Medicaid fraud propels a host of abuses in Philadelphia | Addiction Professional Magazine Skip to content Skip to navigation

Medicaid fraud propels a host of abuses in Philadelphia

July 6, 2017
by David Sheridan
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The opposite of addiction is connection. Perhaps the only thing worse than being a person with an active substance use disorder is being someone who exploits those who are disadvantaged, disabled or disenfranchised. A June 1 article in the Philadelphia Inquirer reveals yet another such network of addiction treatment providers and boarding house operators.

The process, known as “pimping out,” is fueled by Medicaid dollars. Housing operators send their boarders to cooperative outpatient treatment programs that bill Medicaid for treatment services, and the centers then funnel some of the reimbursements to the housing operators. The system is organized to the point that it even includes van rides for the residents to and from the treatment centers participating in the scheme. One longtime program manager calls it a “pay-to-play system of kickbacks” in which individuals are trapped in systems that provide neither practice-based evidence of effective addiction treatment and recovery support nor the equally essential safe, recovery-supportive housing.

The Pennsylvania Alliance of Recovery Residences (PARR), and similar affiliates of the National Alliance for Recovery Residences (NARR), offer solutions that build sustainable networks of recovery-oriented systems of care. We know that these conditions need not exist, and that alternatives will deliver superior outcomes without the human cost associated with systems such as the one described in the Inquirer article.

Robert Fairbanks, the author of How It Works, an in-depth look at housing, programs and neighborhoods highlighted in the Inquirer article, is cited in the article: “Ultimately, it's difficult to blame many of the people involved in pimping out. Kickbacks … are strategies developed by people stuck in hard place, trying to survive.” Fairbanks thinks of the treatment center/recovery house matrix as a “meat market and a messy poverty management system in one.”

The system is not new. Fairbanks' book was published in 2009, and before then the described abuses were known to elements of the criminal justice system, social services agencies, and city government.

Pattern repeated elsewhere

This storyline is disturbingly similar to others, including a recent one about New York City that was covered by The New York Times in May 2015. As in Philadelphia, the scheme's financing was provided by Medicaid-funded addiction treatment providers. NARR responded at the time that such schemes are a predictable result of a large population of Medicaid-dependent individuals with substance use and/or other disorders, acute demand that exceeds the availability of habitable low-cost housing, lax oversight and enforcement of funder rules and housing standards, and a failure to promote legitimate recovery housing options.

Importantly, these systems cannot persist without their tacit acceptance by many influential people in private and governmental agencies. Margaret Heffernan, in Willful Blindness: Why We Ignore the Obvious at Our Peril, acknowledges that we turn a blind eye to feel safe, to avoid conflict, to reduce anxiety, and to protect prestige. She goes on to say, however, that greater understanding leads to solutions, and it begins with challenging our biases, encouraging debate, discouraging conformity, and not backing away from difficult or complicated problems.

These kinds of abuses are not limited to Medicaid. Similar questionable and unethical practices in the private insurance market have been the subject of federal indictments of treatment providers and housing operators. In addition to illegal diversion of insurance funds, allegations surrounding these arrangements include “body brokering” of insured clients to treatment centers willing to pay big money for the referrals.

As in New York City, Philadelphia officials know that the “pimping out” system is thriving. Although some officials minimize its scope, the system could include as many as 4,000 individuals in 200 different “recovery houses.” Many defend this system as the only way to house and treat people in recovery who have few or no resources. No one claims this is a good way to deliver care—it's certainly not a point of pride for city officials. Such a system may be better than living on the street, but it cannot provide either effective treatment or decent housing that supports recovery. Instead, it creates the opposite: sustained dependency and disenfranchisement.

Recovery is difficult, and the populations targeted by these schemes face especially tough challenges in overcoming barriers to health and well-being. Medicaid reimbursements are usually insufficient relative to the actual costs of delivering covered services, and provide no surplus enabling providers to pay for referrals (even if it were legal to do so). It's not surprising that operators paying or receiving kickbacks provide inferior care. For example, the Inquirer article notes that group sessions can be quite large—as many as 60 individuals. That's four times the number allowed by many states, including California, which limits Medicaid reimbursements for group therapy to no more than 15 per group.

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