New York City Public Schools failed to claim $431.6 million in federal Medicaid reimbursements for special education services, costing the city a hefty sum as it stared down a structural budget gap not seen since the Great Recession, according to a city comptroller’s audit released Thursday.
Of the 17.2 million documented therapy sessions provided to 145,000 students with disabilities over the audit period, education officials submitted claims for only 9.3 million, or slightly more than half, City Comptroller Mark Levine found. Federal Medicaid policy prevents the filing of reimbursement claims if just one document is missing.
In some cases, the city’s school system had no record at all of providing eligible services to students who were legally entitled to them — raising questions of whether the city is leaving money on the table or failing to support some children with disabilities.
“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 said in a statement.
“When NYCPS cannot reliably claim federal dollars for services it already provides, and cannot consistently document whether mandated services were delivered, students, families and taxpayers all lose.”
In a formal response included in the audit, education officials wrote that they disagreed with “key assumptions” behind Levine’s estimates of lost revenue. One major concern is the audit uses gross reimbursement numbers — in practice, the state deducts half of reimbursements, so the city stands to benefit less than calculated by the comptroller.
“This report contains assumptions and misconceptions that significantly overstate what can realistically be reimbursed in the current structure,” Nicole Brownstein, a public schools spokeswoman, added in a statement. “We will continue pursuing every operationally feasible reimbursement opportunity to maximize available resources and ensure every student receives the resources they deserve.”
Between July 2022 and June 2025, auditors found the school system claimed reimbursement for only 54% of documented occupational, physical or speech therapy sessions, resulting in at least $273.4 million in foregone Medicaid revenue.
Education officials also failed to document — or potentially failed to provide — roughly 16% of eligible services to students with disabilities as legally required by their individualized education programs, according to the comptroller.
If those services were provided, but not recorded, that would result in an additional $132.8 million in lost revenue — though the school system maintained it was inappropriate to draw such conclusions and the estimate was speculative.
“Either NYCPS simply did not provide a significant percentage of required therapy services,” auditors wrote, “in which case children did not receive services that were considered medically necessary to thrive in their school environments — or NYCPS provided the services but did not collect any documentation needed to seek Medicaid reimbursement for them.”
The school system also did not bill Medicaid for certain services — including evaluations, re-evaluations and psychological counseling, special transportation and nurses — that Levine said are covered by the federal program.
The comptroller called on the city to strengthen its documentation systems and “ensure every eligible dollar is claimed and every required service is tracked.”
Mayor Mamdani in January sounded the alarm about a possible $12.6 billion budget gap over two fiscal years, lacing into former Mayor Eric Adams for a pattern of under-budgeting that set the city on a path to a historic shortfall. The gap was ultimately closed with the help of Gov. Hochul and deferring the city’s pension fund payments.