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New York City Ed Department Cited by Audit as Defrauding Federal Government
A scathing federal audit reveals that the New York City schools misspent $870 million in Medicaid payments by channeling tens of thousands of poor special-education students into speech therapy performed by unqualified practitioners, often without proper referrals. Mayor Bloomberg and Chancellor Klein need to increase the misleading information to the media, real fast.
June 23, 2005
U.S. Audit Faults Speech Therapy in City Schools

The New York City schools misspent $870 million in Medicaid payments by channeling tens of thousands of poor special-education students into speech therapy performed by unqualified practitioners, often without proper referrals, according to a scathing federal audit released yesterday.

The school system's record-keeping was so chaotic and the speech services so badly documented that school officials often could not prove that students needed the speech therapy, or ever received it at all, said the audit, which covered the period between 1993 and 2001.

The city schools, chronically in need of money, are portrayed in the audit as having vigorously tapped into an antipoverty program, while doing a haphazard job at best of adhering to federal regulations.

Medicaid typically pays for health care for the poor, but since the late 1980's, it has also paid school systems nationwide for speech, hearing and other health-care services for poor children. Schools in New York State, especially the city's, have taken advantage of the program far more than those in other states, according to federal statistics.

The audit represents a new stain for the city's special education system, which has long been troubled and has been roiled in the last two years by Mayor Michael R. Bloomberg's effort to overhaul the schools.

In fact, even as the audit identified improper spending, many parents have often complained that there have been lengthy delays in obtaining special education services. In this case, because of what the auditors contended was a routine lack of proper documentation for speech services, it is impossible to say whether the therapy, if it was received at all, took the place of other special-education needs.

The auditors did say that while the violations might seem technical, they "could have a direct impact on the quality of services rendered." They also said school officials disregarded the state's advice that speech referrals should come from a physician or a licensed practitioner.

State and city officials vehemently disputed the audit, which took three years to complete and was issued by the inspector general in the federal Department of Health and Human Services. The officials insisted that the findings be withdrawn.

Washington and the states share the cost of Medicaid. The auditors recommended that New York State be forced to return $435 million to the federal government, which is the federal portion of the questionable payments. The city school system itself is not being held financially liable, but if the state has to return the money, it could in turn punish the district.

The Centers for Medicare and Medicaid Services, which is part of the Department of Health and Human Services, would not discuss whether it plans to penalize the state.

If it does, the amounts at stake are so high that the issue is likely to be catapulted into Congress. Senator Charles E. Schumer, the New York Democrat, has in recent years lobbied the Bush administration to rein in federal regulators and investigators over the issue of Medicaid speech services.

The findings in the audit were among the most critical appraisals of a state Medicaid program anywhere in the nation in recent years. The auditors estimated that 86 percent of 2.5 million Medicaid claims for speech services by the New York City schools from 1993 to 2001, totaling $870 million, violated federal regulations. The services were for 110,000 students.

After scrutinizing a sample of 100 claims, the auditors found that in 42 cases, they were unable to verify that the services had been provided, based on documentation offered by the school system. Most of the 100 claims either lacked correct referrals from a medical professional, or were not provided by or overseen by a properly certified speech therapist.

The audit represents an escalation of federal scrutiny into New York's overall Medicaid program, which at $45 billion is far larger than that of any other state. A 2004 audit by the inspector general found similar deficiencies in $340 million in Medicaid spending on speech services in schools in New York outside New York City.

The New York State Health Department, which oversees Medicaid, accused the inspector general of essentially picking on the state, saying that it had applied far stricter standards in this audit than it had in audits of speech services in other states.

The department said the federal government had over the years issued conflicting and confusing rules for Medicaid speech services, and as a result, it was unfair for the state to be penalized for not following them. It also said the auditors were applying rules intended for a medical setting to an educational one.

"There is no question that the New York City Department of Education billed for services it felt were provided to poor children with disabilities," Kathryn Kuhmerker, a deputy state health commissioner, wrote in response to the audit.

Margie Feinberg, a spokeswoman for the New York City Department of Education, noted in a statement that Mayor Bloomberg took office and gained control of the school system after the period covered by the audit. She questioned why the inspector general waited until 2002 to begin looking at claims going as far back as 1993.

"We disagree with this audit and will work with the state to have the recommendations reversed or changed," she said.

Jill Chaifetz, executive director of Advocates for Children, a nonprofit group that monitors special-education programs in the schools, said she was not surprised by the audit. "There has been a longstanding problem of lack of accountability in the system," she said.

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© 2003 The E-Accountability Foundation