IRA distribution code in box 7 was "1" & Schwab said it's up to me to verify I'm disabled. I was going to change the code to 3, Turbotax says I can't

Yes. Schwab does not know that you're disabled. You have to enter it in TurboTax.

If you are totally and permanently disabled, your early IRA distribution is exempted from the 10% penalty (but not from income tax).

Please read this TurboTax Help topic.

In TurboTax Online, please follow these steps:

1. After you have entered all your forms 1099-R, on the summary page Review your 1099-R Info, click Continue 
2. Follow the interview until you arrive at the page titled Let's See If We can Lower your Tax bill and click Continue
3. Continue until you get to a page titled Did you use your IRA to pay for any of these expenses?
4. Enter the amount of your distribution in the box next to Permanent Disability and click Continue
5. Your early withdrawal penalty will be waived.