Medicaid: A potential source of revenue for special education

Currently, over 4.3 million children are receiving special services within the nation's schools because of physical, developmental, and educational disabilities. It is estimated that twice this number would benefit from special education services. Public Law 94–142, the Education for the Handicapped Act, offered the first real opportunity for many children with disabilities to receive special health and educational services. Public schools have become a primary setting for provision of services to these children, however, many states have encountered difficulty in procuring funding. One federally mandated source of revenue is the Medicaid program. In the fall of 1991, all state Medicaid and special education programs were asked to provide information concerning current or planned use of Medicaid funds for special education services. Responses were received from 36 states. Only 19 states reported using Medicaid funding in any capacity, and of these, only four required schools to bill Medicaid for services rendered. The majority of these programs are in the pilot stages of development. Special education services covered by Medicaid vary widely, as do reimbursement mechanisms. All 19 states allow Medicaid coverage for speech, physical, and occupational therapy. Only about half of those states provide allowances for diagnostic evaluation and assessment, while coverage for psychological services is provided by three-fourths of those states, and EPSDT screens by half of the states. Only two programs had been evaluated formally at the state and/or federal level. Medicaid remains a largely untapped source of revenue that could be used to help fund services for disabled children.