New York City Public Schools failed to claim $431.6 million in federal Medicaid reimbursements for special education services, according to a report released Thursday by City Comptroller Mark Levine. The audit found that the school system only submitted claims for just over half of the therapy sessions provided to students with disabilities, potentially missing out on significant funding during a time of considerable fiscal strain.
Over the audit period, which covered July 2022 to June 2025, 145,000 students with disabilities received 17.2 million documented sessions of occupational, physical, or speech therapy. However, claims were filed for only 9.3 million of those sessions, representing about 54 percent, the comptroller’s office said. Federal Medicaid policy requires complete documentation to file reimbursement claims, and missing even one document can result in denied payments.
In some cases, the audit revealed that the school system lacked any record of providing legally mandated services to certain students with disabilities, raising questions about whether these services were delivered or simply not tracked. As a result, the city may have forfeited an additional $132.8 million in Medicaid revenue linked to undocumented services.
“Failing to collect Medicaid reimbursements the City is entitled to is more than a fiscal problem — it raises serious questions about whether government is operating as effectively as New Yorkers need it to,” Levine stated. He called on the city to improve documentation and billing procedures to ensure that all eligible federal funds are accessed and that mandated services are properly recorded.
The audit also noted that the school system did not seek Medicaid reimbursement for a number of other covered services, including evaluations, psychological counseling, special transportation, and nursing support.
Education officials responded by disputing key assumptions in the audit, particularly the use of gross reimbursement figures. They explained that the state typically withholds about half of these funds, meaning the actual financial benefit to the city would be less than the comptroller’s estimate. “This report contains assumptions and misconceptions that significantly overstate what can realistically be reimbursed in the current structure,” said Nicole Brownstein, a spokeswoman for New York City Public Schools. She added that the school system remains committed to pursuing all feasible reimbursement opportunities to support students.
The findings come amid broader financial challenges faced by the city. In January, Mayor Eric Adams warned of a potential $12.6 billion budget gap spanning two fiscal years, critiquing prior budgeting practices. The shortfall was eventually alleviated through assistance from New York State Governor Kathy Hochul and by deferring the city’s pension fund payments.
Levine’s office emphasized that addressing the Medicaid billing and documentation issues presents an opportunity to secure significant funding without additional taxpayer burden, while simultaneously improving services for students with disabilities.