Medicaid cuts threaten special education in schools: what you need to know

The Impact of Medicaid Funding Cuts on U.S. Schools

With a $1 trillion reduction to Medicaid now signed into law, schools across the United States are bracing for the potential loss of critical federal reimbursements. This change has sparked concern among advocates for students with disabilities and school district officials, who warn that public education systems—especially those heavily reliant on Medicaid funding for special education services—may be forced to make tough financial decisions as early as the next school year.

According to reports, schools collectively receive approximately $8 billion annually through Medicaid reimbursements for essential services such as counseling, occupational therapy, and speech-language support. These services are mandated under federal law for students with disabilities, leaving school districts with little flexibility if federal support decreases.

While the Centers for Medicare and Medicaid Services (CMS) assert that the legislation, known as the "One Big Beautiful" bill (OBBBA), does not alter coverage for children under 19, legal and education experts suggest that the financial burden could shift to state and local governments. This uncertainty has left many school districts in a “holding pattern,” unsure of how to proceed.

In Asheville City Schools, North Carolina, the potential loss of $400,000 in Medicaid reimbursements has already prompted budgetary reviews. The district, which serves around 3,800 students, including 600 who receive special education services, may need to cut several teaching and therapist positions. Heidi Kerns, the district’s CFO, said, “We’re at our limit,” emphasizing the vital role Medicaid plays in avoiding general budget overruns.

Parents like Heather Brown, whose daughter Lynnzie receives home-based therapy funded by Medicaid, fear the real-world consequences. “They’ve done everything they can to keep her comfortable and healthy,” she told a news outlet. Without that funding, services could be delayed, reduced, or eliminated altogether.

Legal experts such as Lateefah S. Williams warn that families might face longer evaluation wait times and staff shortages. “If the changes proceed as written, most districts will feel the impact by next school year,” Williams said.

Not all voices are in opposition. Frederick M. Hess of the American Enterprise Institute argued that reduced funding could drive efficiency, suggesting that forced budget discipline might eliminate wasteful practices. However, Jason Willis of WestEd countered that even leaner budgets must still meet strict federal mandates, potentially setting up schools for legal and logistical challenges.

In Sacramento County, California, where about a quarter of students require special education, districts worry that shrinking Medicaid support could pit educational needs against each other. “These cuts make groups with shared interests compete,” said Kristin Wright of the county’s education office.

Some regions remain cautiously optimistic. Washington, D.C.’s charter schools, for example, expect continued local funding support. Julie Camerata of the DC Special Education Cooperative confirmed that the city has allocated $6.5 million in reimbursements for the 2024–25 school year, and public schools received $10 million more.

Elsewhere, the outlook is less stable. In Colorado, Kaci Coats of the Collaborative for Exceptional Education expressed doubts that the state would cover the shortfall. “This will become a long-term cost for states,” she said.

Teachers, too, are seeing the direct effects. In Asheville, special education teacher Kaysee Grogan has witnessed how Medicaid funding transforms students’ lives, from enabling mobility through new wheelchairs to providing communication tools like tablets. “Cuts would drastically change a lot of students’ lives,” she said.

While the Congressional Budget Office has confirmed Medicaid spending will drop over the next decade, the specific impact on schools remains uncertain. What is clear is that districts are preparing for a fiscal landscape where difficult trade-offs may become the new norm.