Congressional efforts to reform health care include capping federal funding and streamlining Medicaid to refocus it on its original, neediest recipients and slow the rate of growth for what has become an expensive, unrestricted entitlement threatening the future of the safety net for those in greatest need.

Yet critics argue that such efforts would adversely impact low-income schools, which in some cases tap into Medicaid for reimbursements for certain health-care related costs, such as school nurses and other health care professionals, and equipment for children with special needs.

Critics charge that limits on Medicaid would “put schools in competition with hospitals and doctors’ offices for coveted funds – a shift they say that’s sure to leave them short-changed.”

But the health care reform proposal making its way through Congress does not actually prescribe any reductions in Medicaid-reimbursed school services.

In fact, states are free to spend their current Medicaid funds—or to appropriate new funds—to school-based health services. Even if a state were to choose to move away from school-based strategies to meet the health-care needs of the poor children they are required to serve under Medicaid, schools would still have numerous other sources of funding for school-based health services.

Mechanics of School-Based Medicaid Reimbursements

Congress’s proposed reforms to Medicaid would only cap federal Medicaid contributions to states.

While the current funding formula varies by state, on a national basis the federal government has historically funded about 57 percent of total Medicaid spending. Although the reform would cap the per enrollee amounts that the federal government contributes to states, nothing in the proposal mandates that any fewer people be covered or any less money be spent in the aggregate.

Medicaid requires that poor children’s health care be covered, but does not prescribe that such coverage be delivered by school districts.

State government administration of the program determines who is an eligible provider, (which could include a school), and payment rates. But there is neither a requirement nor a prohibition on funding health services in schools via Medicaid dollars. Thus, if a state determines that school health reimbursements are a good use of Medicaid dollars, the state legislature can appropriate funding.

Putting Medicaid Spending for School-Based Health Services in Context

Payments to school districts made via Medicaid for health services equate to approximately 1 percent of total Medicaid reimbursements, with schools billing the program for an estimated $4 billion in 2015, of which approximately $2 billion is federally funded.

Further, Medicaid reimbursements to schools are dwarfed in comparison to K-12 school spending generally, which include other funding sources for health care.

More than half of the U.S. Department of Education’s annual budget goes to K-12 spending, with the largest tranches comprising spending on programs authorized under the Elementary and Secondary Education Act (ESEA) – now known as the Every Student Succeeds Act (ESSA) – and the Individuals with Disabilities Education Act (IDEA).

Yet The New York Times claims that, because of the health reform bill, “the ability of school systems to provide services mandated under the federal Individuals with Disabilities Education Act would be strained. The law is supposed to ensure that students with disabilities receive high-quality educational services, but it has historically been underfunded.”

Such a claim distorts the reality of current federal education spending on children with special needs, conflating IDEA – a totally separate program – with the limited amount of services reimbursed through Medicaid.

Although some IDEA health services may be reimbursed through Medicaid, at the discretion of a state’s Medicaid plan, funding for IDEA, which is at historically high levels, is a separate federal funding stream authorized and appropriated as an autonomous program, and IDEA far outstrips annual Medicaid payments at nearly $13 billion per year.

Schools Access Myriad Federal Health Care Funding Streams

Federal, inflation-adjust per pupil spending nearly tripled since the 1970s, with overall federal K-12 education spending at approximately $40 billion. Total federal, state, and local K-12 education spending totals $634 billion annually. Taxpayers finance numerous federal programs and grant streams that support health-related services in schools.

The Department of Health and Human Services funds a number of school health programs:

• The Health Resources and Services Administration’s (HRSA) Special Programs of Regional and National Significance (SPRNS) grants, a portion of which pays for training for school nurses, was funded at $77 million in 2016.
• The Community Integrated Service Systems (CISS), designed to support children’s healthcare in early education settings, was funded at approximately $10 million in 2016.
• The Maternal, Infant, and Early Childhood Home Visiting Program, which provides home visiting programs for at-risk populations to promote school readiness and child health and to improve academic achievement, was funded at $400 million in 2016.
• Telehealth Network Grants, which focus on providing telehealth services to rural communities through school-based health centers, were funded at $17 million in 2016.

The Department of Education also provides some health care-related funding for schools. Title IV of the $24 billion ESSA includes $1.65 billion in funding that can be used for school-based health services, such as mental health programs, programs that support a healthy lifestyle, and drug and violence prevention.

A Better Way – Give Schools and Parents Options 

Whether it is the recent hand-wringing over Medicaid reimbursements, or any number of other niche programs, public school special interest groups have long complained about the prospect of any diminution in the ever-increasing rate of spending for myriad federal programs—and the bureaucracy that supports them.

While federal education spending has ballooned over the past five decades, such inflation has not led to academic excellence, instead saddling districts with an ever-growing bureaucratic compliance burden and non-teaching personnel to match.

Congress should free schools from the labyrinth of federal education programs and allow them to prioritize existing federal education dollars in a way that meets local needs.

The Academic Partnerships Lead Us to Success (APLUS) proposal would do just that, allowing states to put federal education dollars toward locally determined priorities, such as special education services.

It’s also worth noting that new innovations in the education choice space make it possible to more flexibly and directly meet students’ special needs, bypassing bureaucratic public school arrangements altogether by allowing parents to arrange the services tailored to their individual child’s needs.

Private providers deliver services for children with special needs through a direct-to-provider system through education savings account (ESA) models.

For example, in Arizona’s education savings account program, which provides parents with 90 percent of what the state would have spent on their child in the district system directly into a parent-controlled account, families can use funds to pay for private school tuition, as well as a range of special education services if their child needs them.

Katherine and Christo Visser in Arizona, parents to Jordan – a student with cerebral palsy – use their ESA to pay for equine therapy to build Jordan’s muscle strength, while also paying for a private reading tutor who specializes in serving children with visual impairments. These health-related education services are paid out of the Visser’s ESA, enabling them to contract directly with providers that work with Jordan.

Empowering parents with education choice while freeing states and school districts from federal red tape will offer children greater access to the services they need, while the proposed reform of federal Medicaid financing will give states stronger incentives to make sound choices about how best to deliver Medicaid services to children in need.