The failures of Arizona’s Medicaid program

Topline: Arizona has recovered only 5% of the $2.5 billion it lost in a Medicaid fraud scheme that contributed to 40 deaths and allowed substance abuse patients to keep using alcohol and drugs.

Key facts: ProPublica and the Arizona Center for Investigative Reporting found earlier this year that state and local officials had “ignored calls to address lax oversight later shown to have contributed to thousands of patients being recruited into sham treatment programs.” The warning signs were missed by both Democratic Gov. Katie Hobbs’ administration and her predecessor, Republican Doug Ducey, according to the report.

The state’s American Indian Health Program, financed by Medicaid, aimed to increase access to treatment for Native Americans who didn’t have typical insurance, but it removed too many guardrails in the process. Providers did not need to pass background checks or go through in-person inspections of their facilities. There were also no limits on how much they could charge, and some doctors billed the state tens of thousands of dollars for a single appointment.

The state also allowed about 13,000 unlicensed providers into the Medicaid system. ProPublica claims that the state “yielded to pressure from special interest groups connected to the behavioral health industry, which argued that reforms to the fee-for-service American Indian Health plan would threaten their financial interests.”

Most of the 40 deaths came from substance use by patients seeking addiction treatment in sober living homes. One patient was found unresponsive with both fentanyl and alcohol in his system. When his family asked why patients were allowed to drink, they were told, “Since they have an alcohol problem, we let them drink a little bit to calm down,’ ” ProPublica reported.

With only $125 million recovered so far, taxpayers around the country will share the financial burden. The federal government covers over 70% of Medicaid costs in Arizona, according to ProPublica.

Search all federal, state and local government salaries and vendor spending with the AI search bot, Benjamin, at OpenTheBooks.com. 

Supporting quote: “It’s hard, because what happens is these … criminals get the money, they buy lavish homes, they buy multiple expensive cars, they hide the money offshore, they spend the money in ways that is unrecoverable,” Arizona Attorney General Kris Mayes said in a press conference about her efforts to recover the improper payments.

Summary: Arizona’s situation is another reminder that attempts to recover public money after it has already been lost are rarely as successful as imposing stronger guardrails before any cash is spent.

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