Medicaid cuts may impact special education services
Special-education advocates and some public school districts are bracing for potential budget constraints as they prepare for the $1 trillion in Medicaid cuts the president signed into law last month.
The billions that public schools get each year in reimbursements from Medicaid for services such as counseling and speech therapy are at risk, advocates warn.
As cuts to Medicaid start next year, educators and other experts say they are beginning to evaluate an uncertain future that could make schools responsible for billions more in services for students. Federal law requires schools to provide medical services to eligible students with a range of disabilities and needs.
“If the proposed changes move forward as written, most districts would start feeling the financial squeeze within next school year’s budget cycle,” said Lateefah S. Williams, a senior attorney at Maryland-based Shefter Law who focuses on special-education law. “That means families could see reductions in available services, longer wait times for evaluations, or staff layoffs when school starts back in the fall.”
Medicaid spends about $8 billion on school-based services, according to fiscal year 2024 data, the most recent data available. Schools bill their state for medical services provided to students who are on Medicaid and are later reimbursed.
Though the nonpartisan Congressional Budget Office has said the law will result in less Medicaid spending over the next 10 years, it remains unclear whether reimbursements to schools will be affected.
States and school districts would decide how to pay for services in the event of any shortfalls, experts and government officials said.
In a statement, the Center for Medicare and Medicaid Services said nothing in the One Big Beautiful Bill “impacts eligibility, benefits, or services provided to children under the age of 19. Additionally, there are no new federal requirements that impact a state’s ability to cover and pay for Medicaid services in schools.”
In Asheville City Schools, roughly 600 of the district’s 3,800 students require special-education services. The district receives $400,000 in Medicaid reimbursement annually, according to Heidi Kerns, the chief financial officer of Asheville City Schools.
Heather Brown, 52, receives services from the district for her daughter, Lynnzie, 16, who was born with cerebral palsy that severely impacts her motor functions and ability to communicate.
Medicaid funds cover services for Lynnzie’s physical and occupational therapy and vision care at home, where she receives schooling and treatment. District leaders also meet with Brown twice a year to discuss goals for her daughter’s individualized education program (IEP).
“They’ve always been really helpful and went above and beyond to make sure my kid is comfortable and healthy,” Brown said of the school district.
Kerns says the funds are a “lifeline” to ensuring all students in special education have resources for their care, without straining the district’s broader budget. The loss of funding could result in significant district-wide budget reductions.
“Schools are very resourceful, but we’re being stretched to the limit at the moment,” Kerns said.
Asheville City Schools has begun evaluating ways to save money if Medicaid reimbursements run dry, according to district officials. Around six teaching staff, eight instructional and behavioral support assistant positions, or four therapist roles could be reduced if the district’s federal reimbursements are cut.
“There’s a limited amount of money. And if someone will not provide that difference for all those required services we have to provide, then we have to start cutting things that we can, or increasing class sizes so we can add fewer teachers in order to make ends meet,” she said.
Frederick M. Hess, a senior fellow and director of education policy studies at the American Enterprise Institute, said he is skeptical that any cuts to Medicaid reimbursements would harm districts, which need to enact “more disciplined” spending on their special-education programs.
“Losing access to resources can be a very healthy thing for any organization, public or private,” Hess said. “It can give that organization an opportunity to reassess assumptions, to look for unnecessary or inefficient practices, and to trim staff who probably should have been trimmed years ago. But that requires the organizations to choose to use the chance to tighten their belt as that kind of opportunity.”
Jason Willis, a clinical professor at McGeorge School of Law at the University of the Pacific and senior policy fellow at WestEd, an education nonprofit, said schools will need to take care when cutting budgets because they still have to comply with federal regulations for services to special-education students.
Also, families may end up not receiving the level of service they are used to, he said. For example, reduced staffing may cause students and families to wait longer to engage with administrators and teachers for services, he said.
“It’s going to be extraordinarily difficult for education administrators to continue to accomplish all the tasks associated with complying with federal education rules when there is less funding available to support those activities,” Willis said.
In Sacramento County, California, about 250,000 students attend the county’s 14 school districts. Roughly a quarter of the county’s students receive special-education services, and nearly half of those students rely on Medicaid-provided services through their IEPs, according to the Sacramento County Office of Education.
Medicaid reimbursement reductions will impact general education students, said Kristin Wright, executive director of inclusive practices, prevention and intervention services at the Sacramento County Office of Education. Wright warns that school districts within the county would have to reevaluate budgets if the reliable stream of Medicaid funding goes away.
“These cuts set up groups of people that have the same interests to have to be pitted against each other,” she said.
D.C.’s charter schools are confident that the city will continue to provide Medicaid reimbursements, despite any cuts to the service, said Julie Camerata, the executive director of the DC Special Education Cooperative, an education nonprofit that secures Medicaid reimbursements for special-education students with IEPs for 32 charter school systems throughout Washington.
In the 2024-25 academic year, the District’s charter schools received $6.5 million in reimbursements, and the city’s traditional public schools were reimbursed roughly $10 million, according to the organization.
“Both the mayor and the council have been very supportive of the city’s public education ecosystem,” she said.
The city’s Medicaid office said it does not anticipate reductions to reimbursements in the future, according to District officials.
Other education officials are not as confident that their state and local governments will allocate funding to fill the gap left by potential cuts to Medicaid reimbursements to schools.
Kaci Coats, the executive director of the Collaborative for Exceptional Education, a Colorado organization focused on in-school programming for students with disabilities, said if Medicaid funding is reduced, she is unsure if additional funds would be allocated to cover medical and early intervention services for special-education students in the state.
“This is going to become a long-term cost for states,” Coats said.
Kaysee Grogan, a special-education teacher at Asheville Middle School, said Medicaid-funded services provide students with dedicated treatment for their medical needs, allowing her to focus on teaching.
A nonverbal student in her class received a tablet that improved his communication. Another student received a new wheelchair to ensure access to the entire school.
“The funding through Medicaid is access to many different resources and many different tools,” she said. “Cuts would drastically change a lot of students’ lives.”
Paige Winfield Cunningham contributed to this report.
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