Federal auditors flagged nearly $200 million in improper Medicaid ABA payments. Providers and clinicians say the fix is targeted oversight, not deeper rate cuts.
Key Takeaways
- Rate cuts can make fraud worse, not better. When reimbursement falls below sustainable levels, quality providers exit while bad actors simply bill more. The result can be a smaller market weighted toward the very behavior states are trying to stop.
- Targeted oversight is the alternative providers favor. Advocates and federal auditors alike point to data analytics, billing-pattern review, outlier detection, and accreditation as more precise instruments than across-the-board cuts.
- Federal audits document the scale of the problem. HHS Office of Inspector General reviews in four states found roughly $198 million in improper Medicaid ABA payments and another $410 million potentially improper, with at least one flawed claim in every sampled enrollee-month. Most of those findings trace to inadequate documentation that kept auditors from confirming what took place during billed sessions.
- The argument is for systemic controls, not blunt savings. Providers say states should build program integrity into the system and engage quality providers, rather than chase short-term savings that resurface as downstream costs.
Federal auditors and prosecutors have made Medicaid-funded applied behavior analysis (ABA) a leading target of fraud enforcement, and many states are responding in the bluntest way available to them: cutting what they pay. New York has reduced its Medicaid rate for the main adaptive behavior treatment code by 25%, Indiana has paired rate cuts with utilization caps, and a major Georgia managed care plan has trimmed reimbursement by 20%. Yet one of the most consistent arguments coming from providers, and from the clinicians who work alongside them, is that a rate cut is not a fraud strategy. It is a market strategy, and the market it produces can be worse than the one it replaces.
That view now spans several provider organizations and clinical leaders rather than any single company. Dr. Mirella Petersen, VP of Payor Relations and Government Affairs at Autism Learning Partners (ALP), one of the country’s largest ABA providers by location count, put the core of it plainly in an interview with Acuity. “When rates are cut below sustainable levels, good providers leave and providers committing fraud, waste or abuse just increase their rates of those activities,” she said. Dr. Rebecca Thompson, a psychologist and BCBA-D who leads multiple state trade associations, frames the same concern as a question of precision. “If Medicaid programs are serious about weeding out bad actors, they should use outlier analysis and investigate individuals or organizations whose billing practices fall outside of the generally accepted standards of care,” she told Acuity. “Right now, they are using blunt instruments when surgical precision is most appropriate.”
Why Rate Cuts Can Backfire as a Fraud Strategy
The argument turns on which providers a deep cut drives out. Organizations that invest in training, supervision, and documentation tend to operate on thin margins, so a steep reduction forces them either to scale back that investment or to leave a market entirely. Providers engaged in fraud face no such constraint. Petersen points to Florida as the cautionary case: an operator already billing fraudulently for a set number of children, she argues, responds to lower rates simply by adding more names, while compliant providers absorb the loss or exit the market.
Florida is frequently cited that way for a reason. State Medicaid paid roughly $1.5 billion for ABA services across 2023 and 2024, with more than half concentrated in Miami-Dade County, and fraud there grew severe enough that the state imposed provider moratoria in Broward and Miami-Dade counties and tightened credentialing for behavior technicians. The federal picture is more complicated than a simple story about low rates, though. In Indiana, investigators traced runaway spending to the opposite condition: a legacy policy that reimbursed providers a fixed percentage of whatever they billed, which let some organizations collect payments exceeding $300,000 per child in a single year. The lesson providers and auditors increasingly share is that the rate level, on its own, is not the lever that controls fraud. Julie Kornack of the Center for Autism and Related Disorders (CARD) argues the pattern points at payers as much as providers. “These instances of excessive payment are about questionable practices of state Medicaid agencies and the managed care organizations administering their benefits,” she told Acuity Media Network. “In-network providers would welcome a prohibition on out-of-network providers who use limited resources more quickly by charging exorbitant rates. Likewise, we applaud Indiana for setting fixed rates and only wish they had done so sooner.”
Targeted Oversight: Data, Outlier Analysis, and Accreditation
The alternative providers describe is oversight that distinguishes good actors from bad ones, rather than reductions that hit both equally. One signal that comes up repeatedly is the shape of a provider’s prescribing. A book of business clustered tightly at 30 to 40 hours a week for nearly every child can point to cookie-cutter billing, while wide variation, from roughly 10 hours for some children to 35 for others, tends to reflect individualized treatment planning. During New York rate discussions, Petersen said, one managed care plan told ALP its prescription range showed exactly that kind of variability, with no billing anomalies of concern.
The technology to flag suspicious billing before it is paid is also maturing. Acuity has reported on AI-driven revenue-cycle platforms that draw on large claims databases to predict which submissions are likely to be denied, and the same modeling could be aimed at fraud detection. Some states are already narrowing their coding rules: Acuity has covered restrictions on concurrent billing in Michigan, Virginia, Vermont, and Texas, an area the federal OIG has flagged, although provider groups argue some of those rules misread how supervision and direct care are layered together. Kornack puts the objection in clinical terms. “A restriction on concurrent billing will only dilute ABA quality that is critical to patient outcomes,” she said. “When Medicaid agencies don’t use the CPT billing codes as they were intended to be used, which includes concurrent billing, they make it more difficult to deliver quality ABA and limit their ability to understand the services a patient received.”
Thompson cautions that program-integrity rules can miss their target and create waste of their own. She points to Indiana’s new supervision standard as an example. “One example of a recent Medicaid policy change, intended to address concerns of fraud, waste, and abuse, which could actually create waste, is Indiana’s new requirement for 1 hour of BCBA supervision for every 8 RBT hours, a 12.5% supervision standard, the highest in the nation,” she said. Because behavior analysts often recommend protocol modification at 10% or less of direct treatment hours for a given client, she argues, a fixed 12.5% floor can compel services that are not medically necessary. “If the additional 2.5% protocol modification is not medically necessary, but only requested and delivered for compliance purposes, this is a waste of Medicaid dollars,” she said. After Indiana clarified that non-billable services also count toward supervision, she added, the cost shifted onto providers: “Now the cost of delivering the additional 2.5% supervision falls on providers who are required to provide and document this service but will not be reimbursed for it.” Kornack frames the same problem as a legal one. “Services should always be individualized: ratios that add supervision hours when it may not be medically necessary not only cost the state more but also disregard the EPSDT mandate to individualize care and, when services are administered by managed care, violate the federal Mental Health Parity and Addiction Equity Act (MHPAEA),” she said.
Accreditation is the other tool a growing number of states have begun to adopt as a quality floor. Massachusetts moved first, requiring its Medicaid managed care plans to contract only with ABA providers accredited by entities such as the Council of Autism Service Providers, a mandate that took effect at the start of 2025 after a state fraud settlement; Acuity has tracked the resulting MassHealth supervision audits. Indiana followed this year, requiring accreditation by October 2027 as part of its broader ABA overhaul. Petersen counts herself a supporter, with limits. “Accreditation in ABA is new, and I’m a big fan,” she said. “It won’t stop all the fraud, waste and abuse, but it’s a good start.” Kornack is more skeptical. “Our field is not prepared for accreditation on a large scale,” she said. “Massachusetts and Indiana are only recognizing one accrediting entity. I would want to see a study that shows patient outcomes are better when patients get services from an accredited entity before I jump on the accreditation bandwagon.”
What the Federal Audits Reveal, and the Cost of Getting It Wrong
The federal audits that triggered much of this state activity do not, on their face, settle the rate debate. The HHS Office of Inspector General has completed reviews of Medicaid ABA payments in Indiana, Wisconsin, Maine, and Colorado, the first four in a planned series of seven. Together those audits identified about $198 million in improper payments and another $410 million the OIG classified as potentially improper. In every state, all 100 of the sampled enrollee-months contained at least one improper or potentially improper claim, a pattern auditors tied to documentation failures, missing credentials, and billing for time that was not treatment, rather than to any single rate structure. Improper and potentially improper payments are a distinct category from fraud, which requires a showing of intent. Kornack presses that distinction. “Most of the improper and potentially improper payments identified in the OIG audits are the result of inadequate session notes. These are not findings of fraud,” she said. “No reasonable person would say that cutting rates will improve clinical documentation.” The CMS administrator has publicly called ABA fraud a major problem, and the Department of Justice has brought criminal charges against the owners of a Minnesota-based ABA center.
For clinicians, that points back to documentation rather than price. Thompson says the sharpest federal recommendation is one providers should welcome. “An HHS OIG recommendation I fully support is random sampling, post-payment review of claims,” she said. “Providers should be able to produce clinical documentation supporting services billed, and if they can’t, it’s completely reasonable for the Medicaid program to ask questions and dig deeper.” Cutting rates, by contrast, does nothing to fix documentation, credentialing, or oversight, and it risks hollowing out the providers most able to meet those standards.
Providers also argue the math is self-defeating, since demand for care does not disappear when supply contracts. “If ABA in New York is decimated and children lose access, the expense doesn’t go away. It skyrockets,” Petersen said, citing a lifetime cost to the state for an untreated individual with autism as high as $3.5 million. ALP has estimated the alternatives states would end up funding at $100,000 to $150,000 a year per student for special education placements and $250,000 to $400,000 or more for residential or out-of-home placements.
None of this amounts to blanket opposition to rate cuts. Petersen said she did not object to North Carolina’s reduction, where the state’s rates remained workable for providers. (North Carolina’s 10% Medicaid provider cut took effect in October 2025 but was reversed by Governor Josh Stein that December amid litigation, restoring rates to prior levels.) Kornack places the squeeze in a wider budget context. “Medicaid agencies are facing strained budgets due to the nearly one-trillion-dollar cut to Medicaid funding in the so-called ‘One Big Beautiful Bill,’ but they shouldn’t leverage the CMS drumbeat about fraud to cut rates and disregard the federal laws that protect these vulnerable children,” she said. The objection providers voice is to cuts imposed without parallel investment in oversight, fraud controls, and provider engagement. Thompson frames the path forward as a shared one. “ABA providers recognize the challenges regulators face with establishing guardrails and standardizing expectations for program integrity,” she said. “We are eager to partner with regulators on rules that align with clinical best practice, preserve access to care, and protect tax-payer dollars.” On that point, providers and the auditors scrutinizing the same programs largely agree: less fraud comes from sharper oversight, not lower rates.
