Sober living crisis: Class-action lawsuit launched against State of Arizona

PHOENIX - For some time now, we have been following the sober living crisis within Arizona, where an estimated $2.8 billion was stolen from the state’s Medicaid system due to fraudulent billing for behavioral health services never rendered.

Now, a complaint has been filed against the Medicaid agency, as well as the state’s Department of Health.

We’ve been combing through the 125-page class action complaint, and we have spoken to the lawyers who filed it. The lawyers say Arizona’s Medicaid system, known as the Arizona Health Care Cost Containment System (AHCCCS) and the state's Department of Health caused thousands of Native Americans to suffer injuries, deaths, drug addictions and homelessness due to the so-called sober living crisis, and blamed the state for creating the crisis.

"They were treated like chattel, more or less," said John Brewer with the Brewerwood Law Firm. "I mean, they weren’t treated as human beings."

Brewer, along with lawyers Dane Wood and Brook Laskey, say Arizona knew massive fraud was happening back in the summer of 2019.

"If you know the problem exists, why aren’t you taking care of it?" said Wood, who is with the same law firm as Brewer.

Fraudulent billing for behavioral health services grew from $43 million to $2.8 billion, according to the newly filed complaint, transforming into a humanitarian crisis after the state cracked down on facilities across Arizona that are believed to be involved in the scheme preying on Native American Medicaid members not just in the Valley, but in Mew Mexico as well.

"Many of the fraudsters drove across state lines, went to cities like Gallup and Farmington, took people from there, brought them here to Phoenix, and then took advantage of the benefits available through AHCCCS," said Laskey, who is with the law firm McCoy Leavitt Laskey.

The complaint lists several representing plaintiffs: some deceased, some now incapacitated, and some children.

"It’s just a systemic failure within AHCCCS just to see – we’ve heard of so many deaths that really, as far as one standing out that is more tragic than another, really is hard to say because they’re all tragic," said Brewer.

Lawyers say the state had egg on its face, and used indictments and arrests to go after bad actors while vulnerable Native Americans developed more addictions, were displaced, or died. Documents say Dr. Satya Sarma, a former medical director for AHCCCS, warned supervisors in 2020 as employees raised concerns about providers who were opening new facilities under different names if they faced trouble.

During one meeting, Dr. Sarma was allegedly told to "stay in her lane."

"Why weren’t resources devoted to making internal changes at AHCCCS in solving this problem, rather than letting it grow to, as [Laskey] called, epic proportions?" Wood said.

Reva Stewart, an advocate for the group ‘Stolen People, Stolen Benefits,’ says outreach to displaced relatives is far from over, saying the state did not do enough on the humanitarian level

"So, we average about 100 to 200 people per week that we’re helping out," said Stewart.

Plaintiffs are suing the state for gross negligence and wrongful death, asking for damages exceeding $300,000.

Officials with AHCCCS and the Arizona Department of Health have released a joint statement on the matter, which reads:

"AHCCCS and ADHS are unable to comment on the substance of pending litigation. Addressing behavioral health fraud remains at the forefront of our efforts. Governor Hobbs and State Agencies have acknowledged the pain and suffering associated with behavioral health fraud and the significant impact on Tribal nations in Arizona. The Hobbs administration has taken swift action against the fraudulent providers, prioritized an emergency humanitarian response, and continues to prioritize operational reform in collaboration with law enforcement and Tribal partners.

Our focus remains protecting the populations we serve, ensuring that Arizonans receive the vital care and services they need, and eliminating fraud."