It’s difficult for Superintendent Whitney Oakley to explain all of the ways Medicaid has helped her school district.
Like districts around the country, the Guilford County, N.C., school system bills Medicaid for an array of special education services, helping to fill the gap of inadequate federal funding to cover obligations for students with disabilities.
That’s why Oakley is carefully watching debates over federal spending cuts, which include proposals to cap federal contributions to state Medicaid programs.
“It would be a huge hit to us, so we have been paying attention,” Oakley said.
A decline in Medicaid funding wouldn’t just harm qualifying students from low-income households, district leaders said. Reimbursements help cover the salaries of staff like psychologists, therapists, and nurses whose work supports all students. Without Medicaid, districts would have to cut those employees’ hours or take funds from elsewhere to cover the costs.
In a March survey of educators by the Healthy Schools Campaign—an organization that promotes strategies like healthy school meals and on-site care—80 percent of respondents said they would expect reductions and layoffs of school health staff and personnel if Medicaid is cut. Ninety percent of respondents said Medicaid cuts would lead to “reductions across their district’s budget, outside of school health services,” the survey found.
Schools use Medicaid to bridge IDEA funding gaps
Guilford County bills Medicaid for services mandated by the Individuals with Disabilities Education Act, the nation’s primary special education law—including one-on-one nursing supports, physical and occupational therapy, and a host of screenings and evaluations.
“It would be a huge financial burden” if Congress cut Medicaid, Oakley said. “We would still have to provide the services [to eligible students with disabilities], but we just wouldn’t have the resources to do it. Doing more with less would eventually result in a cut to services for students across the board.”
When Congress passed IDEA in 1975, it committed to using federal funds to cover 40 percent of the average per-pupil expenditure for special education services, but it has never met that obligation. Current federal funding covers about 10 percent of per-pupil costs, according to AASA, the School Superintendents Association.
Since 1988, Medicaid has allowed schools to bill Medicaid for qualifying services for students with individualized education programs, helping to bridge the gap.
Twenty-five states allow schools to bill Medicaid for certain services for all students, including mental health care, and advocates have pressed more states to take advantage of a federal rule that allows them to do so, according to a tracker maintained by the Healthy Schools Campaign.
All told, Medicaid covers about $7.5 billion in funding for school-based services a year, making it the fourth largest federal funding stream for K-12 education, according to AASA.
Spending proposals target Medicaid, alarming district leaders
Exactly how congressional spending proposals could affect the program is still undecided. Through a budget process called reconciliation, both chambers of the Republican-controlled Congress are negotiating proposals for sweeping federal spending cuts they could pass with a simple majority.
Republican leaders have said they would not cut Medicaid, which is funded through a combination of state and federal dollars, instead focusing on eliminating “waste, fraud, and abuse.” But Democrats argue those claims are double-speak meant to disguise plans that would have serious affects on the program and on states’ budgets.
One possibility: A list of cost-cutting measures proposed by House Budget Committee Chairman Jodey Arrington, R-Texas, calls for reducing or federal contributions to state Medicaid programs or capping them based on a state’s population. Arrington also proposes allowing states to verify eligibility more frequently, which could cause some qualifying recipients to lose coverage if they don’t keep up with the paperwork.
Limiting federal funding could force states to reduce costs by limiting Medicaid eligibility and benefits, said a March analysis by the Center for Budget and Policy Priorities, a progressive think tank.
Because education and Medicaid are the two largest items in most states’ budgets, lawmakers may also face the tough choice of cutting K-12 spending to help pay for the increased burden of Medicaid costs, a coalition of 65 education, health, and disability-rights groups warned Congressional leaders in a February letter.
District leaders face uncertainty on multiple fronts
Proposals to cut Medicaid spending come at a time of compounding uncertainty for district leaders, said David Law, superintendent of the Minnetonka, Minn., district and president-elect of AASA. Declining enrollment, inflation, and the expiration of federal COVID-19 aid have added strain to the spring budget season. And the Trump administration’s threats to pull funding from schools with diversity, equity, and inclusion programs add to the unpredictability, Law said.
Minnetonka leaders cut $4 million from the district’s $165 million budget for the current school year, and they plan to cut $5 million more next year. Another shift in funding would force more hard choices.
In Guilford County, Medicaid makes up less than 1 percent of the district’s $922 million budget, but it’s a game changer for some of the most vulnerable students, Oakley said.
In addition to school-provided services, community organizations host 15 on-site clinics that provide primary care medical services to students during the school day, billing Medicaid and private insurance for those costs. The visits reduce interruptions to the school day, a key contributor to chronic absenteeism, Oakley said.
“We are already stretched very thin,” she said. “This is just one more complexity thrown into the mix.”
