Gov. Kathy Hochul (D-N.Y.) has directed the New York State Department of Health to discuss ending the state’s Medicaid social adult day care benefit program following a major state and federal enforcement operation targeting more than 100 providers suspected of fraud across New York City. The directive comes amid mounting scrutiny of the program’s costs and oversight, after New York state auditors identified $285 million in questionable payments.
Hochul announced the directive on October 20, instructing state officials to examine “all options to eliminate continued fraud, waste and abuse.” She gave the department until December 31 to recommend whether New York should phase out the benefit and transition participants to other services for older residents.
The program provides non-medical daytime supervision, meals, social activities, and personal care in communal settings. According to Hochul, more than 400 providers serve approximately 45,000 Medicaid beneficiaries at an estimated annual cost exceeding $500 million. The federal Centers for Medicare & Medicaid Services (CMS) approves the benefit and helps fund it.
The announcement coincided with the coordinated state and federal crackdown on adult day care providers in New York City. The state Department of Health, the Office of the Medicaid Inspector General, and the state attorney general’s Medicaid Fraud Control Unit joined the Federal Bureau of Investigation (FBI) and the U.S. Department of Health and Human Services Office of Inspector General to investigate suspected fraud.
CMS Administrator Dr. Mehmet Oz called the operation the largest enforcement action of its kind. According to Hochul, investigators are examining allegations of money laundering, kickbacks, and improper billing.
“We will find you, we will prosecute you, and we will hold you accountable,” Hochul said.
Hochul said she traveled to Washington to meet with Oz and coordinate state and federal efforts to combat Medicaid fraud.
The governor also ordered new safeguards. She directed the state Department of Health and the Office of the Medicaid Inspector General to require managed care plans to review social adult day care claims before paying them and to pursue payment suspensions when warranted. The department imposed a moratorium on new providers in July and plans to maintain the restriction through January 2027, with the option to extend it.
New York State Health Commissioner Dr. James McDonald said his department would advise Hochul on whether tighter oversight could address the program’s problems or whether alternative services would better serve beneficiaries.
“Medicaid is a lifeline for millions of New Yorkers,” Hochul said in a statement. “Protecting that lifeline means defending access to care and defending the integrity of the programs that provide it.”
A February review by New York State Comptroller Thomas DiNapoli found that managed care plans paid $2.4 billion for adult day care services between January 2019 and October 2024. Payments increased more than 141% from 2021 through 2023.
Auditors identified $285 million in questionable payments to centers for services they billed after at least one managed care plan had removed them from its network. The payments included more than $28.6 million to centers that health plans had terminated for cause, including suspected fraud.
In one case, a health plan dropped a center in 2021 over fraud, waste, and abuse, but 18 other plans continued to include it in their networks. Those plans subsequently paid the center more than $12.9 million. Auditors also found that a Flushing center with a legal capacity of 323 people submitted claims for 530 participants on a single day in September 2022.
The state Health Department challenged the review’s methodology, arguing that the comptroller’s sampling could overstate the extent of the problems. The comptroller’s office rejected that argument and called the department’s characterization misleading.
Earlier this year, two people in Brooklyn pleaded guilty to a $68 million adult day care fraud scheme, according to the governor’s office.
The department’s review will determine whether New York can preserve the benefit through stronger oversight or should eliminate it and redirect beneficiaries to other services. Hochul’s announcement did not identify potential alternatives or clarify whether New York would need additional federal approval to eliminate the benefits.
At the same October 20 press conference, Hochul announced 16 arrests in a separate investigation conducted jointly by the New York State Police and the state Department of Financial Services.
Investigators linked the cases to nearly $500,000 in attempted fraudulent auto insurance claims in New York City and Suffolk, Onondaga, Monroe, and Erie counties.
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Hochul highlighted New York’s high auto insurance costs, saying residents pay approximately $4,000 annually, nearly $1,500 more than the national average. She said the arrests and insurance reforms included in this year’s state budget should help lower premiums.
The incumbent Democratic Gov. Hochul faces Republican Nassau County Executive Bruce Blakeman in New York’s November 3 gubernatorial election.