In addition to providing health insurance to millions of Americans, Medicaid supports health care in public school districts nationwide. Students enrolled in Medicaid can receive certain health services through their school, such as early vision screening, diagnostic treatments, and services mandated in a student’s individualized education plan.
But cuts to Medicaid spending and greater restrictions on enrollment enacted under the One Big Beautiful Bill Act (OBBBA) last summer could jeopardize school funding, potentially hurting students’ long-term educational attainment and development.
Why This Matters
The Congressional Budget Office projects OBBBA will reduce Medicaid enrollment by 7.5 million people and federal Medicaid spending by more than $900 billion over the next 10 years. Those cuts and their ripple effects will affect low-income individuals, including students, most directly, but the cuts will also have implications for other systems, including K–12 education. OBBBA reductions could affect schools’ revenues in three key ways:
- Schools could receive fewer Medicaid dollars while still being required to provide services mandated by law.
- Declines in Medicaid enrollment among students could lead to fewer students receiving free or reduced-price lunches through direct certification and to fewer students being counted as low-income for the purposes of state K–12 funding.
- States could reduce spending in other areas to make up for less Medicaid funding, with K–12 funding being an appealing option given its share of the budget in most states.
At a time when state budgets are tightening, any reduction in funding could force state and school leaders to make difficult decisions about how to support K–12 education.
What We Found
In fiscal year 2024, school-based Medicaid spending accounted for at least $8.1 billion, with $4.4 billion coming from the federal government and the rest coming from state Medicaid programs. Because of shortcomings in existing data sources, this is an underestimate and serves as a floor for the role of Medicaid in schools. This makes Medicaid a substantial but targeted source of K–12 funds, used to pay health staff such as nurses and psychologists, for mental and behavioral health services, and for specialized equipment.
We found substantial variation across states in the share of federal Medicaid revenue compared with total K–12 funding. In 10 states, the federal portion of school-based Medicaid spending makes up more than 1 percent of total K–12 revenue. When broken down by total K–12 enrollment, school-based Medicaid spending ranges from just a few dollars to $325 per pupil in DC. These figures would be higher if broken down by Medicaid enrollment more specifically, reflecting the targeted role Medicaid plays in supporting low-income students, especially those with disabilities.
Source: Medicaid Budget and Expenditure System, Financial Management Reports for fiscal year 2020 through fiscal year 2024 (available from “Expenditure Reports from MBES/CBES,” Medicaid.gov, accessed April 8, 2026, https://www.medicaid.gov/medicaid/financial-management/state-budget-expenditure-reporting-for-medicaid-and-chip/expenditure-reports-mbes/cbes). Total K–12 education revenue is state-level data from National Center for Education Statistics’ Common Core of Data.
Notes: N/A = not available. N = 44 states with full data from 2020 to 2024. Amount is for federal Medicaid share for school-based service and administration expenses only (not including supplemental support from the American Recovery and Reinvestment Act or from pandemic-related support). Because expenditure reimbursement data may represent different years of administration by state, data are not adjusted for inflation.
This variation can be partially attributed to state-specific Medicaid rules and other policy factors. For instance, states that have expanded school-based Medicaid billing to cover services for all Medicaid-enrolled students tend to report higher Medicaid revenues and per pupil spending.
Further, states that are more likely to have higher rates of Medicaid-enrolled students—such as those that have expanded Medicaid through the Affordable Care Act and those with higher child poverty rates—tend to report higher Medicaid revenue and per pupil spending. Differences in state and district administrative capacity may also play a role.
Ultimately, OBBBA’s Medicaid cuts seem unlikely to result in a major loss of direct revenue for states, but they could increase competition for and change how states distribute more limited funding. States can take steps to preserve long-run funding by shifting up the calculation of their identified student percentage to capture current student Medicaid participation and by leaning on schools’ ability to receive reimbursement for administrative costs.
How We Did It
We used Centers for Medicare & Medicaid Services (CMS) data from 2020 to 2024 to estimate total, federal, and state-level school-based Medicaid reimbursement to schools by state. We generally provide five-year averages to account for lags and inconsistencies in the data. We combine CMS data with state-level K–12 enrollment counts and total K–12 revenues to provide estimates of federal school Medicaid spending per pupil and relative to total K–12 spending by state. We also look at federal school Medicaid spending compared with federal K–12 revenues by program (e.g., Title I and Individuals with Disabilities Education Act). Our estimates are not projections of how federal cuts will affect schools.
