Lawmakers probe Medicaid role in rising special-education costs as subcommittee begins study of HB 742

At a meeting of the Legislature’s Education Funding subcommittee, lawmakers heard from Henry Lippman, the state Medicaid director, about how New Hampshire’s Medicaid-to-schools program interacts with the state’s Special Education Aid system and how changes in federal expectations will require a cost-reporting conversion by July 1, 2026.

The subcommittee was convened to begin work on HB 742, described in the packet as “an act requiring catastrophic special education state aid funding to be drawn from the Education Trust Fund” and to broadly study special education aid, its costing and implementation. The chair of the subcommittee said the goal is to produce recommendations and an administrative directive to the Department of Education and the Department of Health and Human Services that identify the data the Legislature needs to make policy decisions on the program’s formula and funding levels.

Why this matters: Special-education spending has grown and the committee said existing information is incomplete. The statute and current formulas that multiply district costs (for example, a 3.5-times multiplier cited in committee discussion) have prompted recurring bills to change thresholds and multipliers. Lawmakers and agency staff told the panel that incomplete data about which services are health-related and therefore potentially billable to Medicaid complicates cost projections for catastrophic aid, which begins after districts have absorbed an initial amount per pupil (discussed in committee as roughly the $70,000 threshold).

What Medicaid officials told the panel: Henry Lippman summarized the Medicaid-to-schools program and the department’s recent actions. He said 72 school districts are enrolled in the Medicaid schools program and that the state is converting from a fee-schedule approach to a certified public-expenditure/cost-report methodology. "By July 1 of '26 this we have to convert to this actual cost based methodology," Lippman said. The department obtained a competitive federal grant of about $2.5 million to hire a vendor to assist with implementation, including software, technical assistance, a call center and time-study/cost-report templates for districts.

Lippman told the subcommittee that in fiscal 2024 Medicaid reimbursements to schools totaled about $8.8 million and that, based on preliminary analysis and suppressed post-pandemic participation, the state could plausibly recover additional federal funds — possibly dozens of millions more statewide over time if districts increase participation and the cost-report methodology yields higher allowable costs. "We could be in the mid teens," he said when asked whether the total federal draw could roughly double from current levels.

Key data gaps and complications discussed: Committee members and agency staff raised multiple technical and practical issues that limit current Medicaid recovery and the Legislature’s ability to estimate future Special Education Aid costs: whether Medicaid reimbursements are netted out before districts seek special-education aid; variation in how districts record and code services in student information systems; parental consent requirements for billing Medicaid; workforce and licensing constraints (Medicaid generally requires licensed health providers for billable services); and the differences between health-related services that Medicaid covers and education-only services paid through state special-education aid.

Committee members pressed staff about specific examples and numbers. The packet included a district-level breakdown showing a small number of students with extraordinarily high annual costs (the committee cited four students in 2024 with per-student costs in the $500,000–$600,000 range) and a projection exercise that estimated how many students would fall into various cost brackets if thresholds changed. The subcommittee chair said the committee wants the agencies to produce the data and clarifications by the fall budget-retained-bill deadlines so lawmakers can consider changes before the legislative session advances.

Planned agency work and next steps: DHHS described the vendor procurement and grant-funded work to provide technical assistance, cost-report templates and implementation support for school districts. The department said the vendor selection process has involved stakeholder meetings and that the contract will be a public document when it comes before the department’s governing council. The subcommittee chair said he plans to send an administrative directive to DOE and DHHS requesting specific data and work products and scheduled a follow-up subcommittee meeting at 10:00 on the 14th to continue the review and to hear Department of Education staff.

What the subcommittee did not decide: The meeting was an information-gathering session; there were no votes on HB 742 or on statutory changes. Members asked agencies for additional analyses — for example, whether the department can match district invoice-level submissions against Medicaid claims to show which costs are already reimbursed, and what portion of students above the multiplier thresholds are served in-district versus out-of-district placements. Agency staff indicated some of those analyses may require additional staffing or technical work and pledged to return with more detail.

Closing: The subcommittee asked DOE and DHHS to provide RFP materials, the grant documentation, and additional data on invoices and student placements for the next meeting so lawmakers can assess whether statutory or budgetary changes are needed to improve federal drawdown, to clarify allowable costs and to reduce surprise budget impacts on local districts and state aid.