Two Systems, One Program, Zero Transparency

Medicaid is not one program. It is two fundamentally different delivery systems operating under the same name, governed by the same federal law, but producing materially different outcomes for the families who depend on them. Understanding the difference between fee-for-service Medicaid and Medicaid managed care is essential for any family navigating ABA coverage — and it is a distinction that almost no one explains at enrollment.

Fee-for-service (FFS) Medicaid is the original model. Under FFS, the state Medicaid agency pays providers directly for each covered service at a rate published in the state’s fee schedule. Providers enroll with the state, bill the state’s fiscal agent, and receive reimbursement per claim. The state sets the rules: which services require prior authorization, what documentation is needed, and what rates are paid. There is one set of rules for everyone.

Medicaid managed care (MCO) works differently. The state contracts with private insurance companies — managed care organizations like UnitedHealthcare, Molina, Aetna, Centene, and others — and pays them a fixed capitation rate per member per month. The MCO is then responsible for arranging and paying for all covered services for its enrolled members. The MCO builds its own provider network, sets its own credentialing requirements, establishes its own prior authorization processes, and may negotiate reimbursement rates that differ from the state’s FFS fee schedule. Federal law requires that MCO coverage be “no more restrictive” than FFS coverage, but the implementation of that standard varies enormously.

As of 2025, approximately three-quarters of all Medicaid enrollees nationally are in managed care. But the proportion varies dramatically by state and by eligibility category. Some states operate entirely through managed care. Others maintain FFS for certain populations, including children with developmental disabilities or those enrolled in home and community-based waiver programs. In states that use both systems, the same child might be in FFS or MCO depending on when they enrolled, where they live, or which eligibility pathway they entered through.

Where the Coverage Diverges: A Side-by-Side Comparison

Who pays provider — FFS: State Medicaid agency (directly). MCO: Private insurer under state contract.

Reimbursement rate — FFS: Published state fee schedule; same for all providers. MCO: MCO-negotiated; may differ from FFS schedule; varies by MCO.

Provider network — FFS: Any Medicaid-enrolled provider. MCO: MCO’s contracted network only (or out-of-network with authorization).

Credentialing — FFS: Enroll once with state. MCO: Must credential separately with each MCO.

Prior authorization — FFS: State-defined; some states require none for initial ABA assessment. MCO: MCO-defined; may add PA requirements the state does not impose.

PA decision timeline — FFS: Varies by state. MCO: Federal standard 14 days / 72 hrs expedited; new rule effective Jan 2026 shortens to 7 days.

Medical necessity criteria — FFS: State-published definition. MCO: MCO may use state criteria, internal criteria, or third-party vendor criteria (e.g., Optum guidelines).

Hour limits — FFS: EPSDT — no hard caps for children; must cover medically necessary hours. MCO: EPSDT applies, but MCOs may impose soft caps via PA; families must appeal to exceed.

Re-authorization — FFS: State-defined intervals. MCO: MCO-defined; may require more frequent re-auth (e.g., every 90 days vs. 6 months).

Appeals process — FFS: State fair hearing. MCO: MCO internal appeal → then state fair hearing.

Care coordination — FFS: Limited; family navigates independently. MCO: MCO assigns care coordinator (quality varies widely).

Provider choice — FFS: Broad (any enrolled provider). MCO: Limited to MCO network; switching MCOs may be restricted to open enrollment periods.

Sources: 42 CFR §438.210; GAO-24-106532; KFF/HMA Medicaid Managed Care Survey (2024); MACPAC EPSDT brief; CMS Interoperability and Prior Authorization Final Rule (2024).

The Prior Authorization Gap

The single most consequential difference between FFS and managed care for ABA families is prior authorization. Under fee-for-service Medicaid, the state defines which services require prior authorization and under what conditions. Some states do not require prior authorization for the initial ABA assessment (97151), allowing the BCBA to evaluate the child and develop a treatment plan before any authorization review. The treatment plan is then submitted for authorization of ongoing services.

Under managed care, the MCO may impose its own prior authorization requirements — even for services that the state’s FFS program does not require PA for. The GAO found in a 2024 report that CMS has not clearly defined whether MCOs can require prior authorization for EPSDT services when the state does not have such requirements. The result is that different MCOs within the same state may require prior authorization for different services, using different criteria, with different timelines and different denial rates.

For ABA, the practical impact is significant. A child in FFS might begin receiving services within weeks of diagnosis. A child in the same city, enrolled in an MCO, might wait 14 days for a standard PA decision, face a partial denial that must be appealed, wait for the appeal decision, and only then begin services — a process that can stretch to months. During that time, the child is not receiving therapy. The developmental window is closing.

Federal regulations require that MCO medical necessity definitions be “no more restrictive” than the state’s definition. But the GAO found that some MCOs use clinical criteria from third-party vendors that are more restrictive than state FFS requirements. When an MCO applies tighter criteria to determine whether 30 hours per week is medically necessary versus 15, the effect is a de facto hour cap that would not exist under FFS — even though EPSDT prohibits hard caps on medically necessary services for children.

“CMS has not clearly defined whether plans can require prior authorization for EPSDT diagnostic and treatment services when the state Medicaid program does not have such requirements.” — U.S. Government Accountability Office, GAO-24-106532

The Rate Differential: Same Code, Different Payment

Reimbursement rates add another layer of inequity. Under FFS, the state publishes a fee schedule and every provider receives the same rate for the same CPT code. Under managed care, the MCO negotiates rates individually with providers. These rates may be at, above, or below the state’s FFS fee schedule — and they are not publicly disclosed. A provider might accept $45 per unit of 97153 from one MCO and $38 from another, while the state’s FFS rate is $42.

The rate differential has a direct effect on access. Providers who cannot cover their costs at MCO-negotiated rates may decline to credential with that MCO, creating network gaps that leave families without accessible in-network options. This is the dynamic that produced the Arizona Mercy Care crisis: when Mercy Care cut rates by 36 percent, the largest providers left the network, and families were stranded. In FFS, the rate is the rate — and if it is too low, the problem is visible and affects all families equally. In managed care, the rate negotiation is private, the network gaps are specific to each MCO, and the families who are affected may not understand why they cannot find a provider.

The capitation structure itself creates a perverse incentive. MCOs receive a fixed payment per member per month regardless of how many services are utilized. The fewer services the MCO authorizes and pays for, the more of the capitation payment it retains. This does not mean MCOs are intentionally denying care — most operate within regulatory boundaries and face oversight from state agencies. But the financial incentive runs in the opposite direction from FFS, where the state pays more when more services are delivered. For a high-cost, high-utilization service like ABA, which can cost $40,000 to $80,000 per child per year, the structural tension between the MCO’s budget and the child’s clinical needs is inherent.

The Arbitrage Nobody Explains to Families

Most families do not choose between FFS and managed care. The assignment is typically automatic, determined by geography, eligibility category, or state enrollment policy. In some states, families can switch between MCOs during open enrollment periods, but switching from MCO to FFS (or vice versa) may not be an option at all. The result is that the single most important variable in a child’s ABA coverage — the delivery system through which their Medicaid benefits are administered — is often decided without the family’s knowledge or input.

Providers understand the difference intimately. ABA companies that operate in states with both FFS and MCO Medicaid know which payers authorize more hours, which reimburse at higher rates, which process claims faster, and which deny more frequently. Some providers preferentially accept FFS patients because the billing is simpler and the rates are published. Others focus on MCOs where they have negotiated favorable contracts. This creates a hidden market in which provider access varies not just by insurance status but by which flavor of Medicaid a child happens to be enrolled in.

Families, by contrast, are almost never told any of this. The Medicaid enrollment process does not typically include a comparison of ABA coverage across delivery systems. The MCO’s member handbook will describe covered benefits in general terms without comparing them to FFS. Advocacy organizations like the Autism Society and CASP publish guidance on navigating Medicaid ABA coverage, but the structural FFS-versus-MCO distinction is rarely emphasized. The result is that families make enrollment decisions — or have decisions made for them — without understanding that the choice of delivery system can mean the difference between 30 hours of therapy per week and 15.

What Families Need to Know

The gap between FFS and MCO coverage for ABA is not a bug in the system. It is the system. Managed care was introduced to Medicaid to control costs and improve care coordination, and for many services, it has achieved those goals. But for ABA — a service that is expensive, intensive, and requires specialized providers — the managed care model introduces friction that does not exist in FFS: additional prior authorization layers, potentially more restrictive medical necessity criteria, private rate negotiations that can shrink provider networks, and a capitation incentive structure that rewards lower utilization.

Families navigating this system should understand several things. First, EPSDT entitles children under 21 to all medically necessary services, and no MCO can impose hard caps that override that entitlement. If an MCO denies or reduces ABA hours that a child’s BCBA has determined are medically necessary, the family has the right to appeal — first to the MCO, and then to a state fair hearing. Second, if the MCO’s network does not include an accessible ABA provider, the MCO is required to arrange out-of-network coverage under federal network adequacy rules. Third, in states where MCO enrollment is voluntary or where multiple MCOs are available, families should research which MCOs have the strongest ABA provider networks before selecting a plan. Fourth, families should document everything: authorization requests, denial letters, appeal filings, and waitlist notifications. This documentation is essential for appeals and for any subsequent legal action.

The long-term solution is federal. CMS has the authority to clarify whether MCOs can impose prior authorization requirements that exceed state FFS standards, to require transparent reporting of MCO authorization and denial rates for ABA services, and to enforce network adequacy standards that account for the unique characteristics of ABA delivery. The GAO recommended exactly this in its 2024 report. CMS partially concurred. As of March 2026, the clarification has not been issued.

AT A GLANCE

Core Issue: Children enrolled in Medicaid MCOs may face more restrictive ABA coverage than children in FFS Medicaid within the same state, despite identical EPSDT entitlement
Medicaid Delivery Models: Fee-for-Service (state pays provider directly at published rate) vs. Managed Care (state pays MCO fixed capitation; MCO manages network and authorizations)
MCO Enrollment: ~75% of all Medicaid enrollees nationally are in managed care (KFF); varies by state and eligibility category
Federal Standard: 42 CFR §438.210: MCO medical necessity definitions must be no more restrictive than FFS; MCO cannot deny EPSDT services that would be covered under FFS
GAO Finding: GAO-24-106532: CMS has not clearly defined whether MCOs can require PA for EPSDT services when the state does not; some MCOs use third-party criteria more restrictive than state FFS
PA Timeline: Federal: 14 days standard, 72 hrs expedited; new rule effective Jan 2026 shortens to 7 days standard; states may require shorter
Key Differences: Prior auth requirements, medical necessity criteria, reimbursement rates, provider network size, re-authorization frequency, appeals process
Rate Transparency: FFS rates publicly published; MCO-negotiated rates are private and vary by provider and MCO
Capitation Incentive: MCOs receive fixed payment per member/month; fewer services authorized = more capitation retained; structural tension with high-cost ABA
EPSDT Protection: No hard caps on medically necessary services for children under 21; MCOs may impose soft caps via PA but must authorize additional hours if medically justified
Family Rights: Right to appeal MCO denials (internal appeal → state fair hearing); right to OON coverage if MCO network is inadequate; right to request MCO change during open enrollment
CMS Action: GAO recommended CMS clarify MCO PA authority and improve oversight of EPSDT in managed care; CMS partially concurred; clarification not yet issued as of March 2026
States to Watch: Texas (100% MCO for ABA); Arizona (MCO rate cuts/terminations); Virginia (Cardinal Care MCO transition July 2025); New York (ABA carved into MCO Jan 2023); Ohio (OhioRISE)
Practical Advice: Families should research MCO ABA networks before enrollment; document all PA requests and denials; appeal every denial; request OON coverage if network is inadequate

SOURCES & REFERENCES

Federal Law: 42 CFR §438.210 (MCO coverage standards); 42 CFR §441.56 (EPSDT); Social Security Act §1902(a)(30)
GAO Report: GAO-24-106532: Medicaid Managed Care Plans’ Prior Authorization Decisions for Children Need Additional Oversight
KFF/HMA Survey: Prior Authorization Process Policies in Medicaid Managed Care (August 2025)
MACPAC: EPSDT in Medicaid (issue brief); Prior Authorization in Medicaid (August 2024)
CMS Rulemaking: Interoperability and Prior Authorization Final Rule (2024); effective Jan 2026 (7-day PA standard)
State Examples: Texas HHSC; Arizona AHCCCS; Virginia DMAS; New York DOH; Ohio ODM managed care guidance
Industry: ABA Matrix; Behavioral Health Business; CASP Model Coverage Policy; APBA practice guidelines
Published: BreakingNewsABA.com — March 2026