How the Arizona sober living Medicaid fraud actually worked
- Justice For Natives
- Sep 16
- 3 min read
For years the headlines have thrown out giant numbers. $2.5 Billion. Sometimes $2.8 Billion. What is often missing is how the fraud actually happened and how badly the State and AHCCCS failed to stop it.
The bottom line
A network of behavioral health providers and affiliated sober living homes targeted Indigenous people and drained billions from Arizona Medicaid. The State and AHCCCS were supposed to protect those funds. Instead, they moved too slowly and let a system with weak guardrails bleed money. When they finally reacted, it was already too late. Lives were lost, families were hurt, and Native communities were left behind.
Why Native communities were targeted
Fraudsters focused on the American Indian Health Program. This is a fee for service option that let enrolled providers bill the state directly for eligible Native members. Recruiters lured people from reservations and Native communities into Phoenix area homes with promises of housing, food, gift cards, and treatment. The reality in many cases was unsafe housing, little to no treatment, and paperwork designed to keep billing open.
Step by step playbook
Recruit and enroll
People were pulled into homes with promises of shelter and food. Once there they were signed up for Medicaid services and kept on schedules that maximized billable days.
Switch coverage
Operators often steered people toward the fee for service pathway because it allowed direct billing and higher, less controlled reimbursement.
Bill for services that did not exist
Patterns included ghost billing when a person was not present, billing after a person had left or died, overlapping services in the same hour, and services that were not medically necessary.
Homes as referral pipelines
Sober living homes acted as feeders to specific clinics. Some operations paid or received kickbacks. The point was not recovery, it was claims.
Move the money
Shell companies, nonprofits, and out of state or overseas transfers obscured where the money went.
Why use was allowed
Many survivors describe drinking and drug use inside homes. Why would a sober living home allow that. The alleged incentive was simple. As long as a person was still using, operators could justify more treatment on paper. More days in the program meant more billable claims. That is the opposite of real recovery.
How the State responded and why it was not enough
When the fraud became impossible to ignore, AHCCCS and the State announced reforms in 2023 and 2024. They added identity checks on the provider portal. They elevated some behavioral health provider types to high risk status with fingerprints and site visits. They paused new registrations for several categories. They added claim edits and documentation requirements. They also set a specific statewide rate for a frequently abused group treatment code and limited per diem billing tricks.
These measures came after billions were already stolen. During the pandemic, AHCCCS also loosened background checks and in person inspections for some providers, which increased vulnerability to fraud. Even after reforms were announced, problems did not stop overnight. Bad actors adapted, and victims were left in unsafe or unstable housing while investigations and suspensions played out.
Where things stand now
Indictments continue. About five percent of the estimated losses had been recovered by early May 2025. Survivors still need support that matches the scale of the harm. The truth is that the State and AHCCCS did not do their job. They failed to protect Native communities. The fixes so far have not delivered the justice and care that people deserve.
What to do if you suspect fraud
If you suspect fraud, report it to the AHCCCS Office of Inspector General. You can report online or by phone. Every report still matters.
