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

PHOENIX (AP) — A Navajo state senator said Friday she's hoping for final approval of her bill to tighten regulations for rehab facilities amid widespread fraud that has bilked hundreds of millions in Arizona Medicaid dollars and scammed hundreds of Native Americans seeking help for addictions.

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

Hathalie said she anticipates a vote by the full House could come as soon as Thursday, adding that she urges constituents to voice their support for the legislation.

“This bill will ensure checks and balances. This issue has been going on long before the pandemic, and Native people have been largely affected,” said Hatathlie, a Democrat from Coal Mine Mesa on the Navajo Nation who represents Arizona’s 6th District. “Passage of Senate Bill 1655 will start a measure of resiliency and healing. It will most importantly communicate to criminals they are not welcome in Arizona!”

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

The Attorney General’s Office said it would not comment on the pending civil action as it continues to prosecute scores of cases against those programs.

Arizona Gov. Katie Hobbs and Attorney General Kris Mayes announced in May that they were stepping up an investigation of alleged fraudulent Medicaid billing that began before they took office in 2023.

The charges were submitted mostly through the American Indian Health Program, a Medicaid health plan that allows providers to bill directly for reimbursement of services rendered to Native Americans and Alaska Natives.

Mayes told Navajo leaders in a report this year that 72 individuals and entities had been indicted so far, 44 of them since she took office, and over $90 million in property and vehicles relating to those cases were seized.

The Arizona Health Care Cost Containment System has instituted tighter controls, including a six-month moratorium for enrolling new behavioral health clinics for Medicaid billing. The scams’ far-reaching consequences became better known through warnings sounded by state and tribal governments outside Arizona.

Hatathlie's proposed law would increase the civil penalty per incidence of noncompliance at rehab facilities from up to $500 to at least $1,500 daily.

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

Crystalyne Curley, speaker of the Navajo Nation Council, showed her support for the Hatathlie's bill the day the Senate approved it.

Reva Stewart, a Navajo activist in Phoenix who helps Native Americans return to their reservations after leaving fraudulent rehab programs, said she worries the legislation may not go far enough to shut down the worst unlicensed facilities because it largely focuses on licensed ones.

“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 assisted living and nursing homes and other facilities that could be affected worried that the penalties may 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 gone through many revisions in recent weeks and more adjustments are possible, she added.

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