Justice Department sues New York over Medicaid home care ‘fraud scheme’

The Justice Department is suing the New York State Department of Health, the state’s Medicaid director and a company operating a $10 billion home health program for the state.

In the suit, filed Tuesday in the Eastern District of New York, the Justice Department accused Public Partnerships, LLC (PPL) of making false or misleading statements about its ability to take over and run the state’s Consumer Directed Personal Assistance Program (CDPAP).

The lawsuit alleges PPL pocketed a small percentage of the cost of each hour of care billed, amounting to millions of dollars in “unauthorized profits.”

CDPAP provides home care through lay caregivers — including family members — to Medicaid patients with disabilities or significant medical needs.

As of fall 2024, CDPAP was one of New York’s largest health benefit programs, with more than 250,000 patients and more than 300,000 caregivers. PPL was selected to run the program in 2024 when the state decided to consolidate management into one firm instead of hundreds of different companies.

The intent was to save Medicaid $500 million, but New York officials have said the consolidation has saved taxpayers more than $1 billion in the first year of the program.

The lawsuit alleges that the New York Department of Health awarded PPL the contract after conducting a “sham bid” process and then failed to hold the company accountable after learning of PPL’s intent to deviate from the representations made in its bid.

“New York’s failure to police a favored vendor that unlawfully siphoned millions of dollars of Medicaid funding is egregious and betrays the public trust,” Brett Shumate, an assistant attorney general, said in a statement. “The Justice Department is acting to ensure that federal laws regarding truthful statements and fair dealing in federal health care programs are upheld.”

The Justice Department alleges the company misrepresented much of its bid. For example, the suit states PPL’s bid submission “materially misrepresented its staffing plan, its financial readiness to perform the contract, the quality of its in-house software, and other key aspects of its plan.”

The Justice Department also accused the company of improperly inflating hourly billable rates upon taking over the program in 2025.

“To date, New York and PPL repeatedly and willfully have misled the public and the New York Legislature concerning important aspects of the CDPAP transition, including, without limitation, the gross mismanagement of the program by PPL and New York,” the Justice Department said in a statement.

Federal prosecutors are seeking a court order freezing the flow of any gross revenue to PPL under the CDPAP contract and appointing a temporary receiver.

New York State Department of Health spokesperson Cadence Acquaviva pushed back against the claims.

“This baseless complaint is the latest attempt by Washington Republicans to score political points at the expense of vulnerable New Yorkers.  It is inexcusable and completely lacking in merit,” Acquaviva said in a statement to The Hill.

“The fact of the matter is this administration saved CDPAP from a fiscal crisis by removing hundreds of wasteful administrative middlemen. In the process, we reduced costs for state and federal taxpayers while protecting home care for those who need it.”

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