Texas Schools Struggle To Pay Back Federal Medicaid Funds

More than 500 Texas school districts are on the hook for $16 million in funds the federal government says was improperly billed through the Medicaid system. Many of them don’t have the money to pay it back.

The School Health and Related Services (SHARS) program allows Texas schools to bill Medicaid for eligible services such as nurses and accommodations for disabled students. It’s been in place since 2010, though there have been some severe cuts to it. This year, the Texas Health and Human Services Commission slashed $400 million from the program, leading to some districts exiting it altogether.

The federal government audited Texas’s use of funds starting in 2017 and says that districts have billed $16 million in ineligible costs, requiring repayment from the state. The state is now trying and recoup the loss from the districts themselves. Some schools owe as little as $100, but many owe more than $100,000. Texas Tribune spoke to several districts that are finding it hard to repay the amounts in the middle of a school year when all budgets have been finalized.

“Because this comes in the middle of a budget year, it makes planning for schools virtually impossible,” said Brian Woods, director of advocacy at the Texas Association of School Administrators. “Had this clawback been known prior to schools approving their budgets in the summer of 2024, then at least it could have been planned for, right?”

The bill comes at a particularly bad time for Texas schools. A promised funding increase for districts was halted in the last legislative session when Governor Greg Abbott didn’t get his school voucher plan passed. When rural Republicans united with Democrats to stop taxpayer dollars from being used to pay tuitions at private schools (mostly in wealthy urban and suburban areas), Abbott held any expansion of public school funding hostage.

This has left many districts scrambling to pay the bills during times of high inflation. Bus routes have been cut, programs have been slashed, and staffing has been decimated. An additional multi-million bill being thrown at the districts from the HHSC is a significant burden.

Districts are currently trying to appeal the charges, with much anger being aimed at HHSC. According to the Tribune report, it does not appear that the state agency did much to support districts in the crisis, and there are some questions whether HHSC should have been responsible for catching the ineligible charges on the first place.

Meanwhile, the SHARS program continues to be gutted, leaving special education and other students with special needs lacking resources. With the state clearly leaving the school districts on the hook for mistakes even as it denies them additional funding they desperately need, it’s likely that SHARS services will dwindle in schools that can no longer afford them.