With a $1 trillion reduction to Medicaid now signed into law, schools across the United States are preparing for a potential loss of critical federal reimbursements. Advocates for students with disabilities and district officials warn that public education systems, particularly those reliant on Medicaid to fund special education services, may be forced into difficult financial decisions as early as the next school year.
According to The Washington Post, schools collectively receive approximately $8 billion annually through Medicaid reimbursements for services like counseling, occupational therapy, and speech-language support. These services are mandated under federal law for students with disabilities, leaving school districts with limited flexibility should federal support decrease.
Though the Centers for Medicare and Medicaid Services (CMS) insist that the legislation, known as the "One Big Beautiful" bill (OBBBA), does not alter coverage for children under 19, legal and education experts suggest the financial burden could shift to state and local governments. Paige Winfield Cunningham, writing for The Washington Post, noted that uncertainty around how states will handle potential shortfalls has left districts in a “holding pattern.”
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 (600 of whom receive special education services) may need to cut several teaching and therapist positions. “We’re at our limit”, said Heidi Kerns, the district’s CFO, 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 The Washington Post. 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.
