Special schools provide support to high needs pupils in New Zealand. There are 28 day-schools and eight residential schools.
Residential schools support pupils who are hearing and vision impaired, have severe behavioural needs or educational, social and emotional needs and a slower rate of learning.
The ministry is talking to the disability sector on the closure of the four residential schools.
IHC programmes general manager Janine Stewart said children with disabilities should be educated in their local schools, not special schools.
"This is better for the children, better for the families and better for the community."
Mrs Stewart said IHC believed mainstream schools were the future for children with disabilities.
"We have commissioned research that demonstrates that children with disabilities learn better in the same schools are their peers."
Ministry group manager Brian Coffey said funding would be freed up from changes to residential special schools and used instead to support young people in their community.
"This way of providing support has already been implemented since the closure of Waimokoia Residential School [in Auckland] in 2009 and is demonstrating good results," said Mr Coffey.
Residential schools cost the ministry between $70,000 to $90,000 per child per year - meaning a total bill of up to $18 million.
But not all parents are happy with the proposal. Kelly Woods' disabled daughter lives at Salisbury school and said mainstream school had not worked for her.
"She finds being in large groups challenging.
"Mainstreaming has not been well suited for our daughter so far. Choice and respect for parent's wishes absolutely need to be paramount - what works for one child and their family may not work well for another.
"The majority of parents can choose where their child is educated and will all have various reasons why, so why can't we?"
If the proposal is approved, the four residential schools would close at the end of the year.
