By Hannah Bassett and Maria Polletta
On May 16, as cameras flashed and tribal leaders looked on, Arizona’s governor and attorney general announced a statewide crackdown on behavioral health providers suspected of defrauding the state’s Medicaid program out of hundreds of millions of taxpayer dollars.
Officials revealed the Arizona Health Care Cost Containment System (AHCCCS) had suspended payments to more than 100 providers to tamp down widespread fraud. The state had developed extensive safeguards to help prevent new, unscrupulous operators from cropping up, they said, and had begun rolling out a comprehensive plan to assist and protect the vulnerable, largely Indigenous patients victimized by the scandal.
“It will be a fight, but one that my administration and I are fully committed to,” Gov. Katie Hobbs told reporters. “We will take the actions necessary to bring an end not just to the fraudulent activity, but also to the humanitarian crisis that it has created.”
In the five months since the announcement, the state has fallen short on both fronts, according to patients, advocates and behavioral health providers interviewed by AZCIR. They described last-minute notifications of relevant tribal authorities, a chaotic rollout of a dedicated crisis response line, insufficient vetting of providers meant to fill gaps in housing and treatment, and a lack of oversight that has allowed people affiliated with suspended facilities to quickly reopen new businesses.
The state’s failure to adequately anticipate the impact of widespread suspensions among behavioral health providers has put members of an already susceptible population at further risk of relapse, abuse, homelessness and even death as operators shut down, AZCIR has found. Advocates—and the providers left standing—are struggling to meet the increasingly urgent need for services among displaced tribal members and other victims, from transportation and housing to legitimate addiction treatment.
When pressed repeatedly about the scope of the scandal in September, AHCCCS officials still couldn’t say how many of its patients had been affected.
Hobbs’ office, for its part, said the governor is in “constant communication with stakeholders, tribal leaders, law enforcement and other impacted communities to continue refining our approach and mitigate the humanitarian impacts of the shutdowns” when questioned about the complaints.
“As a social worker, my number one priority is always caring for Arizonans who need help,” Hobbs said in an emailed statement.
Those on the ground remain skeptical.
“How have they taken care of our people?” said Reva Stewart, an organizer with grassroots advocacy group Stolen People, Stolen Benefits, said of the state. “We’re still having deaths in these (sober living) homes. We’re still having people getting recruited. We’re still having people who are missing to this day.”
In announcing the results of the state’s investigation in May, Hobbs, a democrat who’d taken office in January, said she’d inherited a Medicaid system riddled with fraud.
Attorney General Kris Mayes described the state’s probe as “a game of whack-a-mole,” specifically highlighting “vulnerabilities inherent in the fee-for-service billing model.”
Most of AHCCCS’s plans follow a managed care model, with contractors like Mercy Care and UnitedHealthcare processing billing claims at fixed rates. Fee-for-service plans, on the other hand, allow providers to determine their own rates and submit claims directly to AHCCCS for reimbursement.
The American Indian Health Plan (AIHP) follows the fee-for-service model, making Indigenous patients particularly attractive targets for scammers and traffickers, according to state officials. The state reimbursed behavioral health providers for certain services covered by the AIHP at about 59% of the amount billed—with no cap—until early May, when AHCCCS revised its policy to establish a set reimbursement rate for intensive outpatient treatment.
Reports had emerged of vans traveling to reservations, enticing tribal members with promises of free housing, and taking them back to fraudulent facilities that would bill AHCCCS for services never provided. In some cases, facility staff would confiscate patients’ phones and identification. Others said they were prevented from leaving.
Between 2019 and 2022, payouts for AIHP outpatient behavioral health claims ballooned from $53 million to $668 million. The AHCCCS Office of Inspector General eventually connected irregular billing to allegations of criminal activity affecting between 5,000 and 7,000 tribal members.
Though AHCCCS had been investigating fraud allegations for months leading up to the May news conference, state officials did not inform certain tribal leaders of their findings until the week before, according to Navajo Nation Attorney General Ethel Branch.
“It was not a lot of coordination and notice,” said Branch, who oversees Operation Rainbow Bridge, a Navajo-led team established to assist displaced tribal members in response to the crisis. While communication between state and tribal leaders has improved in the months since, she said, “getting that information from AHCCCS or the state would have been very helpful early on.”
Branch and others also identified problems with the rollout of the state’s crisis hotline option for those affected by the crackdown—a centerpiece of AHCCCS’ “comprehensive member impact plan.”
Adding a new 211 crisis line option for those affected by the suspensions was meant to help displaced patients find temporary housing, transportation home or addiction treatment from trusted medical providers. But many of the victims didn’t have access to phones, and those who did manage to call reported discouragingly long wait times early on.
“At the beginning, it was chaos,” said Jeri Long, a Native advocate with Stolen People, Stolen Benefits. “It was just pure chaos.”
When callers did get through, there was no guarantee they would be referred to emergency resources nearby. According to Veronica Boone, wellness director with the Tucson Indian Center, Tucson-area callers seeking temporary lodging were told they would need to relocate to Phoenix, more than 100 miles away.
That’s if temporary or permanent housing options were available at all. The state’s widespread affordable housing deficit and clearance of Phoenix’s homeless encampments left displaced people trying to access shelter during weeks of extreme heat, according to Walter Murillo, chief executive officer of Native Health.
“It was a horrible, horrible mess,” Murillo said.
Stolen People, Stolen Benefits is one of a handful of grassroots organizers that stepped in to fill gaps in the state’s response efforts. Its volunteers gather regularly in the Phoenix area to search for missing persons, distribute food and water, and offer aid to Native individuals evicted by facilities that shuttered after the state froze payments to providers.
That aid includes helping displaced patients find reputable treatment, shelter or—in about 70% of cases—transportation home. The group uses donations to pay for bus and plane tickets, and coordinates directly with tribes to arrange group transports when possible.
Stewart said she has noticed a spike in the need for services this fall, with “so many more new faces” appearing during recent outreach. That’s at odds with the declining number of inquiries to the 211 hotline, according to aggregated caller data AZCIR obtained from the state.
The discrepancy could mean the number of patients in need is stabilizing. Or, it could mean displaced individuals are turning elsewhere for help. At one transport arranged by Stolen People, Stolen Benefits in late September, none of the six members of the White Mountain Apache Tribe assembled at the group’s makeshift headquarters had tried calling 211 for assistance.
This article is published as part of the Mental Health Parity Collaborative, a national partnership between AZCIR and The Carter Center’s Rosalynn Carter Fellowships for Mental Health Journalism and other newsrooms throughout the U.S.