how are schools handling students who memorize books but can't actually decode

As chocolatelovinggran suggests.

You ask questions about the text..

I was quick to learn to read and my Mum was convinced I'd just memorised the text.
She used to make me read the sentence backwards to check if I could actually read each word 😂

one of our relatives kids used to do this. In his 20s he had a breakdown and was diagnosed with autism

‘Whole pattern books’ and ‘decoding’
I don’t even understand your language ekartroda

*they

"can't actually decode"

Do you mean by this that the children can't actually read but memorise stories that have been read to them?

I think memorising stories is quite common in young chilren before thay can read. That's why they often object if a word or phrase is changed.

I haven't heard of this holding up their reading ability when they are a little older.