Centene Corp. (NYSE: CNC) reported progress on tamping down what it sees as problematic spending on behavioral health, namely applied behavior analysis (ABA).

However, the managed care titan reports that it still has work to do to get its Medicaid spending back in line with previous expectations. Centene CEO Sarah London said on the company’s third-quarter earnings call that Medicaid margins are still challenged, with behavioral health driving 50% of the “above-baseline trend.”

“We continue to aggressively pull levers internally to appropriately manage medical costs and advocate for rates that reflect the medical demand in the ecosystem, all part of returning Medicaid margins to a more normalized long-term levels,” London said during the call.

Additional drivers of Medicaid costs include home care and high-cost drugs. In total, efforts to reduce spending on medical services resulted in a health benefits ratio (HBR) of 93.4%, a 0.4% decrease from the second quarter of 2025. London said Medicaid HBR levels in the second quarter were “unacceptable.”

At that time, London also said the company was putting together an ABA task force to address spending on the service.

In one state, his task force guided state partners to “increased precision in ABA clinical service definition as well as more stringent supervisory and caregiver engagement requirements.” The result: a 45% reduction in outlier payment rates. London did not specify the state.

London did specify that New York and Florida have been a focus for addressing Medicaid spending and other challenges.

In Florida, Centene’s Children’s Medical Services results were improved by additional funding for the year 2025, backdated to February of that year, and an increased rate in 2026. This contract covers ABA. Those funding updates better reflected the medical needs of the program’s members, London said.

In New York, Centene terminated a provider group, London said, which “engaged in suspicious billing.” The state has also taken action against this provider. London did not identify the company. She also added that the company is taking more decisive action on fraud, waste and abuse in the state.

“We think we’re taking a bite out of forward trends,” Drew Asher, CFO for Centene, said during the call, referring to behavioral health and other cost drivers.

Centene’s experience and the experience of several other major payers over the summer highlighted the impact of increased behavioral health utilization on the payer segment. Elevated use of benefits has spurred providers to action after previously expressing some interest in the potential benefits of improved behavioral health utilization.

So, to some degree, the increased spending from behavioral health benefits utilization shouldn’t be a surprise. In 2024, several executives at large, public payer groups noted that the increased utilization of behavioral health was unlikely to stop any time soon and that it would hopefully bend costs in physical health care spending.

Other payers are taking note of increased spending on ABA. Earlier this earnings season, an executive at Elevance Health name-checked ABA as a category that has contributed to increased benefits spending within its Medicaid business during an earnings call.