Medicaid Fraud Implicated in Deaths of Native Americans Who Died in Phoenix Sober Living Homes, Governor Katie Hobbs Blamed

Group therapy treatment center

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.

According to Dr. Satya Sarma, a medical director for the AHCCCS, a Native American woman with an addiction problem complained that “a mental health provider registered with Medicaid had housed her in an Arizona motel, didn’t give her any treatment and at times prevented her from leaving,” The Arizona Republic reported last June.

Sarma said, “The only ones who complain are the ones who got out, and basically not everyone who gets out is going to complain or even know they can. It was alarming. I’ve done quality management. This is not what you see. … It really stood out for me.”

The Zuni Police Department in New Mexico posted a warning on Facebook in November 2022 “regarding a possible scam regarding people coming to the Zuni Reservation, portraying themselves as transport for substance abuse counseling in Phoenix AZ.”

AHCCCS posted a similar warning on its website in December. “AHCCCS is aware of individuals targeting American Indians/Alaskan Natives who reside on tribal reservations by recruiting and transporting them to live in what they are calling sober living homes or behavioral health residential facilities in Phoenix,” the notice said. “Some are not licensed health care providers who are not following through with promised service.”

The post linked to a warning on Facebook from the Navajo Police Department, which said in part, “The recruiters do not generally work for just one company and have been spotted at places where gatherings are common, such as flea markets, and often approach people they see walking.”

In 2021, then-Attorney General Mark Brnovich secured indictments of 13 people and 14 businesses for engaging in the fraud. They have all since pleaded guilty. It was based on a 107-page memo from a private citizen that alleged how over 30 sober living homes in the Phoenix area targeted Native Americans and billed for treatment services that were not provided.

Unlike Hobbs, Brnovich aggressively went after the fraud. In early 2022, the Office of Inspector General from Health and Human Services released their annual statistical summary of the states’ Medicaid Fraud Control Units (MFCU) for fiscal year 2021, which lists criminal case data submitted by all 53 of the nation’s MFCUs. Arizona’s MFCU under Brnovich was recognized as one of the nation’s top performing MFCUs, securing the third top number of indictments of all 53 MFCUs.

ProPublica featured the stories of several Native Americans who died at the homes. The father of Jeffrey Hustito, Anders Hustito, told the publication, “We were really thrilled when he decided to get treatment. He just got worse over there.” The younger Hustito died in December after smoking fentanyl with another resident of a sober home in Glendale. He also had alcohol in his system. His father said someone at the home told him that the residents are allowed to have a little alcohol to calm them down.

The provider, Beyond4Wallz, was accused of billing excessively for services that were not provided to patients. Beyond4Walz eventually closed down.

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.

This type of scam has been discovered in other parts of the country. A crackdown in Florida several years ago led to cleaning up the fraud there. The sober living homes were cheating insurers there, not Medicaid.

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Rachel Alexander is a reporter at The Arizona Sun Times and The Star News NetworkFollow Rachel on Twitter / X. Email tips to [email protected].

 

 

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