Medicaid Autism Therapy Billings Surge to $2.2B, Sparking Federal Fraud Probe

Medicaid Autism Therapy Payments Triple to $2.2B

Direct payments from state Medicaid programs for autism therapy have expanded rapidly, growing from $660 million in 2019 to $2.2 billion in 2023. This explosive growth has established applied behavior analysis (ABA), the clinical term for the therapy, as the single fastest-growing service within Medicaid. The number of companies providing ABA almost doubled between 2019 and 2023, as entrepreneurs and private-equity firms entered the sector to capitalize on the increasing demand and generous government funding, which is about 70% financed by federal taxpayers.

This boom is driven by a sharp rise in autism diagnoses, which climbed from one in 150 children in 2000 to one in 31 by 2022. However, a Wall Street Journal analysis found that regulatory oversight has not kept pace with the industry's growth. The Department of Health and Human Services’ inspector general has launched a state-by-state investigation that has already uncovered widespread billing errors and practices prohibited by Medicaid guidelines, such as billing for therapy while patients were napping.

Indiana Provider Billed $1,600 an Hour, Averaging $340,000 Per Patient

Indiana became an epicenter for extreme billing practices due to a state policy that reimbursed providers 40% of their billed charges, effectively creating a blank check. In 2023, Indiana-based Piece by Piece Autism Centers collected $29 million from Medicaid for just 84 patients, which amounts to an average of $340,000 per child. The company achieved this by systematically increasing its list price for routine therapy to $1,600 an hour, which resulted in a state payment of $640 per hour—more than ten times the national average of $61.

Piece by Piece's owner, Meghann Mitchell, acknowledged the lack of state oversight. “I don’t think Indiana really had any oversight, or not much,” Mitchell stated. During the period of soaring Medicaid revenue, she acquired several properties, including a $2.5 million home in Florida. The company's total revenue from Indiana Medicaid reached approximately $58 million from 2019 to 2023.

Federal Probe Widens as States Overhaul Reimbursement

The escalating costs and billing irregularities have triggered a significant government response. The Trump administration has focused on alleged fraud in Minnesota, ordering the Centers for Medicare and Medicaid Services (CMS) to withhold $260 million in Medicaid funds from the state. Federal prosecutors have charged the owners of two Minnesota autism-therapy centers with wire fraud after they collected a combined $20 million in Medicaid payments.

In response to the surge in spending, Indiana has dismantled its reimbursement system. Effective in 2024, the state replaced the 40% rule with a flat rate of $68 per hour for state-paid services. State officials are also planning an additional 6% cut and intend to cap lifetime service hours at 4,000 per child. These actions signal a broader regulatory shift that is expected to reduce profitability for providers and deter investment in a sector that has operated with minimal financial controls.