US Justice Department accuses New York state of letting fraud flourish in Medicaid program

NEW YORK (AP) — The U.S. Justice Department accused New York state officials Tuesday of facilitating fraud, saying they let a Georgia company use a sham bidding process to gain control of and then abuse a $10 billion program to provide home care to disabled Medicaid patients.

Federal lawyers made the claims in a civil lawsuit in Brooklyn federal court, naming the state’s Department of Health, its Medicaid director and the Alpharetta, Georgia-based company Public Partnerships LLC, as defendants.

In the lawsuit, the federal government asked a judge to order the end to any wrongdoing and to appoint a receiver to run the company.

The lawsuit came two months after President Donald Trump's administration acknowledged it made a significant error in facts to help justify its fraud probe into New York’s Medicaid program, undercutting a federal campaign to tackle waste, mostly in Democratic-led states.

In a statement, Public Partnerships said: “We strongly disagree with the characterizations in the complaint and will respond fully through the appropriate legal process.”

The company added that it was selected “through a transparent, competitive process to strengthen and modernize” New York's program and to serve more than 250,000 New Yorkers who rely on home care and the hundreds of thousands of caregivers who provide the care.

“That mission drives every decision we make and remains our focus today,” it said. “We are proud of what we have achieved with the State of New York and stand by our performance.”

In a statement, the New York Department of Health said the lawsuit was “baseless ... inexcusable and completely lacking in merit.” It said the claims were “the latest attempt by Washington Republicans to score political points at the expense of vulnerable New Yorkers.”

The Department of Health also said the courts have confirmed that the process of hiring Public Partnerships “was accomplished through a fair and legally sound competitive bidding process.”

It added: “We look forward to the day where these disingenuous attacks can stop and our partners in Washington can look to New York as a model for how to improve to control costs and root out abuses while preserving and improving quality of care.”

The lawsuit claimed that Public Partnerships has cheated taxpayers by generating millions of dollars in illegal profits through its operation of the program after it was awarded the contract in late 2024.

Portraying New York state and the company as partners in a fraud on the public, the lawsuit said that the company and New York officials repeatedly misrepresented when the company's contract would begin, causing severe disruptions to patient care statewide.

It said Public Partnerships and New York state had ignored limits on what the company was entitled to pocket in profits, spoiling a plan to save hundreds of millions of dollars.

In a release, the Justice Department said the “self-dealing” company took advantage of lax oversight by the state to raid the program of millions of dollars by billing at excessive hourly rates.

“New York’s backroom deal with PPL has cost taxpayers millions of dollars and cast countless Medicaid patients to the curb,” said Assistant Attorney General Colin M. McDonald for the Justice Department’s National Fraud Enforcement Division.