How Medicaid Cuts Will Affect Your Child's IEP Services (And What You Can Do About It)

Your child’s IEP says 30 minutes of speech therapy, twice a week. It said that last year. It says it now. Nothing changed on the paper.

But something changed underneath it. And nobody told you.

How Medicaid Cuts Affect Special Education Funding

Last year, roughly $1 trillion in Medicaid cuts were signed into law. Most of the debate focused on health insurance. What barely made the news is that Medicaid provides an estimated $7.5 billion a year to public schools, paying for speech therapists, OTs, PTs, school nurses, mental health services, assistive technology, and more.

Schools have relied on Medicaid reimbursements for thirty years to fill the gap left by chronic underfunding of IDEA. That gap is significant: the federal government promised to cover 40% of special education costs in 1975 and currently covers around 12%.

Now the money that has been quietly holding the system together is being cut. A survey by the Healthy Schools Campaign found that 80% of school leaders expect staff layoffs, 70% anticipate mental health service cuts, and 62% foresee reductions in assistive technology and specialized equipment. Many of these cuts are timed to begin toward the end of 2026.

Parents heading into IEP meetings this fall may be sitting across from teams that already know services are about to get thinner, with no directive to say anything about it.

How Funding Cuts Actually Show Up in Your Child’s IEP

This is the part that matters most, because it won’t look like a funding cut. It will look like a series of small, quiet changes that no one flags for you.

Your child’s speech therapist used to carry a caseload of 40 students. Now it’s 65. She’s doing her best, but sessions are shorter and less individualized. When she’s out sick, there’s no substitute. Your child misses a session. Then another. Nobody calls.

The OT your child was receiving individually is now delivered in a group of four. The IEP still says “occupational therapy,” and technically it is. But it’s not the same service.

The school tells you they’re “having trouble finding a provider” for physical therapy. They’re working on it. Weeks go by, then months. Your child’s IEP still lists PT as a related service. It just isn’t happening.

None of these show up as a formal change to the IEP. No one sends you a Prior Written Notice. No one asks for your consent. The document looks the same. The experience your child has looks nothing like what the team agreed to.

Your Child’s FAPE Rights Have Not Changed

Federal regulation is clear. Under 34 CFR §300.103(c), the state must ensure there is no delay in implementing a child’s IEP, even when the payment source is being determined. In plain language: the school’s funding problem is real, but it is the school’s problem to solve. Your child’s right to a Free Appropriate Public Education (FAPE) does not shrink when the budget does.

And when a school fails to deliver IEP services, those sessions are not just gone. Under 34 CFR §300.151(b), compensatory services are a recognized remedy. Missed services are owed.

What Parents Can Do to Protect IEP Services

Request service logs. You want session-by-session documentation: when services were delivered, by whom, for how long. Not a verbal update at the IEP meeting. Schools track this data. You have the right to see it. If there are gaps between what the IEP promises and what’s being delivered, that’s where your child’s rights live.

Put missed services in writing. An email to the case manager is enough, and it doesn’t need to be adversarial. Something like: “Hi [name], I want to confirm that [child’s name] missed speech therapy on [dates]. Can you let me know what happened and how the team plans to make up the missed time?” A verbal complaint disappears. An email doesn’t.

Name compensatory services directly. If your child has missed weeks of a service, don’t wait for the school to bring it up. Ask: “Given the sessions that were missed, what compensatory services is the team proposing?” Schools know what compensatory services are. Using the term signals that you do too.

Ask the hard question at your next IEP meeting. Before the team reviews goals, ask: “Has anything changed about staffing, funding, or resources that might affect how my child’s services are delivered this year?” You’re not asking them to predict the future. You’re asking them to be honest about right now.

Advocating for IEP Services Is Not Taking Advantage of Schools

Advocating for your child’s IEP services is not taking advantage of schools that are struggling. It is making sure the system works the way it was designed to. When parents hold schools accountable, that pressure moves upstream. Districts facing consistent accountability from families have stronger grounds to push back on the budget decisions that made compliance impossible in the first place. Your advocacy builds the case for better funding and better policy. Silence makes it easier to pretend the cuts had no consequences.

Your child’s IEP is not a wish list. It does not say “30 minutes of speech therapy, funding permitting.” It says 30 minutes of speech therapy. The money behind that commitment is shifting. The commitment itself is not.

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Frequently Asked Questions

How does Medicaid fund special education services in schools?

Medicaid provides an estimated $7.5 billion annually to K-12 public schools. Schools bill Medicaid for reimbursement on health-related services listed in a student’s IEP, including speech therapy, occupational therapy, physical therapy, nursing services, mental health counseling, assistive technology, and specialized transportation. For the median school district, Medicaid covers more than 40% of children. It is one of the largest federal funding sources for public schools.

Will Medicaid cuts remove services from my child’s IEP?

No. Schools cannot legally remove services from your child’s IEP because of funding changes. Under IDEA, your child is entitled to a Free Appropriate Public Education (FAPE), and the services written into the IEP are legally binding. However, Medicaid cuts may lead to staffing shortages, increased caseloads, and difficulty hiring providers, which can result in services being delivered inconsistently or at lower quality even though the IEP document remains unchanged.

Are schools still required to provide IEP services even if funding is cut?

Yes. Under 34 CFR §300.103(c), the state must ensure there is no delay in implementing a child’s IEP, even when the payment source for special education services is being determined. FAPE is not contingent on any particular funding source. The school district’s funding challenges do not reduce or eliminate its obligation to deliver the services agreed upon in the IEP.

What are compensatory services under IDEA?

Compensatory services are additional services provided to a student to make up for services that were written into the IEP but not delivered. Under 34 CFR §300.151(b), when a state educational agency finds that a school failed to provide appropriate services, it must address that failure through corrective action, which can include compensatory services or monetary reimbursement. If your child missed speech therapy sessions due to staffing shortages, for example, the school may owe those sessions back.

What should I do if my child’s IEP services are not being provided?

Start by requesting service logs to confirm which sessions were delivered and which were missed. Then document the gap in writing by sending an email to the case manager asking what happened and how the team plans to make up the missed time. Ask specifically about compensatory services. If the school does not resolve the issue, you can file a state complaint with your state educational agency, which is required to investigate and issue a decision within 60 days.

How much of special education costs does the federal government actually cover?

When Congress passed IDEA in 1975, it promised to fund 40% of the average per-pupil expenditure for special education. It has never come close to meeting that commitment. Currently, federal IDEA funding covers approximately 10 to 13% of per-pupil special education costs. The remaining costs are covered by state and local funding, and schools have increasingly relied on Medicaid reimbursements to help close the gap.