A massive Medicare fraud scheme has been unraveling in the state recently, involving sketchy sober living homes taking advantage of Native Americans, many who ended up dead. Scammers used hastily popped up sober living centers to take advantage of the program, which is operated under the state’s welfare system, the Arizona Health Care Cost Containment System (AHCCCS). Estimates of deaths range from two dozen to 200 people, with the fraud costing taxpayers up to $2.5 billion. Much of the blame has been placed on Governor Katie Hobbs for not stopping the fraud.
Three wrongful death lawsuits have been filed related to the fraud. A 232-page class action lawsuit was filed in December. It alleged, “The grossly negligent and indifferent misconduct of Defendant STATE OF ARIZONA, including through its agencies AHCCCS and AZ-DHS, caused thousands of Native Americans, who are the class action Plaintiffs and proposed Class Members, to suffer and incur horrific injuries, deaths, dangerous drug addictions, fraudulent mental health services, homelessness, and other damages described herein that resulted in the so-called ‘sober living crisis.’ Defendant STATE OF ARIZONA is culpable for creating the crisis.”
A spokesperson for the U.S. Department of Health and Human Services’ Office of Inspector General said the Arizona fraud schemes are “the largest that have targeted a single demographic population in recent U.S. history,” The Arizona Republic reported in June.
The American Indian Health Program provides medically necessary services for enrolled members of Native American tribes, including coverage for preventive and behavioral health care services. In December 2022, AHCCCS began suspending payments to questionable providers.
News reports state that under Hobbs, reform has been inadequate. ProPublica heavily researched the scandal and found that “the leader Hobbs appointed at AHCCCS also stalled a key reform the agency would later credit with helping to stem the fraud.”
The problem arose in large part due to providers setting their own rates with no cap, ProPublica found. Some behavioral health providers claimed tens of thousands of dollars for a single counseling or treatment session. Reimbursement claims from providers ranged from $150 to $2,500 for the same service.
One provider had no health department license, and others didn’t have liability insurance, since there was a loophole that allowed them to get around it, enabling sketchy groups to offer services.
Some providers were found by the state to have failed to supervise staff or had no proof that their counselors were qualified. One client said her treatment center didn’t do much other than give her a mattress on the floor and food, and said some of the patients smoked fentanyl in the bathroom.
In 2022, Native Americans testified to the Arizona Legislature about the problem. A bipartisan group of state legislators supported a bill last year that would have addressed it, but according to Senate President Warren Petersen (R-Mesa), Hobbs didn’t support SB 1655, which passed out of the Senate unanimously, working behind the scenes with “grifters” to quash it.
