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Arizona leaders misled the public about how bad Medicaid billing fraud scandal really is

The Medicaid billing fraud scandal that rocked Arizona last year may have just gotten bigger.

It was already what Attorney General Kris Mayes called one of the biggest scandals in state history, but now, the Arizona Center for Investigative Reporting has found that state leaders misled the public about the scope of the crisis.

Hannah Bassett broke the story for AZCIR and spoke more about it with The Show.

Full interview

HANNAH BASSETT: So the scandal first came to light, I would say last May 2023 that's when Governor Hobbs A G Mays members of tribal leadership, federal authorities gathered to announce that they were going to be investigating this widespread Medicaid fraud. But the fraud seems to have been building year over year really since 2019. So that spans obviously the Ducey administration as well as into the Hobbs administration. And the issue that they presented was that fraud had spread primarily among behavioral health providers who were exploiting one plan within AHCCCS, the Medicaid agency's offerings, namely the American Indian Health Plan, which as what's known as a fee for service program, was able to be exploited for its relatively unique reimbursement rates and what ultimately happened it seems is that these fraudulent providers were billing for services that were never really delivered.

LAUREN GILGER: So, who was most hurt in this?

BASSETT: Absolutely. It was disproportionately. So, American Indians, Alaskan natives, folks who are eligible for the American Indian Health plan, but it certainly wasn't just those populations disproportionately so, no question. But these fraudulent providers were enrolling members who would not qualify for the American Indian Health plan to receive those services just so they could bill for more people gain more money, receive more money from the Medicaid agency

GILGER: And those people weren't receiving the services they might need. Yeah. How much does this cost the state at this point? Do we know?

BASSETT: Legislators most recently have said upwards of $2 billion. It's as A G Mays has stated previously, one of the largest scandals in state history. I spoke as well with the Department of Health and Human Services, the federal authorities and their Office of Inspector General who looks at enforce these types of programs and overseeing them. They offer a kind of oversight and accountability aspect to state Medicaid programs. They identified this fraud scheme here in Arizona as one of the largest in modern US history.

GILGER: My goodness. OK. So you have been investigating kind of the state's response into this and found that the true breadth of this crisis might really still be unclear, it might be bigger even than we know. But you were able to confirm that this went beyond what we initially thought what we were initially told, tell us how far this went. 

BASSETT: So exactly, the I would say the officials remarks publicly so far have really emphasized behavioral health providers specifically targeting the American Indian Health plan within the agency's division of fee for service. And that only covers services for about 10% of AHCCCS' members. So it's a pretty small share. But what we learned from comment eventually from access from the governor's office after pressing them on this for a few lines of inquiries that we wanted to know more about was that they are aware that fraud has spread to what are known as managed care organizations and those are organizations that AHCCCS contracts with.

We know them as United Health Care, Mercy Care just to name a couple, and those entities oversee 90% of the services that are offered under the umbrella of Medicaid here in Arizona. So the fact that fraud likely spread to those managed care organizations has much greater implications, just percentage wise of the damage that could have been done to Medicaid members here in the state. And from a fiscal perspective, the money at play that these bad actors might have been able to have abused and manipulated. 

GILGER: So we don't even know the extent of it. What what could this mean for the impact this might have had on the entire kind of provider ecosystem.

BASSETT: So this is where it gets into a more niche aspect of what specifically happened during the COVID-19 pandemic and the public health emergency. So at the start of the pandemic, health care was so interrupted, like so many other aspects of our lives and to promote access to health care and medicine and all the things that we need to stay healthy. The federal government made some adjustments to its usual protocols. So that included among those things like telehealth expanded to, to make it more easy for people to access services.

Another one that was implemented by CMS, the Centers for Medicare and Medicaid Services, for all states including Arizona was allowing Medicaid agencies to relax some of the standard provider, screening and enrollment checks that help make sure that these providers, for example, behavioral health providers are who they say they are, are delivering services that they say they are all of that. So during the public health emergency, Medicaid agencies all over including AHCCCS, rolled back those checks. And part of the concern here in Arizona is that they, the Medicaid agency waived site visits. So that's going out inspecting a behavioral health providers, physical location, for example, and also waived fingerprint checks. So making sure that the providers involved in the care don't have any kind of suspect criminal background that would exclude them from being in a proper position to deliver care.

So not being able to verify that those providers were who they said they were and were upstanding providers in the system, potentially allowed more bad actors to enter, not just the fee for service, but also the managed care organizations which I think I alluded to with the 90% really covers the entire provider ecosystem, so to speak all Medicaid members.

GILGER: So this could have really opened the door for potential scammers it sounds like. Do we know though how many got in that way? How big this could be? It sounds like there are still because of what's been released to the public what state officials have talked about a lot of questions here.

BASSETT: Yeah, I think there are really just a lot of unanswered questions that really beg more exploration. It would be wonderful if the governor's office, if access leadership would share more about what they know, about how far fraud might have spread within managed care organizations since it does have such serious implications for so many Medicaid members and so many taxpayer dollars involved there. But we do know that they have acknowledged there are similar patterns within managed care as what they already have spoken publicly about with fee for service.

And I think that the question is if the, if the AG has already identified this as one of the biggest scandals in state history and that was just under that small component of fee for service plans, what does that mean when it does extend to managed care? And how did this evolve? Who was aware of what happening? When could there have been any chances earlier on to intervene, to institute safeguards to better protect Medicaid members and taxpayer dollars for ultimately an agency that is tasked with serving some of the state's most vulnerable populations.

GILGER: Yeah. OK. We'll leave it there. Hannah Bassett is an investigative reporter for the Arizona Center for investigative reporting, also a report for America Corps member, joining us. Hannah, thanks for coming on. Thanks for your reporting here. I appreciate it.

BASSETT: Thanks so much for having me. It's been a pleasure.

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Lauren Gilger, host of KJZZ's The Show, is an award-winning journalist whose work has impacted communities large and small, exposing injustices and giving a voice to the voiceless and marginalized.