Arizona legislation to better regulate rehab programs targeted by Medicaid scams is moving forward

PHOENIX — A Navajo state senator said Friday she hopes for final passage of her bill to tighten regulations for rehabilitation facilities, amid widespread fraud that has cost hundreds of millions of Medicaid dollars in Arizona and defrauded hundreds of Native Americans seeking help for their addictions.

Senate Bill 1655, sponsored by Senator Theresa Hatathlie, was unanimously approved by the Senate this week and sent to the House, where it received its first reading and was assigned to the Health and Human Services Committee.

Hathalie said she expects a vote in the full House to take place as early as Thursday, adding that she is urging voters to express their support for the legislation.

“This bill provides checks and balances. This issue has been going on since long before the pandemic, and indigenous people have been largely affected,” said Hatathlie, a Democrat from Coal Mine Mesa of the Navajo Nation, who represents Arizona’s 6th District. “The passage of Senate Bill 1655 will be the beginning of some measure of resilience and healing. Above all, it will make it clear to criminals that they are not welcome in Arizona!”

The legislative effort comes the same week that relatives of two Native American men who died during rehabilitation programs in Phoenix sued Arizona’s Medicaid program and the Department of Health Services, alleging inadequate oversight.

The Attorney General’s Office said it would not comment on the ongoing civil suit as it continues to prosecute dozens of cases against these programs.

Arizona Governor Katie Hobbs and Attorney General Kris Mayes announced in May that they were intensifying an investigation into alleged fraudulent Medicaid billing that began before they took office in 2023.

The charges were filed largely through the American Indian Health Program, a Medicaid health plan that allows health care providers to directly bill for reimbursement for services provided to Native Americans and Alaska Natives.

Mayes told Navajo leaders in a report this year that 72 individuals and entities have been charged to date, 44 of them since she took office, and that more than $90 million in property and vehicles have been seized in connection with the cases.

The Arizona Health Care Cost Containment System has instituted stricter controls, including a six-month moratorium on enrolling new behavioral health clinics for Medicaid billing. The far-reaching consequences of the scam became better known through warnings from state and tribal governments outside Arizona.

Hatathlie’s proposed law would increase the civil penalty per instance of noncompliance in rehabilitation centers from a maximum of $500 to at least $1,500 per day.

It would also require that patients’ family members be notified when they arrive at a facility for evaluation. Employees of residential facilities would be required to undergo fingerprinting and background checks.

Navajo Nation Council President Crystalyne Curley voiced her support for Hatathlie’s bill the day the Senate passed it.

Reva Stewart, a Navajo activist in Phoenix who helps Native Americans return to their reservations after leaving fraudulent drug rehabilitation programs, says she worries the legislation may not go far enough to close the worst unlicensed facilities because they focuses largely on licensed facilities.

“We all want a solution to this problem,” Stewart said. “I just want to make sure this solution works.”

During early Senate hearings, representatives of nursing homes and other facilities that could be affected expressed concern that the penalties could be too high for smaller operations.

Hatathlie said facilities will have a 30-day grace period to bring any violations into compliance. The legislation has undergone many revisions in recent weeks and more adjustments are possible, she added.

“This is a big problem; this is a big problem in Arizona,” Republican Senate President Warren Petersen said after Tuesday’s vote. “If you’re a government agency and you’re doing something wrong, don’t mess with Senator Hatathlie.”