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The Arizona Secretary’s director of Medicaid Agency resigned this week, as expected to face questions from lawmakers about handling a massive fraud scheme that targets Native Americans.
Democrat Gov. Katie Hobbs announced Wednesday that she has accepted the resignation of Carmen Heledia, director of the Arizona Healthcare Cost Containment System. The governor said it has become clear that he will not confirm Heredia’s nomination, denounced Republican lawmakers for politicizing the process of confirming Heredia’s lawmakers.
Sen. Jake Hoffman, a Republican and chairman of the Senate Speaker’s Nomination Committee, said in a statement that Heredia had “inadequately executed” the suspension of hundreds of behavioral health care providers in response to fraud schemes. Heredia had been head of the AHCCCS since early 2023 without confirmation from the Senate. This says civil servants likely started the fraud during the Republican administration of former Gov. Dougduchy. In the year before Heredia became director, records show that officials were warned that fraud was hurting patients, but they struggled to deal with the public that Heredia went along with other state leaders in May 2023, and failed to warn them.
(A Ducey spokesman earlier this year did not comment on his missed opportunity to stop the fraud, but said the former governor spent quite a bit of time helping Hobbs transition.)
Under Heredia’s leadership, the AHCCC withheld payments to more than 300 businesses as it investigated allegations of fraudulent claims with Medicaid for its treatment services. In many cases, no services were provided, and employers were accused of allowing patients to continue using the substances they wanted to overcome through treatment.
In a statement, Heredia said she presented her resignation with a heavy heart and expressed concern that the partisan agenda was dragged “through career-damaging hearings.” Two years ago, Senate Republicans derailed the nomination of one of Hobbs’ previous picks to lead the health department.
In September last year, more than a year after crackdowns began, the Arizona Survey Report and the Proporabrica Center reported that the outage caused patients to become homeless. Victims of the scheme, some of the other states, were left without the use of the drug or alcohol treatment they were sought.
Over the years, most businesses in Arizona enjoyed huge Medicaid rebates by enrolling Native Americans in the program and charging the state’s American Indian Health program at any service fee for services such as counseling sessions. (AIHP was an Medicaid insurance option, and there was no limit set to how much the provider could charge the service until the fraud was discovered.)
At a press conference Thursday, Democrat Attorney General Chris Mays said there have been more than 100 indictments and 25 convictions so far related to the scheme. She also said she hopes more charges will come.
The AHCCCS said over the past two years, the top priority for officials is patient safety and that in May 2023 it established a hotline for victims. It provided a short hotel stay for those evacuated from the shuttered facilities. However, AHCCCS said last year it had not recorded what happened to the majority of the hotline’s then 11,400 callers. According to available data, more than 575 people had finished without a home as of September last year. Azcir and Propublica also found that at least 40 Indigenous residents of calm housing and treatment facilities in the Phoenix area died as the state shaking its response.
Of the hundreds investigated, a handful of suspended providers were allowed to resume Medicaid claims after clearing claims with the state. But they said the suspension was still pushing them financially on the brink of financial and overthrowing patient care, Azsil and Propobrica discovered. As a result, a swift and proactive response to the crisis – authorities said it was necessary to eradicate fraud and save lives, but raised concerns that behavioral healthcare, particularly Native Americans, is becoming increasingly difficult to access.
“Under Katie Hobbs’ leadership, Heredia’s response was incredibly unsettling to say the least,” Hoffman said. “We have a broken system left behind due to Heredia’s mismanagement, and our vulnerable group is caught up in this collapse.”
A Senate Republican spokesman declined to ask for an interview with Hoffman.
Hoffman’s statement focused primarily on fraud schemes that officials say will cost the state $2 billion, but he also said he has problems with other issues within the AHCCC, including long-term care.
In addition to Heredia’s resignation, Arizona Department of Health Director Jennifer Kunico also resigned this week. Like Heredia, Cunico was set up to appear before lawmakers for a confirmation hearing. Cunico said she was proud of her work in the department, but made the difficult decision to withdraw the nomination after it became clear that she would not be confirmed. Her resignation retracted her appointment two years after a fervent confirmation hearing, after a thrilling confirmation hearing, two years after Hobbes’ previous picks, heading the Department of Health.
Hoffman said Cunico defended public health officials’ pandemic response during a meeting with lawmakers but did not provide details. Hoffman previously sponsored laws that prohibit state and local agencies from enacting vaccine mandates.
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The governor defended Heredia’s response to the fraud crisis, saying that both Heredia and Kunico were working on a variety of initiatives, including improving access to mothers’ health care.
“Carmen Heledia helped eradicate billions of dollars in Medicaid fraud and the associated humanitarian fallout that the previous administration ignored,” Hobbs said in a statement. “Her work to eliminate waste, fraud and abuse in our healthcare system was a national model and she has ensured people who need to get it all the time.”
She said, “The unprecedented politicization of the Senate’s review verification process has ended the oversight of two healthcare professionals, where the state government has run more efficiently and more effectively.”
Christopher Romacaff, an investigative reporter and Roy W. Howard Fellow of Azsill, contributed to the report.
