Improper Payments: Colorado’s $77.8M Medicaid Crisis

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A federal audit says Colorado’s Medicaid program sent tens of millions in improper autism-therapy payments—raising a hard question for taxpayers: who is guarding the public purse when government spending explodes?

Quick Take

A federal HHS Office of Inspector General audit found at least $77.8 million in improper fee-for-service Medicaid payments for Applied Behavior Analysis (ABA) therapy for children in Colorado during 2022-2023.
Auditors reported the sampled claims were all improper or potentially improper, citing problems such as payments tied to uncredentialed staff and missing required documentation like diagnoses.
The OIG recommended Colorado refund $42.6 million to the federal government (the federal share), a demand Colorado officials have not fully accepted.
The audit landed amid Colorado’s reported Medicaid budget strain, intensifying scrutiny over oversight, compliance, and basic stewardship of tax dollars.

Audit findings put Medicaid oversight back in the spotlight

The U.S. Department of Health and Human Services Office of Inspector General reported that Colorado made at least $77.8 million in improper Medicaid payments for ABA therapy for children in 2022 and 2023. The audit focused on fee-for-service Medicaid and examined a massive claims universe, then tested a sample of enrollee-months tied to dozens of recipients and multiple therapy centers. The audit’s central message was compliance failure, not ideology.

Auditors said the payments did not fully comply with federal and state requirements, and the sample showed a 100% rate of improper or potentially improper claims. The reasons described include missing documentation, services billed without required support such as diagnoses, and situations involving uncredentialed technicians. The watchdog also flagged additional amounts as “potentially improper,” putting even more spending under a cloud until documentation questions are resolved.

Colorado’s ABA spending surge collided with controls built for a smaller program

Colorado’s Medicaid spending on ABA has grown rapidly over the last several years, with reported totals rising from about $60.1 million in 2019 to about $163.5 million in 2023. Reporting tied the jump to higher reimbursement rates and more therapy hours, rather than a matching spike in the number of patients. When a program expands that fast, paperwork and credentialing controls must scale with it—or taxpayers get exactly what the audit described: payments that cannot be defended as compliant.

Colorado’s Department of Health Care Policy & Financing, which administers the program, has described the $77.8 million figure as an estimate and has pointed to efforts launched in 2025, including post-payment audits and billing system updates. The state response matters because the OIG recommendations include real consequences: the watchdog called for repayment of the federal share and demanded stronger guardrails to keep the same billing patterns from repeating in the next budget cycle.

Refund demand tests accountability in a tight budget environment

The OIG recommendation that Colorado refund $42.6 million to the federal government is more than a bookkeeping dispute. Medicaid is jointly funded, and when a state cannot support payments as allowable, federal taxpayers are effectively asked to eat the cost. Coverage of the audit also placed these findings against Colorado’s broader Medicaid financial stress, with lawmakers and administrators facing pressure to restrain spending while still maintaining services for vulnerable families.

Conservatives watching this story will recognize a familiar pattern: government expands a program, dollars race out the door, and oversight lags behind—until a federal watchdog shows up with a bill. None of that diminishes the real needs of children with autism who benefit from legitimate therapy. It does, however, underline a core principle: compassion without controls is not compassion, it is mismanagement—and mismanagement always gets paid for by working families.

What the report does—and does not—prove about “fraud” claims

The audit uses the language of “improper” and “potentially improper” payments, which often means a claim fails documentation or eligibility rules, not necessarily that prosecutors could prove intent beyond a reasonable doubt. That distinction is important for readers trying to separate audit findings from criminal allegations. At the same time, a 100% improper or potentially improper rate in the sample is a glaring red flag for administrators and lawmakers who promised taxpayers basic competence.

For families relying on ABA services, the risk is that the cleanup could become chaotic: tighter prior authorization, payment holds, and more audits can disrupt providers and delay care if the state does not implement reforms carefully. For taxpayers, the risk is simpler: if credentialing and documentation rules are treated as optional, Medicaid becomes a pipeline for waste. The report’s publication puts Colorado and federal overseers on notice to prove they can protect both children and the public treasury.