Every year, more than 200,000 students with disabilities in New York City receive mandated special education services, including physical and speech therapy. It carries a significant cost to the city — hundreds of millions of dollars annually — although most of it can be reimbursed by Medicaid.
But the city’s Department of Education failed to seek reimbursement for at least $431 million from mid-2023 to mid-2025, according to a new audit by the city’s Office of the Comptroller. The department either lacked the proper documentation to be reimbursed or did not request repayment, missing out on substantial money at a time when city agencies have been asked to trim budgets and find new revenue.
The city comptroller, Mark Levine, said that the total amount of unclaimed reimbursements was a conservative estimate and that the true number could be much higher. He called on the Department of Education — which has a roughly $40 billion budget, the largest of any city agency — to hire additional people to improve its reimbursement rate.
“The fact that we’re leaving money on the table to this scale really is not acceptable in this fiscal environment,” Mr. Levine said in an interview. “It is quite troubling.”
The issue is not new. For nearly 15 years, city leaders, including past comptrollers, have repeatedly called on the Department of Education to maximize what it could recover in Medicaid reimbursements for special education services. Since 2011, the department failed to recoup at least $1.2 billion in Medicaid funds, according to several estimates by the comptroller’s office.
In a letter to the Office of the Comptroller, the school system’s chief financial officer, Seritta Scott, said that the Department of Education had made “significant steps” to improve collection of Medicaid reimbursements and would roll out further upgrades, including a system that would automate the reimbursement claims process, before the end of the year.
Ms. Scott said that the department had concerns about the methodology used by auditors and that the $431 million in foregone reimbursements was inaccurate, saying that it was a significant overstatement based on incorrect assumptions. She added that the department “acknowledges the importance of maximizing Medicaid reimbursement.”
Nicole Brownstein, a spokeswoman for the Department of Education, reiterated the agency’s concerns with the audit, saying that it contained “assumptions and misconceptions” that skewed the findings.
“We will continue pursuing every operationally feasible reimbursement opportunity to maximize available resources and ensure every student receives the resources they deserve,” Ms. Brownstein said in a statement.
The school system said that the comptroller’s estimate should have excluded more than $232 million. For example, school officials asserted that the comptroller had included sessions that were ineligible for Medicaid reimbursement.
In New York City, about 145,000 students with disabilities come from low-income families, and the legally mandated services they receive could be reimbursed by Medicaid, the safety-net health program that is a joint responsibility of the federal and state governments. The reimbursement process and requirements can be tedious and painstaking, and just a single paperwork error can cause a claim to be rejected.
Ten types of services can be reimbursed, including occupational, physical and speech therapy as well as hearing and psychological evaluations. But the department has long sought reimbursement only for occupational, physical and speech therapy, and even then, it submitted claims for about half of the sessions in recent years, according to the audit.
The Office of the Comptroller started its review as a follow-up to an audit released in 2021, which found that the department missed out on $180 million in Medicaid reimbursements from July 2017 through June 2019. Auditors recommended that the department seek reimbursement for services beyond occupational, physical and speech therapy.
In the latest audit, Mr. Levine said he was concerned that the percent of therapy sessions submitted for Medicaid repayment had declined over the three years that were scrutinized. “The trend is moving in the wrong direction at a time when we have all these pressures,” he said.
He said that the audit took longer than expected because the Department of Education refused to release some data and was slow to release other information. “They were quite defensive in their responses and seemed to invest a lot of energy in trying to undermine the process,” Mr. Levine said.
In her response to the comptroller’s office, Ms. Scott, the school system’s chief financial officer, disputed that characterization, saying that auditors had sought volumes of complex records, including some with sensitive student information. The department “does not agree, however, with the implication that the audit’s length resulted from a lack of transparency or cooperation,” she wrote.
John Kaehny, the executive director of Reinvent Albany, a government watchdog group, said that he believed it would take a financial crisis in the city for there to be enough pressure on the department to improve its collections.
“The systemic flaw here is that the D.O.E. has enormous trouble recruiting and especially keeping employees with the skills to make sure these reimbursements get submitted,” Mr. Kaehny said.
Auditors also found evidence that the Department of Education had not provided about 16 percent of the mandated sessions of occupational, physical and speech therapy to students enrolled in Medicaid.
Randi Levine, the policy director at Advocates for Children of New York, a research and legal group, said that every year, thousands of students in New York City complete the school year without receiving a single session of their mandated services.
“The city has a legal obligation to ensure that every student with a disability receives services,” Ms. Levine said. “It is a significant issue that we want the city to address.”
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