Medicaid Crunch: States Slash ABA Reimbursements as Costs Soar — Families Fear Access Loss

State Medicaid programs nationwide are grappling with rapidly rising costs for applied behavior analysis (ABA), an intensive therapy widely used for children and young adults with autism. As states move to cap hours, reduce reimbursement rates, tighten provider rules, and adjust eligibility, families and smaller providers warn that abrupt changes threaten access—especially in rural areas and for older children who already face limited options.

Rising demand and mounting bills

Screening and diagnoses of autism spectrum disorder have increased, and many families report life-changing benefits from ABA: improved communication, expanded social skills, better focus, and reductions in challenging behaviors. ABA programs often range from 10 to 40 hours per week across home, school and clinic settings, which contributes to high costs for public and private insurers.

Federal guidance, audits and political pressure

Federal guidance from the Centers for Medicare & Medicaid Services in 2014 required state Medicaid programs to cover comprehensive autism services for children; by 2022, every state Medicaid program had established ABA coverage. At the same time, federal auditors have begun probing state ABA payments for potential fraud and improper claims, adding pressure on states to reform payment systems.

“For such a costly and intensive service, the states need to explore how to best reimburse this benefit so that it’s sustainable and promotes quality,” said Mariel Fernandez, vice president of government affairs at the Council of Autism Service Providers and a board-certified behavior analyst.

How states are responding: Indiana, Nebraska and North Carolina

Indiana has been a focal point. Medicaid spending on ABA in the state jumped from $21 million in 2017 to $611 million in 2023. A federal inspector general found at least $56 million in improper payments to ABA providers in 2019–2020. In 2024 the state lowered reimbursement to roughly $68 per hour, prompting clinic closures, mergers and community pushback. A state working group warned that, without policy changes, spending could reach $825 million by 2029 and recommended creating a dedicated ABA office to increase oversight.

Nebraska’s ABA spending soared from $4.6 million in 2020 to more than $85 million recently. The state cut reimbursement rates—reducing pay for direct therapy by behavior technicians by about 48%, to roughly $74.80 per hour—drawing criticism that officials gave providers only 30 days’ notice and did not complete a local cost survey. Providers and advocates say recruiting and retaining qualified clinicians is harder in sparsely populated states, where travel times and workforce shortages raise delivery costs.

North Carolina estimated that autism-related services, including ABA, will cost an estimated $639 million in fiscal 2026 (a 425% increase from 2022). The state implemented broad Medicaid rate reductions effective Oct. 1, cutting autism-service reimbursements by about 10%. Families of 21 children sued to halt the cuts, arguing they discriminated against children with disabilities; a preliminary injunction temporarily paused the autism-specific reduction.

Impact on families and providers

Smaller providers say rate reductions and abrupt implementation timelines have forced layoffs, salary reductions and closures. Many families—particularly those in rural areas or with older children—report difficulty finding providers who will accept Medicaid or serve older age groups. Angela Gleason, of an autism advocacy organization, described the challenge of finding services for her 13‑year‑old son with autism and speech delay; for families like hers, Medicaid is often essential to afford ongoing therapy.

Provider leaders acknowledge the need for sustainable payment systems. Jason McManus, president of Indiana Providers of Effective Autism Treatment (InPEAT), said states must balance fiscal realities with preserving access and quality. Sam Wallach of Attain and Leila Allen of Lighthouse Autism Center said some rate corrections can make coverage sustainable but urged careful transition plans, local cost studies and adequate notice to providers.

Policy trade-offs and next steps

States face competing priorities: reining in unsustainable spending, preventing fraud, ensuring geographic access to qualified clinicians, and maintaining the intensity of services many families report as essential. Proposed policy tools include hourly or annual caps, enrollment and billing audits, provider rate-setting tied to local costs, and creation of oversight offices to monitor quality.

As policymakers weigh reforms, families and advocacy groups urge transparent rulemaking, staged implementation timelines, and safeguards to protect continuity of care. Without careful planning, rapid cuts risk disrupting services for vulnerable children who depend on sustained, intensive support.

Reporter note: Sources quoted in this article include clinicians, state provider representatives and family advocates who asked to be identified by name based on their public roles and statements.