Even though Medicaid gets federal funding and is run by state governments, individuals who rely on this program often have limited control over their care providers and the costs involved.
This situation highlights inherent flaws. States have a strong incentive to maximize federal matching funds, while federal taxpayers end up shouldering much of the financial burden. This creates a conflict between state officials and the federal government’s attempts to manage Medicaid expenditures alongside taxpayers’ desires to prevent healthcare providers and contractors from benefiting from poor oversight.
The scandal surrounding home care in New York is indicative of more than just a failure in contracting; it serves as a caution about Medicaid’s overall structure.
Often, quick-fix reforms in Medicaid lead to heightened expenditures, more inefficiencies, and added fraudulent activities.
Consider New York’s case. Democratic Governor Kathy Hochul’s administration has yet to roll out nearly $11 billion in necessary fiscal reforms. Issues within the Consumer Personal Assistance Program, which offers Medicaid-funded home care, drew the attention of federal prosecutors.
Recently, the U.S. Department of Justice took legal action against the New York State Department of Health and Public Partnership LLC. Prosecutors argue that the intended reforms aimed at cutting waste in this expensive program have instead fostered a persistent scheme of Medicaid fraud.
Non-medical long-term care for the elderly and disabled is particularly susceptible to misuse due to the difficulty in verifying claims about the hours worked or services rendered by caregivers.
As Bill Hammond from the Empire Center explained, “This service is often delivered by unqualified individuals in private homes, typically without oversight. The risk escalates if the caregiver is a friend or family member of the patient, which is an increasingly common scenario under the CDPAP policy.”
Data from New York illustrates the extent of the issue.
In 2021, the state had 138 home health aides for every 1,000 residents aged 65 and older—more than twice the national average. In New York City, the ratio was even higher, with 236 aides per 1,000 elderly residents. By 2024, that number is projected to rise to 171 aides per 1,000 older residents statewide.
The aim of home care was to lessen the reliance on nursing homes, but while the proportion of older New Yorkers in such facilities decreased, it did so more slowly than in most other states. New York’s per capita Medicaid spending on these homes remains the highest nationwide and twice the national average.
Over the past decade, hundreds of financial intermediaries have emerged to manage payroll and administrative tasks for caregivers under CDPAP. These entities have exploited the lack of stringent oversight associated with Medicaid funding.
Some even promoted the idea of becoming a CDPAP caregiver to gain compensation from Medicaid for caring for a family member—essentially making the same money as trained home care aides earning minimum wage.
This has led to what Hammond describes as “an overwhelming demand for high Medicaid benefits, with this demand increasing nearly ten times faster than the state’s senior population.”
In 2024, New York enacted legislation to consolidate the management of CDPAP under a single contractor, awarding this role to PPL.
At that time, CDPAP was using nearly 600 intermediaries, and enrollment surged from about 12,000 to over 250,000 between 2015 and 2023.
Lawmakers claimed that minimizing the bureaucracy would help control costs. Yet they failed to follow through on promises of increased accountability and significant savings.
According to the Department of Justice, the procurement process for what they termed “one of the most lucrative contracts to manage the nation’s Medicaid program” was flawed from the start. Prosecutors contend that PPL was chosen as the winning bidder through an insincere bidding process.
The shift from using many intermediaries to solely PPL also proved disorderly. The unrealistic timeline disrupted patient care and was clear to both PPL and the Health Department.
Most critically, allegations suggest that “PPL and New York” neglected to adhere to key contractual restrictions regarding financial incentives and benefits meant to save substantial costs during the CDPAP transition.
Reportedly, PPL managed to siphon off millions in Medicaid funds, with the cooperation of the state Department of Health.
PPL is certainly not irreplaceable; however, if the incentive structure doesn’t change, similar self-serving companies will likely step in.
As long as federal taxpayers contribute somewhere between $1 to $9 for each dollar that New York contributes towards Medicaid, state officials will remain unaccountable regarding the misuse of public funds.
Any money recovered from this alleged fraud will be minuscule in comparison to the broader crisis of improper spending in Medicaid, which is said to have surpassed $1 trillion over the last decade.
Overall, the New York home care scandal illustrates more than just a contractual issue; it points out serious flaws in Medicaid’s design.
This program incentivizes states to boost spending, obscures accountability for waste, and leaves taxpayers struggling to address fraud after funds run dry. An overhaul of Medicaid to restore responsibility is long overdue.
