Home > Uncategorized > The Collateral Damage of Obamacare Repeal: Public Schools Lose Their 3rd Largest Federal Revenue Stream… and Stand to Lose Even More!

The Collateral Damage of Obamacare Repeal: Public Schools Lose Their 3rd Largest Federal Revenue Stream… and Stand to Lose Even More!

June 29, 2017

One fact that has been lost in the reporting on Obamacare is the devastating impact it would have on public school budgets across the country. As reported by Emma Brown in yesterday’s Washington Post, the current bill repealing Obamacare would eliminate the Medicaid funding earmarked for public schools and include it in a block grant that would be given directly to States… a block grant that would be considerably smaller than the amount currently provided for ALL Medicare services. Unsurprisingly, school superintendents and school boards are alarmed at this prospect. Here’s the background on how Medicaid funds have helped public education:

For the past three decades, Medicaid has helped pay for services and equipment that schools provide to special-education students, as well as school-based health screening and treatment for children from low-income families. Now, educators from rural red states to the blue coasts are warning that the GOP push to shrink Medicaid spending will strip schools of what a national superintendents association estimates at up to $4 billion per year.

That money pays for nurses, social workers, physical, occupational and speech therapists and medical equipment like walkers and wheelchairs. It also pays for preventive and comprehensive health services for poor children, including immunizations, screening for hearing and vision problems and management of chronic conditions like asthma and diabetes…

Schools have been able to register as Medicaid providers and seek reimbursement, as doctors and hospitals do, since 1988. Two-thirds of districts that bill Medicaid use the money to pay the salaries of employees who work directly with children, such as school nurses and therapists, according to a January survey by AASA, the superintendents’ association.

And here’s the problem that will face public schools: many of the personnel currently funded by Medicaid provide mandated services to special needs children who are raised in poverty. That is, the physical and occupational therapy services, screening services, and medical services funded by Medicaid are required by IEPs or required to ensure that children are screened for special education services. Those needs, along with the requirements for “…medical equipment like walkers and wheelchairs” will need to be funded first when school districts put their budgets together, budgets that are likely to be tighter than ever since public education funds will be competing against medical costs at the State level. An AASA policy director described the “trickle down” effect of the Obamacare repeal:

The Republican plan for Medicaid is likely to hurt schools in several ways, said Sasha Pudelski, who tracks healthcare policy for AASA. Most directly, states may decide to prohibit schools from receiving Medicaid dollars because of what is likely to be stiff competition against doctors and hospitals for limited resources, she said.

Less directly, states struggling to cover healthcare costs now covered by the federal government would have to seek cuts elsewhere in their budgets, including in education, which accounts for a large share of many states’ spending.

“The kids who will be hurt first and foremost are special ed kids and kids in poverty, but then everybody will be hurt, because we’ll have to shift dollars from the general education budget,” she said.

But the GOP’s desire to limit spending knows no boundaries and is predicated on magical thinking that “…controlling federal spending would force the healthcare system to become more efficient in providing services” and the punitive notion that bending “…the cost curve on federal entitlement programs (would) encourage states that tend to spend beyond their means to actually stay within their budget.” 

And making matters even worse for school districts is the fact that even though their share of the Medicaid budget is small, their needs for those funds are high and consequential:

Schools receive less than 1 percent of federal Medicaid spending, according to the National Alliance for Medicaid in Schools. But federal Medicaid reimbursements constitute the third-largest federal funding stream to public schools, behind $15 billion they receive each year for educating poor children and $13 billion they receive to educate students with disabilities under the Individuals with Disabilities in Education Act (IDEA).

The federal government initially promised far more financial support for IDEA, the four-decade-old law that outlines schools’ obligations to educate students with disabilities. Congress pledged to pick up 40 percent of the cost of special-education services under the law, yet has never come close. It now pays only about 15 percent.

Medicaid payments have helped fill that gap. Without those dollars — and facing a recent Supreme Court decision that raised the bar for the services school districts owe students with disabilities — many districts wonder how they will pay for services they now provide.

And here’s the budget reality for school districts: by the time schools begin developing their 2018-19 budgets, most taxpayers will not realize how much Medicaid funding their districts received in previous years and many will buy into the notion that school districts can trim “fat” from their budgets to offset the lost funds… an example of magical thinking that permeates the electorate. And when they learn that such cuts are impossible due to teacher contracts, the punitive thinking will kick in and be fueled by the resentment stirred up by politicians of both parties who will rail against the “fat paychecks” and “Cadillac health plans” the “greedy” teachers receive. Meanwhile, the .1% who receive a tax break as part of this repeal will remain silent on the sidelines… or invest in for-profit charter schools who can operate much more “efficiently” by employing teachers who receive less compensation. Welcome to the plutocracy.


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