Applied behavior analysis (ABA) therapy for autism has become one of the fastest-growing service categories in Medicaid.
Rapid growth, significant workforce demands, extensive use of paraprofessional staff, and complex documentation and supervision requirements have also created heightened compliance and payment-integrity risks. In response to increasing expenditures, varying clinical practices, and reported fraud schemes, the Centers for Medicare & Medicaid Services (CMS) recently released its Applied Behavior Analysis Toolkit (linked here) to support state Medicaid and Children’s Health Insurance Program (CHIP) oversight. Providers and investors should understand both the legitimate forces driving demand for ABA and the compliance issues receiving increased regulatory attention.
In this three-part series, we examine the factors driving increased regulatory attention to ABA, how routine compliance concerns can escalate into enforcement matters, and the steps providers and investors can take to reduce risk and strengthen compliance.
Rising Demand, Expanding Coverage
Demand for ABA therapy has grown in step with an increase in autism diagnoses over the past two decades. CMS estimates that 5% of children with Medicaid or CHIP coverage have an Autism Spectrum Disorder (“ASD” or “autism”) diagnosis, significantly higher than children covered by private insurance. Medicaid and CHIP spent over $10.1 billion on ABA services in 2025, representing a 421% growth over the last five years.
Demand also reflects that ABA is the behavioral treatment modality with the strongest evidence base for autism and may be used to improve communication, adaptive functioning and daily living skills, as well as to address dangerous or interfering behaviors.
In a 2014 informational bulletin, CMS clarified that states are required to cover “medically necessary” diagnostic and treatment services for children with ASD.. In Minnesota, one of the first states to offer Medicaid coverage under the Early Intensive Developmental and Behavioral Intervention (EIDBI) benefit, claims increased from $600,000 in 2018 to over $400 million by 2025.
Rapid Growth and Uneven Oversight
Historically, most states did not condition Medicaid reimbursement for ABA agencies on obtaining ABA-specific organizational accreditation. As the ABA industry has grown, states and payors have increasingly looked to formal accreditation standards as a mechanism to support quality oversight and program integrity. Recent initiatives by the Council of Autism Service Providers (CASP) and the Autism Commission on Quality (ACQ) have helped formalize and promote organizational quality standards. Massachusetts and Indiana are among the first states to incorporate accreditation requirements for Medicaid-participating ABA providers.
State Audits Have Identified Issues
In 2022, HHS-OIG announced audits of Medicaid ABA payments in eight states. The results from the four completed audits reveal common themes. Most notably, in every state reviewed, all 100 sampled enrollee-months included one or more claim lines that were determined to be improper or potentially improper. While these findings do not necessarily indicate fraud, they highlight recurring compliance issues related to documentation, credentialing, treatment planning, and supervision requirements.
- The Indiana audit, concluded in December 2024, estimated at least $56.6 million in improper payments, including payments where documentation requirements were not met, providers lacked appropriate credentials, or there was no underlying diagnosis or treatment referral.
- The Wisconsin audit, concluded in July 2025, estimated at least $18.5 million in improper payments, including session notes that did not support the CPT code billed, the number of units billed, the date of service, and did not include signatures of rendering providers.
- The Maine audit, concluded in January 2026, estimated at least $45.6 million in improper payments, including where the claim did not include a comprehensive assessment, did not meet documentation requirements, did not include a treatment plan, or providers lacked appropriate credentials. The Maine audit assessed Rehabilitative and Community Support Services to children with ASD, which includes ABA as well as other treatment modalities.
- The Colorado audit, concluded in February 2026, estimated at least $77.8 million in improper payments, including documentation not supporting the claim, providers lacked appropriate credentials, and there was no underlying diagnosis or treatment referral.
Although the specific findings varied by state, recurring themes included documentation deficiencies, credentialing issues, treatment planning concerns, inadequate evidence of supervision, and insufficient support for billed services. Together, the audits provide insight into the compliance areas receiving increased regulatory attention.
These findings matter beyond the audit context. Although improper payments are not necessarily fraudulent, the recurring documentation, credentialing, and oversight deficiencies identify areas likely to draw regulatory scrutiny and enforcement attention. The next post in this series will examine how ordinary compliance concerns can escalate into more serious enforcement matters in this environment of heightened scrutiny.
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The Commercial Litigation Update blog is currently edited by Jennifer O'Connor and Adam Paine.
