NC judge extends pause on state-imposed Medicaid cuts to autism therapy
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- Judge temporarily blocks North Carolina Medicaid cuts to treatment for kids with autism.
- Families of 21 children sue DHHS, alleging discriminatory Medicaid rate cuts
- DHHS cites funding limits and warns reversing cuts may be difficult
A North Carolina judge has extended a pause blocking the state’s Medicaid reimbursement cuts for treatment of children with autism, keeping the rate reductions on hold while a lawsuit over the changes continues.
Superior Court Judge Clayton Somers granted a preliminary injunction Monday, saying that not doing so would cause “irreparable harm.”
Somers said it wasn’t the court’s role to decide how the state funds Medicaid or whether the General Assembly should take action but found that Health and Human Services Secretary Devdutta Sangvai “made these cuts with surgical precision.”
The families suing the state, through their attorney, had argued that the cuts were discriminatory and targeted children with autism, putting them at risk of losing care and being institutionalized. Meanwhile, the state argued that discrimination did not motivate the cuts and that the department had a duty to balance its budget.
Judge George Collins on Tuesday had temporarily paused the cuts until the Monday hearing.
The “cuts are devastating to people, providers and communities that rely on NC Medicaid,” DHHS said in a statement shared by spokesperson Summer Tonizzo with The News & Observer following Collins’ order.
“NCDHHS did not want to take this extremely difficult step of making these significant reductions for NC Medicaid services, however without additional funding from the General Assembly, it was unavoidable.”
On Oct. 1, DHHS reduced Medicaid provider reimbursement rates by 3% to 10%, citing a funding shortfall. Applied behavior analysis therapy — which uses positive reinforcement to help children with autism build communication, social and daily living skills — faced the maximum 10% cut.
The case was filed in late October in Wake County Superior Court on behalf of 21 children, represented by their families, who sued DHHS and Sangvai.
The lawsuit challenges reductions to Medicaid payment rates to health care providers for applied behavior analysis, or ABA therapy.
Families argue that targeting ABA therapy with the steepest Medicaid reimbursement cuts is unconstitutional and discriminatory, and will delay or disrupt therapy, cause regression in children’s skills, and worsen long waitlists. They asked the court to temporarily halt the cuts and to permanently block them if they are found unlawful.
“Plaintiffs in this case now face grave and irreparable harm from these severe cuts,” the lawsuit says. They “face a lack of access to treatment and the substantial risk of slowed progress and even regression in their communication, social, and other life skills.”
Michael Easley Jr., a lawyer representing the families and a former U.S. attorney, told The N&O following Tuesday’s order that Judge Bryan Collins found that “the balance of equities greatly favored the patients who need this critical care.”
“This particular kind of care has decades and decades of peer review literature showing that for what otherwise is a condition that can cause folks to lose a lot of hope. This can be a real bright spot in helping these kids during this really critical developmental window,” he said. Additionally, he said, the kids affected by the cuts are already at disadvantage because they rely on Medicaid and often live in rural or underserved parts of the state where access to behavioral health care is limited, he said.
Considering the judge’s initial favorable ruling, Easley said he hopes the state will now find a way to keep autism therapy rates fully funded. If not, he said, “we will continue to press our case in court.”
He said during his time as U.S. attorney, he was responsible for enforcing the Americans with Disabilities Act. “When I saw what was happening with these rate cuts and the decision to target a specific type of care for a specific type of disabled child, it immediately went off in my head as a potential case of disability discrimination,” he said.
He noted that while other Medicaid services also saw cuts of up to 10%, those reductions apply broadly — to settings such as ambulatory surgical centers and birth centers — rather than to one defined group.
Easley said the legal team includes former clerks to U.S. Supreme Court justices Ruth Bader Ginsburg and David Souter and Chief Justice John Roberts, among others. “We were able to bring a lot of brilliant legal talent to represent really two dozen autistic toddlers who otherwise wouldn’t have had a voice,” he said.
The state Department of Health and Human Services, opposing the temporary pause, argued in a brief that it is legally required to operate Medicaid within the funding lawmakers have provided. If the court orders the previous ABA payment rates restored, it said undoing the cuts would be “difficult if not impossible in the short term.” DHHS also noted that even with the reduction, North Carolina’s reimbursement for a ABA billing code remains higher than in 44 other states.
Easley pushed back on the state’s comparison of reimbursement rates to other states, saying there’s only one “billing code that actually matters” — the one that covers one-on-one therapy with a child. He said the economics of providing ABA therapy in North Carolina are different from places with a more established workforce and higher private-insurance payments.
“This order makes the need for the General Assembly to fund Medicaid even more urgent. Any reinstatement or reversal of the provider cuts without additional funding from the General Assembly means the program will run out of funding sooner, putting the entire state Medicaid system at risk, told The N&0. .
“Without additional funding and implementation of the October 1 rate cuts, North Carolina could run out of NC Medicaid funds as early as April 2026,” it said. “If the NCGA fully funds NC Medicaid, the Department will reevaluate all cuts and take action to reverse or modify cuts to ensure NC Medicaid can operate within the appropriated budget.”
The lawsuit also argues that DHHS has violated the North Carolina Public Records Act. The families’ attorneys submitted a records request in early October asking for emails, financial calculations and other documents related to the ABA rate cut. DHHS acknowledged the request but has not produced the records, according to the lawsuit, which says state law requires prompt access to public information that is “the property of the people.”
On Monday, the parties agreed that documents would be provided through discovery — the formal legal process for exchanging evidence — rather than through a public records request.
Medicaid funding stalemate
The lawsuit follows a monthslong standoff over the Medicaid rebase — the funding required to maintain current services and payment levels. Lawmakers approved $600 million for Medicaid in July, but DHHS said the amount fell short and warned that cuts would be necessary without more money.
Republican leaders have questioned the department’s projections and argued DHHS could have delayed the cuts while talks continued. Both the state House and Senate have so far been unable to agree on a broader Medicaid funding package, and may not return to Raleigh again this year.
As part of the reductions that took effect Oct. 1, applied behavior analysis for children with autism was slated for a 10% rate cut. In an August letter to lawmakers, Sangvai said “utilization of this service in North Carolina has grown much faster than expected.”
“To ensure children who truly need this care can get timely access and high quality treatment, NCDHHS is more closely evaluating the reasons for rapidly growing utilization of this service,” he said.
In court filings, DHHS also noted that Medicaid spending on ABA and related behavioral therapies is projected to increase about 425% from $121.7 million in state fiscal year 2022 to $639 million in 2026.
The families who brought the lawsuit include those with toddlers and young children across North Carolina, many of whom are nonverbal and require substantial support for severe autism, according to the lawsuit.
Some already receive ABA therapy through Medicaid and say they would lose access without adequate reimbursement. Others have been stuck on long waitlists for months, and in some cases more than a year, unable to start therapy despite doctors’ recommendations, says the suit.
This story was originally published November 5, 2025 at 1:07 PM.
