Medicaid billing abuse deprives autistic kids of therapy and taxpayers of trust

News stories involving fraudulent government payments and the widespread misuse of tax dollars have become all too common. The latest scandal involves Medicaid and the Children’s Health Insurance Program, or CHIP, two critical safety-net programs meant to serve society’s most vulnerable.

Government spending on applied behavior analysis therapy for children with autism has exploded in recent years. Unfortunately, federal investigations have revealed that this higher spending increasingly reflects rampant billing abuse by unscrupulous providers, leaving taxpayers to foot the bill.

The numbers just don’t add up. According to the Centers for Medicare and Medicaid Services, Medicaid and CHIP spending on applied behavior analysis therapy jumped from $2 billion in 2021 to over $10 billion by 2025. That’s more than a 400 percent increase , despite the fact that the number of children receiving an autism diagnosis only grew by 67 percent.

State-level data are just as jarring. In Minnesota , Medicaid spending on autism therapy skyrocketed from under $700,000 in 2018 to over $342 million by 2024, while in North Carolina, outlays grew from $1.9 million in 2020 to over $505 million in 2025. Indiana offers an especially egregious example. In 2023, the Hoosier State paid a single provider $29 million for therapy services covering just 84 patients, about $340,000 per child.

Today, autism treatment is one of the fastest-growing categories of Medicaid spending.

Federal officials took notice. Investigators released audits for just four states — Indiana, Colorado, Maine and Wisconsin and found hundreds of millions of dollars in improper disbursements, including payments made to ineligible recipients, payments in the wrong amount and payments made without proper documentation. Officials have since recommended that these state governments return roughly $123 million in misspent federal funds.

None of the four states had performed a statewide post-payment review of these Medicaid fee-for-service claims. Colorado’s example makes this oversight failure particularly appalling. Federal auditors determined that every single one of the 100 sampled enrollee months contained potentially improper payments. Providers were found to be charging Medicaid for services delivered by staff without proper credentials and, in some cases, even billing naps and group recreation as one-on-one therapy.

The problem goes far beyond lax oversight and billing errors. Earlier this year, the Department of Justice filed criminal charges in what it alleges was a $46 million Medicaid fraud scheme that involved billing for services that were never delivered and using falsified diagnoses.

This isn’t just about bad actors abusing the healthcare system. Runaway applied behavior analysis spending exposes the moral hazard at the heart of Medicaid’s financing architecture. Since the program is structured as an open-ended entitlement, state Medicaid spending automatically triggers federal matching funds. However, because states don’t fully fund their Medicaid programs, they have little incentive to control spending and prevent abuse.

Fortunately, the government is taking steps to address runaway applied behavior analysis therapy spending. The agency recently unveiled a toolkit that offers states practical advice on verifying provider qualifications and ensuring tax dollars fund only clinically appropriate care. As part of a broader effort to combat fraud, federal health officials are also developing the Comprehensive Regulations to Uncover Suspicious Healthcare rule, which seeks to leverage artificial intelligence to stop improper or fraudulent payments in real time.

Congress is acting, too. House Republicans recently introduced the Anti-Fraud Fund Act of 2026 , which would allocate billions of dollars to federal investigators and prosecutors to proactively fight fraud in federal health programs. But beefed-up enforcement can only go so far.

As long as Medicaid’s open-ended entitlement status lets states shift costs to federal taxpayers, incentives to limit fraud and improper payments will remain weak. If Congress wants to tackle the root of the problem, it should consider reforming Medicaid into a block grant, which would give states a fixed amount of money instead of an open-ended federal match.

Applied behavior analysis therapy is a vital tool to help children with autism flourish, and Medicare and Medicaid administrator Mehmet Oz illustrated the stakes perfectly when he affirmed that “every dollar lost to fraud or waste is a dollar that cannot reach a child who genuinely needs it.”

Policymakers must ensure Medicaid remains a lifeline for vulnerable children — not a vehicle for wasteful spending.

Alex Ciccone is Policy and Government Affairs manager at National Taxpayers Union.