Federal Audit Finds $56 Million in Improper Medicaid Payments for ABA Therapy in Indiana

A recent audit by the U.S. Department of Health and Human Services Office of Inspector General (OIG) has revealed that Indiana’s Medicaid program made at least $56 million in improper payments for Applied Behavior Analysis (ABA) services between 2019 and 2020. The audit highlights significant documentation issues, billing errors, and oversight gaps that should be a wake-up call for both ABA providers and Medicaid administrators.

Why Was Indiana Audited?

Indiana's Medicaid spending on ABA therapy exploded between 2017 and 2020 — increasing from $14.4 million to $101.8 million in just three years. This rapid growth placed Indiana among the highest spenders on ABA services in the country.

Given this sharp rise, the OIG launched a review to determine if Medicaid payments for ABA therapy complied with federal and state requirements.

What Did the Audit Find?

The results were alarming. The audit found that every single enrollee-month sampled contained payments that were either improper or potentially improper.

Key problems included:

• Inadequate documentation to support billed services
• Unqualified staff providing therapy
• Billing for non-therapeutic activities like playing board games or watching movies
• Missing or incomplete treatment plans
• Incorrect use of CPT codes (including 97155 and 97156)
• Missing required signatures on documentation

In total, the audit estimated that Indiana’s Medicaid program made $56,052,628 in improper payments during the two-year review period.

What Happens Now?

The OIG recommended that Indiana refund $39.4 million (the federal share) to the U.S. government. Beyond returning funds, the OIG made several key recommendations for Indiana’s Medicaid program, including:

• Providing clearer guidance to ABA providers about documentation standards
• Conducting regular statewide post-payment reviews of ABA claims
• Improving oversight of prior authorization processes
• Reviewing whether an additional $53 million in potentially improper payments need to be refunded after further investigation

What Was Indiana’s Response?

Indiana’s Family and Social Services Administration (FSSA) did not directly state whether it agreed or disagreed with the audit findings. However, state officials outlined steps they have already taken or plan to take, including:

• Updating Medicaid guidance for ABA providers
• Strengthening audit and review processes
• Enhancing training for providers on documentation requirements

Why This Matters for ABA Providers Everywhere

While this specific audit focused on Indiana, the findings send a strong signal to ABA providers in every state — especially those serving Medicaid clients.

Key takeaways for providers:

• Documentation must clearly tie all billed time to therapeutic goals
• Notes should detail what happened in session, why it was therapeutic, and who provided the service
• Non-therapeutic activities are not billable — even if the client enjoys them
• Staff qualifications and supervision must meet Medicaid standards
• Missing signatures or incomplete plans can result in clawbacks of payments

The Bigger Impact on ABA Access

Audits like this have ripple effects. While improving compliance is essential, increased scrutiny often leads to:

• Slower authorization processes
• More frequent audits of providers
• Increased administrative burden
• Potential reduction in provider participation in Medicaid programs due to perceived risk or low reimbursement rates

Families relying on Medicaid for ABA therapy could feel the impact if providers exit the system or reduce Medicaid caseloads to avoid audit risk.

Final Thoughts

ABA providers who serve Medicaid clients should view this audit as a call to action. Ensuring thorough documentation, clear treatment plans, and compliance with billing rules is no longer optional — it’s critical for the sustainability of practices and continued access to services for families.

As Medicaid oversight of ABA grows across the country, providers who stay ahead of compliance expectations will be better positioned to thrive — while continuing to deliver ethical, effective care.

Sources:

• OIG Article Summary Page
• Full Audit Report (PDF)
• Audit Highlights (PDF)
• Indiana Family and Social Services Administration (FSSA)

Disclaimer: This article summarizes publicly available information and reporting from external sources. We encourage readers to review the original reports linked above for complete details and context. This summary does not represent legal advice, nor is it an official statement from any party involved.