The Journal. - She Tried to Get Sober. She Got Scammed Instead.

Episode Date: December 4, 2023

For months, state and federal law-enforcement officials have been investigating a Medicaid scam in which hundreds of fraudulent sober-living homes in the Phoenix area have recruited Native Americans from across the West. Raquel Moody shares her experience in what she believes were fraudulent sober homes, and WSJ's Dan Frosch unpacks how the scam worked. Further Reading: - Fraudulent Sober Homes Exploited Native Americans, Say Authorities  Learn more about your ad choices. Visit megaphone.fm/adchoices

Last year, Raquel Moody was struggling with alcohol addiction, and she wanted to get sober. I had started, you know, drinking and just... I got lost in my addiction, and I knew I needed help. Raquel lives in Arizona, and I knew I needed help. Raquel lives in Arizona, and she's Native American. The state has a special program aimed at giving Native Americans more treatment options for addiction. Raquel heard about a type of facility called a sober living home and decided to try it.

But when she got there, she noticed some red flags. When I arrived at the housing, there was no intake. You know, it was just straight to your room. There's your bed. And there was nothing to do. I mean, we sat in these sober living homes just watching TV. I would always question, you know, if there were activities that we could do because I'm a recovering alcoholic. And when I get bored, I want to drink. The only thing they needed from Raquel was her Medicaid number. There were no drug tests. And what surprised her most, people living there were still allowed to drink alcohol.

What did you expect it would be like? And then what was it like when you actually arrived? I was expecting them to help me with everything they promised me with. You know, I really wanted to work on myself. I was hoping, you know, these classes that they were offering would help me better myself. And they said that they would help me, and they never did. Thousands of Native Americans like Raquel have also been caught up in sober homes like these, where officials say, instead of helping people get clean,

many of the homes were actually committing fraud. get clean, many of the homes were actually committing fraud. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Monday, December 4th. Coming up on the show, Arizona's fake sober homes. When it comes to smart water, alkaline 9.5 plus pH with antioxidant, there's nothing to overthink. So while you may be performing mental gymnastics over whether the post-work gym crowd is worth it, if you'll be able to find a spot for your yoga mat.

Or if that spin instructor will make you late for dinner again. Don't overthink how you hydrate. Life's full of choices. Smart Water Alkaline is a simple one. Arizona has one of the biggest Native American populations in the country. And so the state developed a special program to make it easier for low-income Native Americans to get health care, including addiction treatment. Here's our colleague Dan Frosh. So basically, tribal members can go seek services, in this case, drug and alcohol rehab services, essentially. And they do not have to jump through the same verification hoops that non-Native Americans have to. All you need to do is say you're an enrolled tribal member

and then the provider can seek to get reimbursed by the state. The intention was to make it easier for Native Americans to get addiction services and easier for providers to disperse those services and trying to cut out a lot of red tape. The program led to a big surge in the number of sober living homes operating in the state. What is a sober home? A sober home is supposed to be a place where you live alcohol and drug-free,

along with other people who are also recovering addicts. And you can work a job while you are trying to maintain your sobriety. And oftentimes these sober homes will connect you with classes, and these classes are supposed to help with your sobriety, give you treatment for your sobriety, et cetera. Is it sort of like a rehab center? It's not a rehab center in the sense that a rehab center, there's a lot more structure and treatment that you'll get in that particular facility. The homes are really where you live. The program started out with good intentions, but it had a pretty big loophole. There was hardly

any oversight to ensure that these sober homes were actually providing the services they said they were. All a sober home operator had to do was collect a person's Medicaid ID number and what tribe they were from. And then they're able to bill the state of Arizona for essentially unlimited amounts of money. So providers, fraudulent providers, scam artists, run-of-the-mill sort of motley crew of individuals, became aware of this loophole in Arizona's very, very unique program that focuses exclusively on Native Americans and began setting up these sober homes across the Phoenix metro area, Glendale, Arizona, other sort of large metropolitan areas in Arizona

where there are significant Native American populations. They would target Native Americans who were living on the streets and ask them if they would live in these homes. In some case, they would pay them to live in these homes, a small amount of money. And then they would bill out to the state rehab services for these individuals without either providing the services or providing only sort of a shell of the services. Huh. But the operation still did require people to be there. It wasn't like they could just say, yeah, we treated 500 people last year. They actually needed real people to be in these sober homes. They needed people to be in the homes, but it wasn't a terribly tall order to tell people

living on the street, hey, I got a place where you can live for free. You can drink alcohol and use drugs. Raquel Moody, who we heard from earlier, tried going to several sober homes in the Phoenix area. But she kept having the same experience. I went straight into another sober living house and, oh my gosh, that was, it was horrible. Thinking that, you know, okay, so I'm in a safe place now. These guys will help me when it's just the same thing, just different owners. So every time I went into these places, I would pray that it would be, you know,

a program that could help me and, you know, just to find out they were all the same. Why did you keep looking for other sober homes to go to? Because I needed help. I needed to work on myself. I didn't want to, you know, drink anymore. I didn't want to use anymore. I didn't want to blame everybody for, you know, my mistakes.

my mistakes. I wanted to own everything that I did and, you know, just have the ability to think clearly, think, you know, just, just, I wanted to be okay. And, you know, what I really wanted was sobriety. I wanted, I wanted to be sober. Sober homes weren't just bringing in people from Arizona. They were also recruiting Native Americans from other states, according to officials. There were reports of individuals traveling to these reservations on behalf of these sober homes in white vans to recruit people to go live in them, saying, hey, you want a free place to live? Why don't you come with me? You can dry out in this home in Phoenix. This seemed to be impacting hundreds and hundreds of tribal members, not only from New Mexico and Arizona, but also as far away potentially as Montana. And these people they were targeting were vulnerable. Yeah, so you're not targeting people who have money.

You're actually targeting people who don't have any money in order to get money, which is sort of the inverse of the way a lot of scams seem to work these days. So you're targeting the poorest and most vulnerable people living on the streets in the Phoenix area, people who are dealing with addiction, and using those individuals who obviously don't have financial wherewithal as a means of gaining this huge amount of profit for yourself. Sober homes were making tons of money on this system.

And eventually, it caught the attention of authorities. Basically, in 2019, 2020, they started to notice that the amount of money they were paying out to these facilities under the specific billing code that's used for substance abuse treatment, it had jumped from $53 million in the fiscal year 2019 to $668 million in fiscal year 2022. 50 million to 600 million? Yeah, we had 53 million in 2019. It started going up each year. And by 2022, you had $668 million. That's a massive increase. Huge increase. So it

was an extreme growth of these reimbursement requests that signaled to authorities that something was wrong. But what happens when a sober home gets shut down? That's after the break. With Smartwater's pure, crisp taste, there's nothing to overthink. So while you may be spiraling over double texting your crush, whether your skincare routine is working because you look the same or is doing nothing because you look the same and whatever the heck red light therapy is.

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about what seemed to be an emerging pattern. Native Americans getting lured into fraudulent sober homes. The state and federal government both investigated and came across some alarming cases. They realized that in one case, Arizona was billed for alcohol treatment for somebody who was four years old. Another provider billed the state for more than a million dollars for services they said they'd provided to a woman and her two kids in one year. So these are exorbitant sums of money they're getting paid to provide services for. And in some cases, you're dealing with people who obviously, it's very clear, are either not getting these services or don't even qualify for them. So that's essentially how the state sort of caught on to what was happening.

The state started shutting facilities down and issuing indictments. So far, more than 300 homes have been suspended from the program, and at least 45 people have been indicted. The FBI, the U.S. Attorney's Office in Arizona, federal health and human service investigators are all looking into this as well. The attorney general of Arizona has said it is one of the largest government scams she's ever encountered, if not the largest one in the state of Arizona. Since the crackdown, Arizona has made changes to the program to make fraud more difficult, including capping reimbursement rates for outpatient rehab services.

But shutting these sober homes down has led to an unintended consequence. There's been a flood of Native Americans who are living at these homes who are now on the streets. The Navajo Nation declared the situation a public health state of emergency. Here, I'll get you some water. You guys doing okay? Yeah. Thank you. You're welcome.

That's Reva Stewart. She's a member of the Navajo Nation, and for the last two years, she's been trying to help people in Phoenix who've been stranded by these programs. Reva helps run a Native American arts and crafts store. But several nights a week, she runs a small volunteer operation that goes out on the street and hands out basic supplies.

Yeah, so we do our bags here. We fill them up with necessities, our hygiene kits, socks. We try to fill up two containers full. People donated blankets and jackets. Coleman jugs. So we try to take as many and as much as we can in both vehicles, and then we'll start hitting the different areas.

Her main goal is to help people who were recruited from other states or reservations far away and get them back home. She says she's contacted family members, bought bus passes for people, and has even bought plane tickets. She's pulled in thousands of dollars in donations, but she's also spent her own money.

Our producer Pierce Singey met with her one night in Phoenix. And you guys were a group of folk. Like, you're not a big non-profit. We're not even a non-profit, no. We're just for people who care about our people. Is that why you're doing this?

This must be really hard work to do this for going on two years. It is. It is hard work. It is very emotional. It's very time-consuming. One of the people Reva helped was Raquel Moody, who we heard from earlier.

Reva helped Raquel find a legitimate sober home where she was able to get clean. Now, Raquel goes out with Reva and helps do outreach on the streets. Are you guys hungry? We have sandwiches. Water? I was able to, you know, find the good, well, the right program. And I've been, I feel a lot better, you know, compared to last year in the condition that I was in.

Like right now, today, I'm happy. And just things are coming together slowly. So right now I'm in the process of looking for a job. I want a job in peer support, helping my relatives, just being there for them. helping my relatives, just being there for them. When you saw that the FBI started cracking down on these sober living homes and that they were getting shut down, how did that make you feel? You know, I was happy. I am happy that a lot of these places are closing.

I was happy. I am happy that a lot of these places are closing. It's been hard because our team often deals with the people that are getting kicked out of these houses. There's a lot of people that are on the streets right now. And, you know, they all want, they all came out here for one thing, and that was to find treatment for their addiction. That's all for today. Monday, December 4th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts.

We're out every weekday afternoon. Thanks for listening. See you tomorrow.