More than a year after new regulations were signed into law, a state program that pays parents to be caregivers for their developmentally disabled children still hasn’t implemented required guardrails meant to rein in skyrocketing costs. State auditors said that the delay has cost Arizona hundreds of millions.

“AHCCCS suspended implementation of the new standardized assessment tool required by State law, and as a result did not realize a potential cost reduction of between $133 million to $493 million in fiscal year 2026,” auditors wrote, referring to the Arizona Health Care Cost Containment System, the state’s Medicaid program.

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After the state Division of Developmental Disabilities requested more than $120 million in supplemental funding last year, state lawmakers passed legislation to cover the budget gap. But that legislation also tightened regulations for DDD’s Parents as Paid Caregivers Program.

The new law was passed in late April 2025, just in time to ensure that DDD could continue to pay its bills. The Division of Developmental Disabilities is a part of AHCCCS.

The Parents as Paid Caregivers Program originated in Arizona in 2020, during the height of the COVID-19 pandemic. At the time, many parents who relied on caregiving services funded by DDD couldn’t find workers willing to provide in-home care for their children with disabilities.

The Parents as Paid Caregivers Program, which was initially fully paid for by federal dollars, trains parents and then pays them to provide in-home care to their own children — instead of third-party caregivers — if they require “extraordinary care” above and beyond typical parenting tasks. That might include things like assisting a teenager with bathing, dressing and eating.

But that enhanced federal funding ran out in March 2025, putting the state on the hook for around 35% of the program’s costs.

The end of federal funding came at the same time that utilization of caregiving services through DDD, whether performed by parents or professional caregivers, increased exponentially.

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According to AHCCCS, the cost of those services was $77 million in 2019 but had increased to $615 million in 2025. During the same timeframe, the number of people with disabilities receiving those services increased from 8,756 to 18,034, and the hours of care provided per person increased from 435 to 1,267.

Following a bitter fight between Republican lawmakers who sought to cut the program’s funding in half amid worries about the skyrocketing cost of the PPCG program and developmental disability advocates and parents who said the program was vital to many families, legislators only agreed to continuing funding the program if guardrails were also placed on it.

A significant provision from the new law, an assessment tool that would cut down on the amount of paid caregiving hours each child was entitled to through DDD — regardless of whether a parent or outside caregiver provided that care — was required to be implemented by October 1, 2025. AHCCCS began using the tool by the deadline, but it suspended its use 15 days later and still hasn’t reinstated it, according to the July 30 audit report. The audit, which the Arizona Auditor General’s Office hired Sacramento-based Sjoberg Evashenk Consulting to conduct, was another requirement of the April 2025 legislation.

AHCCCS suspended its use of the new assessment tool after three legal advocacy organizations threatened litigation, saying that new limits on service hours had to go through a lengthy rulemaking process outlined in the Administrative Procedure Act, which the agency had not done. A key concern was the inability for parents to appeal cuts to their hours.

Parents were frustrated and anxious, worried that they might lose their homes or jobs if their care hours were cut. Many pointed out that the assessment tool’s strict age-based cutoffs for supervision and help with certain tasks didn’t make sense for some children, especially for those who need constant one-on-one supervision to prevent them from running away from their parents or harming themselves.

After it suspended use of the new assessment tool, AHCCCS began rulemaking to create an appeal process, but had to scrap that and begin anew in December because the process it developed did not align with the federal Medicaid appeals framework already in place.

As of May, AHCCCS was still working to develop a new process that would work within the federal framework.

“This shift in policy has contributed to further delays in implementing the requirements imposed by State law and realizing cost reductions,” auditors wrote.

AHCCCS disagrees

AHCCCS disagreed with all of the audit’s findings, while the Arizona Department of Economic Security, which oversees AHCCCS, disagreed with some findings and agreed with others. Both agencies agreed to implement many of the auditors’ suggestions to comply with the law and decrease costs.

In her response to the audit, AHCCCS Interim Director Roberta Harrison wrote that she did not believe auditors properly distinguished between portions of the cost-control law that were and were not implemented. And she said that auditors didn’t acknowledge that AHCCCS couldn’t implement some parts of the law until it got permission from the federal government.

“Specific provisions of (the new law) were implemented as required, while other reforms were delayed due to federal mandates, mitigation of substantial litigation risk, and operational demands,” AHCCCS wrote in its response.

Brandi Coon, a developmental disabilities advocate and co-founder of the Raising Voices Coalition, told the Arizona Mirror that reading through the audit caused her a lot of confusion because of the disparity between some of its findings and her lived experience as someone enrolled in the Parents as Paid Caregivers Program.

Auditors said that a 40-hour per week cap on the Parents as Paid Caregivers that was supposed to be implemented in June 2025 was still not being enforced as of May. That limit was a stipulation included with the federal government’s 2024 approval of the state’s request to make the PPCG program permanent.

Coon said that her son primarily receives care from four outside caregivers, and that she is enrolled in the PPCG program mostly as a backup for a few hours a week when no other caregivers are available.

Coon told the Mirror that she and all the other parents enrolled in the program that she has spoken with were told last year by the service agencies that employ them — just like they employ other caregivers who serve the state’s DDD population — that they were capped at 40 hours per week and would be automatically clocked out after that.

But auditors wrote that, as of May, AHCCCS still hadn’t fully developed or implemented a mechanism to hold service providers accountable for going over the 40-hour limit.

In its response to the audit, the Department of Economic Security said that its provider support network began compiling data on service providers who allowed parents to work more than 40 hours in May 2025 and began implementing corrective action plans for those vendors in April 2026.

It’s clear that some parents are still working more than 40 hours. When auditors looked at the hours worked the week of March 8, they found 257 parent caregivers who worked more than 40 hours, for an estimated $51,000 in possible overpayments for just that week.

In her audit response, Harrison wrote that the 40-hour per week cap on parent caregivers was not intended as a cost-cutting measure.

“Regardless of the caregiver, it is important to recognize that assessed services in excess of 40 hours are still covered for the minor child by a non-parent provider because the services were determined to be medically necessary,” she wrote. “…When a parent provider is capped at 40 hours, the balance of the member’s authorized hours is delivered by a non-parent direct care worker. The State’s obligation to cover the authorized service does not disappear.”

Coon also questioned the math that auditors used to determine that AHCCCS and DES had already missed out on between $133 million and $493 million in savings by delaying the cost-cutting measures.

To determine those potential cost savings, auditors looked at 50 of the 769 reassessments of allowed caregiving hours conducted using the new tool between October 1 and October 16. Of the cases they sampled, authorized hours for services decreased by 30% for supervision services and 45% for help with life skills.

Because there are so many confounding factors, and such a small fraction of the children who receive services were re-assessed from October 1 through October 16, Coon said she didn’t trust the estimates.

The auditors acknowledged that the cost savings estimates should not be taken as fact and could not be extrapolated into system-wide savings.

“Although the estimate provides useful context for the tool’s potential fiscal impact, it should be viewed as an estimate with limitations, not as a precise measure of actual cost reductions,” they wrote.

Because the potential litigation that paused the new tool likely would have been costly, as well, Coon said it was impossible to determine how much money continuing to use the tool after October 16 would save, if any.

In her response to the audit, Harrison agreed.

“AHCCCS paused the tool in October 2025 because imposing service hour limitations through the ordinary policy process, with the threat of imminent and likely protracted litigation, presented an unreasonable and unacceptable operational and financial risk to the State,” she wrote.

Coon added that because paid DDD caregiving hours help families avoid costly emergency room visits, hospital stays and institutionalizing their children, the reduction in hours could ultimately cost the state more money in the long run.

Other states

Auditors wrote that they did not believe the new caregiving hours assessment tool alone would contain DDD costs sufficiently to avoid financial problems in the future.

AHCCCS disagreed.

“Because full implementation (of the new assessment tool) has not yet occurred, it is premature to evaluate the precise impact that the tool will have on long term cost containment,” Harrison wrote.

Auditors recommended that AHCCCS implement the same cost-cutting measures as other states, like expenditure caps and increased eligibility restrictions.

But Harrison wrote that the auditors’ suggestions ignored the “significant legal, operational, and programmatic differences which preclude adoption of such practices in Arizona at present and in the near future.”

Both Arizona law and the state’s Medicaid agreement with the federal government prevent some of those measures being implemented.

“While additional sweeping cost-containment strategies, like those referenced in the report, are possible, they would require legislative action, Federal authority, or both,” Harrison wrote.