‘people Shouldn’t See How The Sausage Is Made’: Inside New York’s Troubled Medicaid Home Care Transition

ALBANY, New York — A scathing Justice Department lawsuit over Gov. Kathy Hochul’s consolidation of a popular Medicaid home care program paints the picture of a transition so troubled that workers inside and outside of state government repeatedly sounded the alarm — seemingly to no avail.

The DOJ’s 57-page civil lawsuit draws from internal documents and email correspondence between state officials and employees of the financial services company Public Partnerships LLC, which Hochul’s administration tapped in September 2024 to take over the consumer-directed personal assistance program, or CDPAP, which covers in-home caregiving for more than 200,000 elderly and disabled New Yorkers.

The lawsuit accuses PPL, state Health Commissioner James McDonald and Medicaid Director Amir Bassiri of making false or misleading statements about the CDPAP procurement and transition processes.

A Department of Health spokesperson said the complaint is “baseless,” while a spokesperson for PPL said there was no nefarious activity involved in the procurement process.

Vice President JD Vance doubled down on the allegations at an event on Long Island on Wednesday, calling PPL “fraudsters.”

“Here’s what the state Medicaid director in New York did: [He] facilitated fraud by using a sham bidding process,” said Vance, who has been charged with leading the White House’s efforts to combat fraud. “This person was actually inviting fraudulent bidders to come in and take advantage of your tax dollars so that he could send it to fraudsters instead of you. That’s disgraceful.”

The DOJ alleges PPL misled the state about its financial situation, its cost projections and its technology to win the $1 billion, five-year contract to administer the Medicaid program, according to the complaint filed Tuesday.

The private equity-backed firm bested over 100 competing bidders by pitching monthly administrative costs of $68.50 per CDPAP participant, which was hundreds of millions of dollars cheaper than other proposals.

As they prepared their bid, however, PPL executives internally discussed a plan to earn revenue beyond that administrative fee by pocketing as much as 35 percent of the spread between in-home caregivers’ hourly compensation and the rates that the company billed to Medicaid managed care plans, according to the DOJ’s complaint.

“I think this hourly rate game is going to become our hobby,” a PPL employee wrote in a July 2024 email described in the DOJ’s complaint.

PPL’s bid also described a platform called PPL@Home to maintain personnel records, but the system did not even exist at the time, the complaint alleges.

“[P]lease DO NOT EMPHASIZE its [sic] a brand new system… concerns on the optics of launching a brand new system for this program,” a PPL executive acknowledged internally, according to the DOJ's complaint.

After PPL won the contract in September 2024, the company told the state it needed “large, upfront payments” to begin the transition, even though its proposal said it had a “financial capital structure plan that supports the startup costs needed for this contract,” according to a copy obtained by POLITICO through a freedom-of-information request. An October 2024 presentation to PPL’s board, also cited in the complaint, showed expected end-of-year reserves of just $8.4 million.

The state advanced $40.5 million to the company in January 2025, contrary to contract language stipulating that initial transition costs would be paid monthly based on the number of consumers shifted to PPL’s system, DOJ’s complaint states.

In multiple internal exchanges described in the complaint, Department of Health employees raised concerns about PPL’s actions: Bassiri, the Medicaid director, called the company’s behavior “opportunistic” and predicted it would “backfire” on the state to allow PPL to bill the state for costs unrelated to direct care.

The concerns only mounted once PPL kicked off CDPAP’s transition in January 2025. PPL had just three months to shift more than 200,000 CDPAP participants and their paid caregivers to its system, even though Health Department and PPL employees alike expressed concerns internally about the short timeline, the DOJ alleges.

The Hochul administration, however, was not “entertaining options” to extend the April 1, 2025 deadline and directed the Department of Health not to disclose data on how many CDPAP consumers had finished registering with PPL, according to the complaint.

Further obscuring the transition’s issues, PPL tallied CDPAP consumers who had not even started the registration process as “in progress” and denied long wait times for people calling for help, even though the company’s internal data showed an average wait of 62 minutes, the complaint alleges.

“Sometimes I think that people shouldn’t see how the sausage is made,” a PPL staffer said of the call center issues, according to the complaint.

The CDPAP transition was enacted as part of a state budget deal in April 2024, aimed at cutting Medicaid costs by consolidating administrative operations then handled by more than 600 fiscal intermediaries under the purview of a single company.

The enacted budget required the state to release a request for proposals to administer the program, but state senators later discovered draft language that would have awarded a no-bid contract to PPL.

State officials were discussing PPL as the program’s sole administrator as early as March 2024 and met with the company the following month, before the budget deal was done, according to the DOJ's complaint.

The Hochul administration claims the transition to PPL saved the state and federal governments twice as much money as expected, at more than $2 billion in annual Medicaid spending. State lawmakers question the figures and say they have yet to receive details on the savings.

Disability advocates who fought against the transition view the lawsuit as vindication of their complaints that the rocky process would knock older, disabled New Yorkers out of the program.

“We urge all involved to take immediate action to safely and responsibly remove PPL while ensuring that those consumers and workers left in the program do not see even more disruption and harm,” Bruce Darling, CEO of the Regional Center for Independent Living, said in a statement.

And Republicans have seized the moment to bash Hochul’s leadership as she runs for reelection.

“This is a damning indictment of the cronyism and incompetence that have defined Governor Kathy Hochul’s leadership in Albany,” Rep. Mike Lawler said in a statement Tuesday. “New York cannot continue under leadership that refuses to take responsibility for a scandal this egregious.”