DOJ Sues New York Over Medicaid Program Mismanagement

The U.S. Department of Justice has initiated a lawsuit against Governor Kathy Hochul’s administration, claiming that select companies improperly diverted millions of taxpayer dollars through manipulated bids in the $11 billion Medicaid home health program.

The lawsuit names State Health Commissioner James MacDonald and Medicaid Director Amir Basili. It presents alarming allegations that the Hochul administration intended to consolidate payroll services for around 250,000 home care recipients under Public Partnership LLC. This move was pursued even in the face of evident warning signs that chaos was on the horizon.

“New York State’s failure to address a favored vendor that unlawfully siphoned millions in Medicaid funds is not just egregious; it’s a breach of public trust,” stated Assistant Attorney General Brett A. Shumate from the Civil Division of the Justice Department.

Shumate further stressed, “The Department of Justice is stepping in to ensure compliance with federal laws that require truthful dealings in health care programs and to shield the public from further harm caused by PPL and New York State.”

While Hochul is not explicitly accused of any wrongdoing in the 55-page document filed in the U.S. District Court for the Eastern District of New York, emails reviewed by federal investigators reveal her involvement in the transition as well as the company’s bid acquisition.

The complaint notes instances where, by September 17, 2024, Defendant Basiri had engaged in urgent email discussions with Department of Health (DOH) officials in other states. These officials revealed that, due to “pressure from the Governor’s Office,” they were trying to verify whether alternate bidders were qualified.

Following PPL’s bid win, officials from the company suggested to the DOH that the timeline for migrating CDPAP recipients and caregivers to their platform should be extended from three to nine months, as they needed more time to hire staff. However, Hochul’s office declined this request, according to an email from a DOH official included in the complaint.

In the subsequent months, Hochul’s administration reportedly minimized the transition’s seriousness, even as thousands of disabled New Yorkers faced considerable customer service challenges to ensure caregivers were paid.

PPL’s records, as uncovered in the lawsuit, indicated that by January 13, 2025, only 43 out of 214,000 individuals in PPL’s system had successfully transitioned just one week into the migration period.

Just three days later, McDonald asserted in a statement that “the facts and data show the transition is proceeding efficiently and effectively.”

Colin McDonald, an assistant attorney general in the Justice Department’s National Fraud Enforcement Division, noted, “New York State’s clandestine deals with PPL have cost taxpayers millions and left numerous Medicaid patients in a state of uncertainty.”

He concluded, “Today’s action serves as a reminder that the Department of Justice will utilize all available tools to safeguard taxpayer-funded programs from fraud and corruption.”