as early as next week. (See story, page 28.)

Supporters say the House proposal would save $182 billion over seven years, and the Senate plan $186 billion. An alternative plan proposed by President Clinton would reduce Medicaid spending by $54 million over seven years.

The congressional plans would send Medicaid money to the states in a lump-sum payment, or block grant. Currently, states are reimbursed for a portion of each dollar they spend on Medicaid, with poor states getting proportionately more.

Block-grant allocations would be based on current spending, adjusted through complicated formulas that are the subject of considerable congressional controversy. Overall, annual increases would be held to about 4 percent by 2002, down from an annual growth rate now of about 10 percent.

States would have great authority to decide whom to cover and what services to provide, although they would have to spend a minimum amount on certain categories of recipients, including families with children or pregnant women.

The Senate bill would guarantee coverage for impoverished pregnant women, children ages 12 and under, and the disabled, but the House bill would not.

Uninsured Children

Republicans argue that Medicaid costs, which have exploded in recent years with the rising cost of medical care, must be curbed along with other spending in order to balance the federal budget.

"We'll have no money for education, no money for highways, no money for defense" if entitlement spending is not limited, said Ginny Koops, a spokeswoman for the Senate Finance Committee.

"I think [critics] will see the governors will be able to do a better job when they have more flexibility to create a program to best fit the needs of their state populations," she added.

But advocacy groups such as the Washington-based Children's Defense Fund argue that as many as 19 million children could be without health insurance by 2002--twice as many as in 1993--if the legislation passes.

About 18 million of the nation's children, or about one in five, depend on Medicaid for basic health care, according to the Clinton administration. Mothers and children make up about three-quarters of Medicaid recipients, according to the National Association of Children's Hospitals, although they represent only about 30 percent of the spending, as the cost of care for the elderly and disabled is much greater.

While they are concerned about the welfare of poor students whose health care may be in jeopardy, educators are bracing for a more immediate financial impact.

In Chicago, for example, $35 million in Medicaid funding may only be a small part of the district's $1.6 billion annual budget, but the district's budget director, David Agazzi, said losing it could force significant cuts in instructional services. If he had to cut teaching positions in order to keep state-mandated school nurses, he said, the district would lose 875 of its 26,000 teachers.

"We'd be very hard pressed to replace it without it actually impacting the classroom," he said.

State Priorities

Schools would probably be hit hardest by the proposed changes when it comes to students with disabilities. They are required by federal law to provide medical and support services such children need to benefit from schooling, which range from speech therapy for a stutterer to all-day nursing care.

Districts began taking advantage of Medicaid reimbursements only in recent years, under a change in federal law in the mid-1980s that allowed them to apply for money for special-education students who were Medicaid-eligible. But Medicaid has become important to districts looking for new sources of money to pay for rising special-education costs.

If the federal government were to supply fewer total dollars and already strapped states had to decide how to distribute those resources, school officials fear they could lose out--and be forced to pick up the entire special-education tab.

A state faced with budget cuts has to decide whether to reduce spending for all programs or focus all its resources on the most vulnerable populations, said Diane Sydoriak, the associate director for special education in the Arkansas education department. She said Arkansas officials are already convening a series of town meetings to discuss what priorities the state should set if federal programs are turned into block grants.

"So that when we get down to the policymakers needing to make these tough policy decisions, they know what it is the citizens of this state value," Ms. Sydoriak said.

She said more than 200 districts in her state receive a total of about $2.8 million in Medicaid reimbursements for special-education services like occupational and physical therapy for low-income children.

"In a state like Arkansas, that's a lot of money," Ms. Sydoriak said. "If we lose that, where's it going to come from?"

Glimpse of the Future?

In Springfield, a low-income urban district in western Massachusetts, the schools receive more than $2 million a year in Medicaid reimbursements for about half of the district's 3,600 special-education students. Superintendent Negroni said it helps pay for transportation and bus attendants for such students. He had also been planning to apply for Medicaid money to support school-based clinics.

"It would be a tremendous blow to me if I didn't have access to this money," Mr. Negroni said. Losing it would mean digging into the regular education budget to see what services he could shave in order to continue mandatory services for disabled children.

"It's going to be catastrophic," he said.

In Wayne County, Mich., County Superintendent Mike Flanagan counts on Medicaid to send his schools about $5 million this year. The Medicaid money may seem like a drop in the bucket compared with the $100 million the county spends overall to provide medical and related services to about 7,000 severely disabled children.

But the county is responsible for nearly half a million students--one in four of the state's schoolchildren--and encompasses some high-poverty districts, including Detroit. So every penny counts, he said.

Indeed, Mr. Flanagan fears he may have already had a glimpse of the future.

Last year, for the first time, his agency had to charge local school districts about $46 million for costs related to special-education students. Even with the Medicaid reimbursements, there was not enough money to cover all the necessary services.

Some affluent districts were able to swallow the cost without dire impact. But for other districts, the result was a financial squeeze that pitted special education against other programs, such as music. One district ceased running school buses.

"You create an atmosphere that's unhealthy," Mr. Flanagan said, "because all those needs are real."

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