Billing the Dead and Seniors Overseas, Feds Tear Into New York’s $500 Million Adult Day Care Program

New York has until late November to tell Washington how a Medicaid benefit meant to give frail seniors a hot lunch and some company grew into the country’s most costly adult day care market.The federal Centers for Medicare and Medicaid Services sent the state’s Medicaid director a letter on October 21 demanding a corrective action plan within 30 days. It arrived a day after agents from the FBI, Homeland Security Investigations, the IRS and the NYPD carried boxes out of centers at Brooklyn, Queens, Staten Island and Manhattan.More than 100 providers are suspected of improper billing, kickbacks and money laundering. The CMS administrator, Mehmet Oz, called the sweep the largest enforcement action of its kind and said the program, as it stands, is a plague on the state.Social adult day care, added to Medicaid in 2013, is not a medical benefit. It pays community centers for daytime supervision, meals, activities and personal care for functionally impaired adults. More than 400 programs serve about 45,000 Medicaid enrollees at an estimated cost of more than $500 million a year, according to the governor’s office.The trouble starts with whoever picks up the check.“Bad incentives drive wasteful spending and lax program integrity,” the president of the Paragon Health Institute, a health policy research group that pushes market-based reforms to government programs such as Medicaid, Brian Blasé, tells The New York Sun. “Medicaid’s financing structure creates incentives for states to expand spending because the federal government picks up most of the tab.”Under Medicaid’s matching formula, Washington pays half of New York’s bill for most services, so every dollar Albany spends brings in a federal dollar. Inside the program, managed long-term care plans collect a premium from the state for each senior they enroll, and day care centers bill for every day a senior signs in. The more names on the rolls, the more everyone in the chain collects, and few along the way have much reason to ask whether a given senior really needs the care or even shows up.That raises the question hanging over last week’s raids: How did a program built for New Yorkers too frail to get through the day by themselves end up paying for people who were dead, out of the country or nowhere near the centers that were billing for them?Kickbacks, Phantom Attendance and Clients AbroadIn the first criminal case from last week’s operation, Staten Island prosecutors charged the owner and the program director of Staten Island Adult Day Care Center, Yangsim Oum and Juyoung Choe, with billing Medicaid for clients who were dead or never attended.The 457-count indictment, dubbed Operation Golden Grift, alleges more than $530,000 in fraud over about four months. Both women have pleaded not guilty.The federal cases out of Brooklyn, however, dwarf that figure.On October 2, Ahsan Ijaz, 29, pleaded guilty in a scheme that cost New York Medicaid about $65 million. His two Brooklyn centers paid recipients cash to enroll, then billed for services never delivered, including on days that enrollees were not even in the United States, prosecutors said. His co-owner, Zakia Khan, was sentenced in September to 76 months in prison.At Queens, federal prosecutors in February charged two men in a $120 million scheme that allegedly paid seniors to sign up. The CMS deputy administrator, Kim Brandt, said a Flushing operator told federal officials that a nearby center was paying up to $1,000 a head to recruit seniors.According to prosecutors, the recruiting was hardly subtle. In the Queens case, the defendants allegedly handed elderly enrollees cash and supermarket gift certificates, and one text cited in the complaint directed a co-conspirator to pay $10,000 to Korean members first.At Brooklyn, Ms. Khan’s operation paid marketers to steer Medicaid recipients to her centers, and those marketers in turn paid the seniors. Federal investigators caught Ms. Khan on an undercover recording handing over kickbacks inside her office.None of this is new. In 2013, the year the benefit launched, state officials suspended enrollment in New York’s largest managed long-term care plan amid reports that centers were steering in seniors who did not need help.“The state took some steps to crack down on what was happening, and a decade later we’re having the same problem,” a senior fellow at the Manhattan Institute, Bill Hammond, tells the Sun.The earlier scandal followed a similar script. Managed long-term care plans were barred from marketing themselves, Mr. Hammond explains, yet day care operators were not, so the two worked in tandem.“The day care center would identify somebody interested in signing up. They would help that person get onto Medicaid and encourage them to sign up for a particular long-term care plan. And everybody would benefit,” he explains.The benefit was meant for people so disabled they could barely leave home. Instead, he recalls, “the Times found people riding up on bicycles, picking up a lunch at the center and riding away.”A Benefit That Grew Faster Than Its WatchdogsThe centers are not directly enrolled Medicaid providers. New York’s 35 managed long-term care plans contract with them, pay them and police them, leaving the state Health Department a step removed.“Everyone was responding to the financial incentives of the system,” Mr. Hammond continues, explaining that plans earn more on seniors who need relatively little care. “So, if you can recruit a lot of low-acuity patients, your managed long-term care plan is going to make money.”A senior who needs round-the-clock help or a nursing home bed is expensive to cover. One whose doctor signs off on a few hours of help a day costs far less, and the gap between what a plan is paid and what it spends is where the profit sits.A later policy change widened that gap, according to Mr. Hammond. Once an enrollee spends more than about six weeks in a nursing home, the state takes over the bill directly, which leaves the plans with little stake in keeping anyone out of one.“Now the long-term care plans are no longer in the business of keeping people out of nursing homes, because they don’t pay for the nursing home,” he says. “They’re just an intermediary taking money from the health department and handing it to a bunch of home care providers, day care providers and other services.”A February audit by Comptroller Thomas DiNapoli found those plans paid about $2.4 billion for the services from January 2019 through October 2024. Auditors flagged $285 million paid to centers after at least one plan had dropped them, and one provider billed for 530 people on a single day, 207 more than it was allowed to serve.The growth was sharpest at Flushing, where a July analysis counted 64 Medicaid-funded centers within a single mile. Between 2018 and 2024, the neighborhood’s Medicaid-eligible senior population grew about 20 percent while the number of seniors covered for adult day care jumped 390 percent.Mr. Oz showed up unannounced at two Flushing centers, Kent Senior Care and Evergreen Adult Day Care, on October 20. At Evergreen, he counted roughly 25 people in a space the manager said served about 200 seniors on some days. The sign-in sheets there already had names entered for October 22 and 23.At Kent, a federal official said the bills included wheelchair transport, though no one inside was using a wheelchair. Mr. Oz later said a wheelchair couldn’t even get through the door because of stairs. Staff at both centers pushed back. They said more seniors were on the way, or were in classes or out running errands.So who cashed in? Nearly everyone in the chain, according to Mr. Hammond.“The managed long-term care plan would collect a premium from the state, the day care center would collect a fee for offering the service, and the client wouldn’t necessarily be all that disabled, or wouldn’t actually go to the day care center,” he says.Court records show where much of the money ended up. Prosecutors allege that Medicaid paid the Queens daycares owned by one of the men charged in February, Inwoo Kim, about $62 million, while Medicare paid his pharmacy roughly $58 million, according to the complaint.Ms. Khan was ordered to repay more than $56 million and to forfeit $5 million, including cash, two properties and gold jewelry seized from her home. Marketers collected referral fees, while the seniors at the bottom of the chain walked away with cash or grocery gift certificates.Washington Starts the Clock on AlbanyFederal pressure had been building for months. The FBI has said New York spends 40 to 60 percent more per Medicaid enrollee than the national average.Governor Kathy Hochul, who met Mr. Oz before the raids, has ordered the plans to review day care claims before paying them and to suspend payments where warranted. A moratorium on new providers runs through January 2027. She has also told the Health Department to weigh every option, including phasing out the benefit, with recommendations due by December 31.“I thought that was a really remarkable statement, because that hardly ever happens in New York,” Mr. Hammond says of the shutdown option.The state counters that its Health Department reviewed 418 programs in 2025, and the Medicaid inspector general investigated 387 subjects tied to adult day care between 2021 and 2025, referring about 100 for possible prosecution.“So out of 418 programs, they had 100 potential crimes,” Mr. Hammond notes.The inspector general’s annual reports gave the issue little attention until September, he stresses.“They’re scrambling to document their efforts in this area because of the pressure they’re feeling from the federal government,” Mr. Hammond surmises.Others say the cleanup has come too late to save the program. Mr. Blasé would end the benefit and keep Medicaid dollars for medical care.“New York should end Medicaid funding for social adult day care to focus on funding medical care, not nonmedical services,” he says, arguing that services this hard to verify invite abuse.“If taxpayers did not fund this, there would not be fraud,” he says, underscoring that seniors need not be left stranded. “Senior centers operate across the country without Medicaid funding, and New York can continue supporting these services with state or local resources, with an accountable oversight structure.”In other words, the hot lunches and mahjong tables could stay, as long as Medicaid stops paying for them.Most providers under review have not been charged, and the FBI has said there is no sign the seniors attending these centers knew of any fraud. For tens of thousands of them, the decision due by year’s end will settle whether their center stays open.“There are definitely people out there who cannot survive without their Medicaid-funded services,” Mr. Hammond continues.Plans make more money on the less disabled, he reiterates, and so “everybody takes their eye off the ball, which is the most important group: the most disabled people.”Whatever Albany decides, those seniors stand to lose the most. Mr. Hammond says the program was meant for a relatively small group who truly can’t get by on their own. Over time, the rolls filled with people who needed less care and cost the plans less to serve. “It diverts resources, it diverts personnel, it diverts attention,” he says.For the frailest, the stakes could not be more basic.“They need help getting out of bed, getting to the bathroom, getting food, very basic things,” Mr. Hammond says.

Billing the Dead and Seniors Overseas, Feds Tear Into New York’s $500 Million Adult Day Care Program

Billing the Dead and Seniors Overseas, Feds Tear Into New York’s $500 Million Adult Day Care Program

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