Indiana Medicaid Faces $56M in Autism Service Payment Issues

Indiana’s Medicaid office has come under scrutiny for making at least $56 million in “improper” payments for autism therapy services over a two-year period, according to a report released Thursday by the inspector general of the U.S. Department of Health and Human Services. This startling figure represents more than a third of audited payments during those years and highlights significant challenges in Indiana’s Medicaid system, which is grappling with both rapid growth and underfunding.

Indiana’s Medicaid program has been under financial strain since the state Family and Social Services Administration (FSSA) discovered a $1 billion shortfall in its budget last year. To address this, FSSA has implemented cost-cutting measures such as instituting waitlists for waiver services and reducing child care vouchers. Despite these efforts, the latest Medicaid forecast, revealed on Tuesday, indicates a remaining budget shortfall of several hundred million dollars. The costs associated with the program are expected to grow faster than the state’s overall revenue, exacerbating the financial challenges.

The federal Office of Inspector General’s (OIG) audit is not the first instance of alleged Medicaid payment issues in Indiana. A federal lawsuit unsealed in September accused the state of processing approximately $700 million in fraudulent Medicaid payments between 2015 and 2020. While the latest audit does not accuse the state of fraud, it does highlight systemic issues in the administration of Medicaid-reimbursed services, particularly Applied Behavior Analysis (ABA) therapy, the most common form of treatment for children with autism.

Since the pandemic, the use of many Medicaid-funded services, including ABA therapy, has surged. Between 2017 and 2020, state Medicaid payments for fee-for-service ABA services skyrocketed from $14 million to $102 million, making Indiana’s spending on ABA services the second-highest in the nation. This rapid growth prompted federal auditors to investigate claims from 2019 and 2020 to determine compliance with federal and state requirements.

Auditors discovered numerous issues with claims, including discrepancies between notes and required documentation, services provided by uncredentialed staff, and services rendered to children who lacked proper diagnoses or referrals. These issues contributed to the estimate of $56.5 million in improper payments. An additional $77 million in payments was flagged as “potentially” improper, with auditors raising concerns about incomplete or unreliable notes that failed to adequately describe the services provided.

While the audit was not designed to determine conclusively whether fraud occurred, OIG spokesperson Katherine Harris clarified that these findings underscore the potential for fraud, waste, and abuse in the Medicaid system. The inspector general has recommended that FSSA refund the federal government $39 million, the federal share of the improper payments. In response, FSSA has committed to reviewing claims, recovering payments from providers, and enhancing its internal auditing processes.

“The state’s goal is to ensure that ABA services are delivered appropriately and effectively to the members we serve,” FSSA spokesperson Michele Holtkamp told IndyStar. According to the OIG report, the agency has begun post-payment audits of 21 providers and plans to conduct these audits annually. Additionally, FSSA is actively educating providers about proper documentation standards to reduce future payment issues.

Even before the discovery of the budget shortfall, FSSA had initiated efforts to control the rising costs of ABA services. In mid-2023, the agency implemented a flat reimbursement fee for ABA therapy, setting it at a rate lower than what many providers had been charging. More recently, the Medicaid office proposed additional restrictions to the State Budget Committee, including limiting ABA benefits to 30 hours per week and capping service duration at three years. Exceptions for continued therapy would require proof of medical necessity.

Holtkamp emphasized that these policy adjustments are “underscored” by the findings of federal auditors and reflect the state’s commitment to ensuring the sustainability and integrity of its Medicaid program.

Indiana’s efforts to address these issues come at a time when the demand for autism services continues to grow. As more families seek ABA therapy for their children, ensuring access to effective and ethical services remains a priority. The findings of the federal audit highlight the importance of accountability in Medicaid spending, particularly for critical services like ABA therapy.

Indiana’s Medicaid office must strike a delicate balance between managing costs and providing essential autism services to those in need. By improving oversight and implementing sustainable policies, the state can work toward a system that supports families while maintaining fiscal responsibility.