by Mary Hudetz, ProPublica, and Hannah Bassett, Arizona Center for Investigative Reporting

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At least 40 Native American residents of sober living homes and treatment facilities in the Phoenix area died as state Medicaid officials struggled to respond to a massive fraud scheme that targeted Indigenous people with addictions.

The deaths, almost all from drug and alcohol use, span from the spring of 2022 to the summer of 2024, according to a review of records from the Maricopa County Office of the Medical Examiner. Over half died as officials ignored calls to address lax oversight later shown to have contributed to thousands of patients being recruited into sham treatment programs.

Patients continued to die even after Arizona officials in May 2023 announced a sweeping investigation of hundreds of facilities. By then, the fraud was so widespread that officials spent the next year seeking to halt Medicaid reimbursements to behavioral health businesses accused of wrongdoing.

The state’s Medicaid agency, the Arizona Health Care Cost Containment System, acknowledged the fraud cost taxpayers as much as $2.5 billion. But it has not accounted publicly for the number of deaths tied to the scheme.

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.

A class-action lawsuit filed last month by families who allege the state’s inaction harmed or killed loved ones seeking addiction treatment names three people who died outside of sober living homes or treatment programs. Their deaths are not among the 40 fatalities tied directly to the facilities in medical examiner records.

Gov. Katie Hobbs, a Democrat who took office in January 2023, blamed her Republican predecessor, Doug Ducey, for failing to relay the scale of the scheme that persisted for years under his leadership. However, AZCIR and ProPublica found that the leader Hobbs appointed at AHCCCS also stalled a key reform the agency would later credit with helping to stem the fraud.

In a brief statement, Daniel Scarpinato, a Ducey spokesperson, did not comment on missed opportunities to detect and stop the fraud under his administration. But he said that the former governor went to great lengths to ensure a smooth transition for Hobbs and that members of Ducey’s staff continued to make themselves available to her administration after he left office. “All they needed to do was pick up the phone,” Scarpinato said.

AHCCCS declined to comment or to make Director Carmen Heredia available for an interview because of the ongoing class-action lawsuit.

Reva Stewart, a community advocate who started a nonprofit to help victims and their families, estimates the crisis led to hundreds of deaths, extending beyond those that occurred in sober living facilities. She said many people recruited into programs were reported missing and some lost access to treatment or became homeless when the state’s crackdown led to the abrupt closure of facilities that housed people.

Stewart and others fault AHCCCS for not acting sooner.

“I had family members who died in these group homes,” said Lorenzo Henry, a member of the San Carlos Apache Tribe who said he was recruited into multiple inadequate treatment programs before finding a facility that helped him. “I would like to see at least AHCCCS take accountability for their actions, for how they let this fraud go on for so long.”

Among the victims was Jeffrey Hustito, a 43-year-old uncle, brother and son from Zuni Pueblo in New Mexico. He had been a caretaker for his father when he was on dialysis and awaiting a kidney transplant. In the fall of 2021, Hustito sought treatment for alcoholism in Arizona, his family said. His father, an Army veteran and custodian for the local Indian Health Service hospital, was relieved to learn about his son’s decision. The two were close, living in the family’s home in a historic tribal village surrounded by high desert and mesas.

But in Phoenix, the younger Hustito became difficult to keep track of. He was caught up in a murky network of treatment programs, according to interviews with his family, social media posts, and state and county records. Sober living home operators always seemed to be moving him, his father said.

“We were really thrilled when he decided to get treatment,” said Anders Hustito, who is slender and soft-spoken. “He just got worse over there.”

Jeffrey Hustito died in a sober living home on Dec. 27, 2022.

The fraud flourished for years under the state’s American Indian Health Program, a Medicaid insurance option for tribal citizens that allowed providers to set their own reimbursement rates. This fee-for-service model, established as a result of federal requirements, aimed to ensure coverage for Native Americans living in areas not typically served by insurance companies. But with no limit on how much they could bill, some behavioral health providers claimed tens of thousands of dollars for a single counseling or treatment session.

The first uptick in behavioral health reimbursement claims came in 2019. That same year, Ducey appointed Jami Snyder, a deputy director at AHCCCS and former head of Texas’ Medicaid agency, to serve as director of AHCCCS. She pursued new initiatives, like additional mental health services and housing options for Medicaid recipients. She also had a more hands-off approach to agency operations, including fraud prevention, than her predecessors, according to former AHCCCS employees.

During the pandemic, Snyder enacted changes to increase access to care. One allowed the state Medicaid program to bypass background checks for providers and in-person inspections of facilities. Another let providers continue collecting Medicaid payments after their health department licenses lapsed, meaning AHCCCS no longer had updated information on clinics’ certifications or ownership. The changes were not communicated beyond Snyder’s senior leadership team for nearly two years, according to documentation provided by an AHCCCS spokesperson.

Snyder declined requests for an interview or comment for this story.

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