AZCIR/ProPublica investigation shines light on Arizona Medicaid agency’s response to massive fraud scheme
In January, the Arizona Center for Investigative Reporting and ProPublica published an investigation that found that dozens of Native Americans dealing with addiction in Arizona died as the state struggled to address a massive Medicaid fraud scheme that cost taxpayers roughly $2.5 billion.
Journalists for the two nonprofit news outlets spent more than a year-and-a-half investigating how the state’s Medicaid agency — the Arizona Health Care Cost Containment System — responded in real time to claims that sober living homes and treatment centers were exploiting a Medicaid program used by Native Americans in the state. Their investigation, part of an ongoing series about the Medicaid scheme, provides the fullest public accounting yet of what was happening within the agency as the fraud played out over several years, harming one of Arizona’s most vulnerable communities.
As the news outlets reported, “Many of the deaths in sober living homes reviewed by the Arizona Center for Investigative Reporting and ProPublica happened as officials — in at least five instances across Republican and Democratic administrations — failed to act on evidence that rampant fraud was imperiling Native Americans whose care was paid for by the agency, according to court documents, agency records and interviews.”
Many of the records AZCIR and ProPublica used to tell this story were obtained with the help of attorneys from the Reporters Committee for Freedom of the Press and local attorney Daniel Arellano. In an interview, AZCIR Executive Director Brandon Quester and former AZCIR investigative reporter Hannah Bassett credited the attorneys with helping make the investigation possible.
“It was huge,” Quester said of the free legal support his news outlet received. “We’re just really happy and lucky that the Reporters Committee was willing to take up our fight.”
Fraud scheme targets Native Americans
Bassett, who co-reported the story with ProPublica’s Mary Hudetz, started reporting on the Medicaid fraud scheme soon after she joined AZCIR as a Report for America corps member in the summer of 2023. By then, the fraud scheme was already public. Community members, including tribal advocates, had reported that people claiming to be legitimate healthcare providers were driving vans to reservations and picking up Indigenous people suffering from drug and alcohol addictions.
But instead of providing the services these patients needed, many sober living and treatment facilities used those patients to take advantage of the state’s American Indian Health Program, a Medicaid insurance option for tribal citizens that allowed providers to set their own reimbursement rates. In some cases, AZCIR and ProPublica reported, behavioral health providers claimed tens of thousands of dollars for a single counseling or treatment session.
Meanwhile, according to AZCIR and ProPublica, many patients were harmed and at least 40 died.
In May 2023, AHCCCS announced that it was launching an investigation into hundreds of sober living and treatment facilities. The announcement attracted widespread news coverage in the state, but AZCIR wanted to report a more comprehensive investigation — one that could explain how this massive fraud was able to evolve from 2019, when it reportedly began, to 2023.
“We wanted to focus on the accountability aspect of how in the world it happened in the first place,” Quester said.
To tell that story, AZCIR needed access to agency records. So Bassett started submitting records requests to AHCCCS, seeking a wide range of communications records involving certain agency employees, including emails, notes, and meeting minutes. She wanted to get a better understanding of when agency staff became aware of the fraud scheme, and how they responded.
But Bassett wasn’t having much success getting the records she needed, even after she narrowed the scope of some of her requests. In some cases, the agency denied her requests, citing exemptions to Arizona’s public records law, including one that allows agencies to withhold records if their “disclosure would be detrimental to the best interests of the state.” In other cases, the agency just wasn’t responding at all.
Frustrated with the agency’s refusal to turn over records, AZCIR decided to contact the Reporters Committee for help.
After connecting with Reporters Committee Staff Attorney Gunita Singh and former Reporters Committee Jack Nelson-Dow Jones Legal Fellow Dani Wertheimer, Bassett explained her requests and reviewed her timeline of communications with agency officials. Singh, Wertheimer, and Arellano of Herrera Arellano LLP then crafted a detailed demand letter last April highlighting how long AZCIR had been waiting for responses to their requests — in some cases more than 150 days — and arguing that the agency was “improperly withholding records” under Arizona’s public records law.
“From that point on, there was momentum,” said Bassett, a former Reporters Committee policy fellow who is now a staff writer at Seven Days in Vermont. “The records came much more promptly after that.”
“Without that demand letter, it would have just languished for we don’t know how long,” added Quester. “Those records would not have started to move the way that they did without that legal support.”
Demand letters shake loose public records
The records AHCCCS turned over revealed the agency’s real-time response to the Medicaid fraud scheme. In emails, meeting minutes, and other communications, Bassett and Quester said they could see division-level staff reporting issues they were observing, including the rising expenditures, and asking agency leaders to address them. The records confirmed a lot of what AZCIR had learned through interviews with sources, including some who were reluctant to go on the record.
“These are public documents that articulate in detail an agency’s response in real time to a massive crisis that ultimately cost taxpayers billions of dollars and dozens of people lost their lives,” Quester said. “Without that legal support, we couldn’t have pulled back that veil of secrecy within the agency of how they were responding and when.”
Even after AHCCCS produced documents following the demand letter, AZCIR noticed that additional records were missing. So last October, Singh, Wertheimer, and Arellano drafted a second demand letter, this time identifying specific records that were not originally turned over and challenging privileges the agency cited in withholding certain records, including the “best interest of the state” exemption.
The second letter shook loose a handful of additional documents.
While the agency didn’t turn over everything AZCIR had requested, the records they were able to obtain through the demand letters helped AZCIR and ProPublica tell a comprehensive accountability story about the largest fraud scandal in Arizona’s history — one that detailed the agency’s struggle to address a scheme targeting one of the state’s most vulnerable populations.
“I had family members who died in these group homes,” Lorenzo Henry, a member of the San Carlos Apache Tribe, told AZCIR and ProPublica. “I would like to see at least AHCCCS take accountability for their actions, for how they let this fraud go on for so long.”
AHCCCS declined to provide comment for the AZCIR/ProPublica investigation because of an ongoing class-action lawsuit filed by families who claim that their loved ones were harmed or killed as a result of the state’s failure to address the fraud scheme.
At a time when many news outlets lack the resources to fight back when agencies refuse to disclose public records, Quester said he is particularly grateful for the free legal support his newsroom received from Reporters Committee attorneys and Arellano.
“Every dollar that we can save in opening up access to public records or holding agencies accountable is huge,” he said. “It goes a long way toward not only ensuring accountability at the state level, but to saving our resources for what we do best, and that’s investigative reporting.
“The work of Gunita, Dani, and Daniel was just on point,” Quester added. “It was thorough. It had authority behind it. It’s a tool in our toolbox to push back on what are otherwise secretive agencies operating in the dark.”