Private Equity and the Surge in Autism Services

The cost of applied behavior analysis services in Medicaid is skyrocketing. It’s part of a private equity gold rush — raising real concerns about the quality of care.

Authors: Alixandra Gould, Mindy Lipson and Melinda Dutton

Editors: Patti Boozang and Amanda Eisenberg

tl;dr

• Applied behavior analysis (ABA) therapy for autism has seen explosive growth in Medicaid spending, with some states reporting increases of 400%–2,000% — outpacing both enrollment and autism diagnoses.

• Private equity investment has fueled rapid expansion and consolidation of for-profit ABA providers, raising concerns about quality, over-utilization and “cookie-cutter” treatment plans. States are responding with reforms: tightening oversight, requiring individualized care, supporting family caregivers and exploring ways to link reimbursement to quality and outcomes.

• Ultimately, the challenge for states is to define and enforce access and quality standards for medically necessary ABA services while managing costs — ensuring Medicaid can sustainably support the diverse needs of autistic people and their families.

The 80 Million Impact

The CDC estimates one in 31 children and one in 45 adults in the U.S. are autistic. That’s millions of people — each with unique needs that can change over a lifetime. The higher rates of autism diagnosis are due primarily to a wider awareness of the condition, the broadening of its definition and more widely available screenings, especially for children. About 5% of kids with Medicaid or the Children’s Health Insurance Plan have received an autism diagnosis, according to CMS — a rate that’s higher than the percentage of uninsured and privately insured kids.

Applied behavior analysis (ABA) is the most widely prescribed therapy for kids with autism, but it is still a relatively new service for states and commercial plans. ABA focuses on social and other environmental modifications to change behaviors and build skills. In 2014, CMS clarified that Medicaid must cover autism diagnoses and treatment under the Early and Periodic Screening, Diagnostic and Treatment (EPSDT) benefit if the services are deemed medically necessary. CMS acknowledged in the guidance that, while there are various recognized autism treatments, most focus on use of ABA. That action helped expand access to ABA. However, families still hit walls — including thin provider networks, patchy expertise and uneven care planning. Since then, ABA clinical standards and guidelines have continued evolving, oversight remains a work in progress, and states and commercial plans are grappling with defining the quality and utilization standards and measures.

Meanwhile, the ABA provider market is booming — fueled in part by increased interest from private equity (PE). With growing payer and patient bases, PE has seen an opportunity to jump into the autism services market and scale for-profit chains at breakneck speed —bringing with it growing pains. Families and clinicians are sounding alarms about inconsistent quality, which watchdogs have linked to the proliferation of PE investment. A 2023 Center for Economic and Policy Research report found payers are “not able to determine the quality of services provided during any time period — especially in terms of clinical staff-patient ratios or types of learning tasks that occur.” Research shows PE-backed ABA providers are more likely to run high caseloads, experience staff churn, and lean on cookie-cutter treatment plans — sometimes prescribing more hours than needed. And, while ABA is an important part of the continuum of care for autism, some policymakers have raised concerns about families being directed to ABA services when respite or paid caregiving would be better for them (and likely more cost efficient for states).

The result? ABA spending is skyrocketing. North Carolina expects a 425% jump in Medicaid ABA spending from 2022 to 2026. Indiana’s payments rose 607% in three years; Nebraska’s up nearly 2,000% in five. This surge far outpaces both Medicaid enrollment and the rise in autism diagnoses and has led to federal and state Office of Inspector General (OIG) investigations. Some fear that ABA could crowd out other vital Medicaid services that states are not required to cover, including home- and community-based services and support for people with intellectual and developmental disabilities (I/DD).

To stem the flood, policymakers across the country are starting to develop and implement reforms to ensure the provision of high-quality care for autism, and shore up the continuum of autism services, while reining in practices that prioritize provider volume over patient need. Here’s what we’re seeing:

• Individualized, Whole-Person Care Planning: States and health plans are looking to more actively link people with autism to the full continuum of autism services, not just ABA, including through prior authorization that considers non-ABA options.

• Caregiver Involvement: Treatment plans increasingly are likely to include caregiver goals and training, helping families generalize skills and plan for discharge.

• Education on Autism Treatment Options: States are seeking to educate families, providers, and plans on ABA best practices and treatment options beyond ABA, emphasizing individualized care.

• Oversight and Guardrails: States are starting to tighten provider standards and oversight to require stronger utilization management, individualized treatment plans, more frequent reauthorizations, and post-utilization reviews.

• Conflict-of-Interest Protections: Some states are considering ways to prevent the same provider from diagnosing, referring, assessing and treating a person — reducing over-utilization incentives.

• Respite and Paid Family Caregiving: Some states are working to expand options for paid family caregiving and expanding respite services, which can discourage ABA use for non-treatment purposes.

• Quality-Linked Reimbursement: States are exploring differential rates and value-based payment models, like tying reimbursement to outcomes and provider qualifications.

The Bottom Line

ABA’s meteoric rise is a case study in how policy, markets and human need sometimes collide. States face a delicate balancing act to expand access while maintaining quality and fidelity to clinical standards, while operating within a challenging budget environment. The stakes are high — not just for Medicaid budgets, but also for millions of autistic people and their families who rely on these services to live fuller, more independent lives.

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