Arizona is the subject of a massive class action lawsuit filed on behalf of thousands of victims of Medicaid fraud. A Maricopa County Superior Court judge rejected the state’s request to dismiss the case.
Starting around 2019, a loophole allowed bad actors to defraud Arizona’s Medicaid agency out of an estimated $2.8 billion.
Perpetrators primarily targeted Native Americans and charged the state for addiction treatment services they never provided while holding victims in fake sober living homes.
The plaintiffs argue the state was grossly negligent for knowing about the fraud scheme but not doing much to stop it.
“This scheme required people and money, and AHCCCS knew this since 2019,” attorney Dane Wood said in oral arguments earlier this month. “This is not about money; this is not about anti-fraud. … This is about people being harmed, which is exactly what happened here.”
The state disagrees and told Superior Court Judge John Blanchard that Arizona shouldn’t be held liable for the harm caused by individual bad actors.
Defense attorney Andy Gaona said during oral arguments that no other case has ever gone forward with the liability framework the plaintiffs are trying to establish. Gaona also accused the plaintiffs of performing mental gymnastics to attach a real degree of responsibility to the state.
Blanchard said the state’s arguments are “well-taken” but also “premature.” He ruled the case will be allowed to go forward.
“The duties alleged by Plaintiff are fact driven,” Blanchard said in the ruling. “That is particularly true for Plaintiffs’ allegations that Defendants assumed a duty when they allegedly discovered the scheme, investigated its scope, and took actions.”
