CMS Offers Guidance As Scrutiny Rises Over ABA Therapy In Medicaid

What You Need to Know

• Key takeaway #1

  In 2025, Medicaid spent more than $10 billion on applied behavior analysis (ABA) therapy for children with autism — a 421% increase from 2021, according to the Centers for Medicare and Medicaid Services (CMS). At the same time, incidents of fraud related to ABA and other therapies have been growing rapidly. In response, CMS released a 173-page toolkit designed to help state Medicaid and Children’s Health Insurance Program (CHIP) agencies combat fraud, waste, and abuse in ABA therapy programs.

• Key takeaway #2

  Although directed at state Medicaid and CHIP agencies, the toolkit offers guidance that health plans may consider adopting to address fraud, waste, and abuse related to ABA therapy, including: (i) requiring a confirmed Autism Spectrum Disorder (ASD) diagnosis by a qualified, independent clinician before  covering ABA therapy; (ii) tying reimbursement to ABA-specific CPT codes (97151–97158) with controls distinguishing clinically billable supervision from non-billable administrative supervision; and (iii) implementing prior authorization, concurrent review, reauthorization, and retrospective review supported by individualized treatment plans (ITP) and standardized outcome measures. Health plans adopting these practices should be mindful that ABA-specific utilization management (UM) controls applied with greater stringency than those governing analogous medical/surgical benefits may give rise to federal mental health parity concerns under the Mental Health Parity and Addiction Equity Act.

Between 2021 and 2025, Medicaid spending on ABA therapy grew six times faster than the number of children who received services, making it one of the fastest-growing areas of Medicaid expenditure, according to CMS. On August 4, 2026, CMS released a toolkit to help state Medicaid and CHIP agencies strengthen their programs and limit fraud, waste, and abuse tied to increased demand for ABA therapy. In 2025, Medicaid spent about $10 billion on ABA and related therapy services for children with ASD — a dramatic increase from the $2 billion spent in 2021.

As demand for ABA therapy services has increased, so too have instances of fraud, waste, and abuse. In March 2026, a federal Medicaid audit uncovered $285.2 million in improper (and potentially improper) payments for ABA therapy in Colorado. The investigation identified documentation failures, uncredentialed staff, and missing diagnostic referrals or examinations.Moreover, the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) said it uncovered widespread documentation failures, uncredentialed staff, and missing diagnostic referrals or exams. Similarly, a state audit in Maine found $45.6 million in improper Medicaid payments for ABA therapy. Allegations of fraud have also been made by private health insurance carriers.

CMS says the toolkit will help strengthen program integrity, protect children from inappropriate treatment, and safeguard Medicaid and CHIP resources. It could also help states address concerns about growing costs, inconsistent clinical practices, and fraud schemes that target autism care. The 173-page document is based on Medicaid data, peer-reviewed literature, and stakeholder input.

Utilization Management Is Critical for Substantiating Medical Necessity

The toolkit recognizes that UM — including prior authorization, concurrent review, reauthorization, and retrospective review — is critical for managing ABA services. It emphasizes that UM documentation standards — including diagnostic and functional assessment support, individualized treatment plans (ITP), and consistent documentation expectations — are necessary to substantiate medical necessity. These standards also can help reduce variation in authorization decisions. 

CMS recommends the following best practices for UM of ABA therapy for children with ASD:

• Structure UM for the full lifecycle of services. Prior authorization should precede service delivery; concurrent review should occur during treatment; and reauthorization should be conducted near the end of each authorization period to reassess medical necessity and adjust service parameters as the child’s needs and progress evolve.
• Align UM with Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) requirements. EPSDT entitles eligible children to all medically necessary Medicaid-covered services. States may impose utilization controls — including prior authorization and hour limits — but those limits must be “soft” (i.e., subject to individualized medical necessity exceptions) and cannot operate as absolute caps or delay needed care.
• Coordinate UM with program integrity. UM policies should be aligned with audit triggers, prepayment edits (e.g., overlap checks, unit limits), targeted audits, and provider screening. Because ABA UM requirements are often spread across multiple documents — including coverage policies, managed care contracts, billing guides, and enrollee materials — states and plans should ensure consistency and proper authority across all sources.
• Conduct close reviews of higher-intensity ABA requests. The mismatch between requested intensity and documented clinical need is among the most common triggers for OIG audits and False Claims Act exposure. Documentation must clearly justify why higher-intensity services are clinically warranted, include frequent outcome assessments, and contain a tapering plan. Authorizations driven by unit maximization rather than individualized need are a central theory in government enforcement and payor fraud cases.
• Complete ITPs before services begin. ITPs must include measurable goals, service intensity, staffing and setting specifications, and expected outcomes, using standardized (not provider-created) outcome measures. Progress updates must genuinely reflect the patient’s clinical status. Failure to support billed codes with adequate ITP documentation is an active basis for litigation and audit findings.

ASD Diagnosis Gaps Fuel ABA Fraud Exposure

The CMS toolkit notes that an ASD diagnosis by a qualified independent clinician should be required prior to approving ABA therapy services to help prevent fraud. Non-licensed practitioners should not conduct diagnostic assessments. Diagnostic assessments should be conducted in person as often as possible, with telehealth assessments being limited to rare, well-justified circumstances. The CMS toolkit includes a useful chart of assessments that can be used.

Distinguishing Between Billable Services and Non-Billable Supervision

The toolkit draws a critical distinction between billable medically necessary oversight and non-billable administrative or employment supervision. Reimbursement must be tied to specific CPT codes. Misstating the nature of supervision — or billing administrative time as clinical supervision — is a recurring audit finding and a core theory in both government enforcement and private payer fraud counterclaims. It also calls for Stark Law-analog conflict-of-interest controls, including disclosure of financial relationships between the diagnosing clinician and the ABA provider to which a referral is made, prohibition of compensation tied to referral volume, and audit monitoring of referral and diagnosis outliers. 

Key Takeaways for Health Plans

The toolkit highlights several practices that health plans can also consider implementing to ensure that ABA therapy received by members is medically necessary. In particular, health plans may look to the toolkit’s guidance on: (i) diagnosis integrity — requiring that comprehensive ABA therapy coverage be predicated on a confirmed ASD diagnosis by a qualified, independent clinician, with appropriate limits on telehealth-only assessments; (ii) CPT code compliance — tying coverage and reimbursement to the specific ABA CPT codes (97151–97158), with billing controls that distinguish clinically billable supervision from non-billable administrative or employment supervision; and (iii) utilization management — implementing prior authorization, concurrent review, reauthorization, and retrospective review processes supported by ITPs, standardized outcome measures, and documentation sufficient to substantiate medical necessity. Health plans that adopt these practices should, however, exercise caution to ensure that ABA-specific UM controls are not applied with greater stringency than comparable controls governing analogous medical/surgical benefits, as doing so may give rise to federal mental health parity concerns under the Mental Health Parity and Addiction Equity Act.