Feds Sue Hochul Officials, Claim Massive Fraud Scheme In Revamp Of NY’s $11B Medicaid Homecare Program

The Department of Justice filed a lawsuit Tuesday against officials in Gov. Kathy Hochul’s administration, alleging they rigged the bidding process for New York’s $11 billion Medicaid homecare program and allowed a favored company to improperly receive millions in taxpayer dollars.

New York State Health Commissioner James McDonald and Medicaid Director Amir Bassiri are both named in the 55-page complaint filed in the U.S. District Court for the Eastern District of New York.

Federal prosecutors allege that state officials orchestrated a scheme to consolidate payroll services for nearly 250,000 homecare recipients under Public Partnerships LLC, commonly known as PPL, and continued moving forward with the transition despite repeated warnings that the rollout would be chaotic.

“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,” Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division 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 and to prevent additional harm from being exacted against the public by PPL and New York,” Shumate added.

Gov. Hochul is not directly accused of wrongdoing in the lawsuit. However, emails uncovered by federal investigators and included in the complaint indicate that her office was actively involved in both the transition process and the awarding of the contract to PPL.

According to the lawsuit, as late as Sept. 17, 2024, Bassiri participated in last-minute email exchanges with health officials from other states while New York officials, under pressure from the governor’s office, sought to determine whether competing bidders were qualified to provide fiscal intermediary services.

The complaint alleges that at least one company that ultimately qualified as a bidder was being scrutinized during this process.

After PPL was awarded the contract, company representatives reportedly proposed extending the transition timeline for consumers and caregivers from three months to nine months as the company rushed to hire staff and prepare for the massive undertaking.

According to internal emails cited in the lawsuit, Hochul’s office rejected the proposal.

“I wanted to give you a heads up that Chamber is coming in hard on the SFI launch, they really aren’t entertaining options to move off of a path that gets this done by 4/1. We will not be advancing statutory or regulatory changes [to extend the CDPAP transition timeframe] at this time,” a Department of Health official wrote in an email included in the complaint.

Federal prosecutors further allege that state officials worked to downplay the seriousness of the troubled transition as disabled New Yorkers and their caregivers encountered major customer service problems and payment issues.

According to PPL records cited in the lawsuit, only 43 out of approximately 214,000 individuals in the company’s system had completed the transition by Jan. 13, 2025, one week after the transition period opened.

Three days later, McDonald issued a public statement asserting that “the facts and data show that the transition is proceeding efficiently and effectively.”

Assistant Attorney General Colin McDonald of the Justice Department’s National Fraud Enforcement Division sharply criticized the handling of the program.

“New York’s backroom deal with PPL has cost taxpayers millions of dollars and cast countless Medicaid patients to the curb,” McDonald said.

“Today’s action is the latest reminder that the Justice Department is mobilizing every available tool to protect taxpayer-funded programs from fraud and corruption,” he added.

The lawsuit marks a major escalation in the federal government’s scrutiny of New York’s handling of one of the nation’s largest Medicaid homecare programs and could have significant implications for the state’s healthcare system and administration.