Medicaid Bid Controversy
Justice Department Sues New York Officials Over Alleged 'Sham' Medicaid Bid for Home Care Program
Key Points
The lawsuit names specific New York officials in their official capacities, including State Health Commissioner Dr. James McDonald and Medicaid Director Amin/Amir Bassiri, along with Public Partnerships LLC (PPL).
In April 2025, DOJ previously sought to pause the CDPAP overhaul: it intervened in a Brooklyn federal case after a judge issued a temporary restraining order, with DOJ’s Consumer Protection Branch warning of “significant concerns” about possible violations of health data privacy rules and whether the state had “misled” patients having trouble enrolling and getting aides paid.
The complaint alleges the state stipulated during bidding that money paid to the new administrator as “direct care” costs had to flow to caregivers and “could not be used as a cost reimbursement or profit” for PPL, a premise DOJ says was undermined by the deal as implemented.
DOJ points to internal DOH communications alleging “dozens” of other qualified bidders were systematically disqualified for “invalid or trivial reasons,” and that senior officials were personally involved in bid vetting, at times taking actions “in response to ‘pressure from the governor’s office.’”
The CDPAP transition, DOJ says, was tied to a 2024 budget deal aimed at cutting roughly $500 million in annual Medicaid spending by shifting from hundreds of administrative entities to a single company; Politico reports lawmakers later discovered draft budget language that would have awarded a no-bid contract to PPL.
The U.S. Department of Justice sued New York health officials and their chosen vendor on June 16, 2026, calling the state's $10 billion Medicaid home-care program a "fraudulent scheme" built on a rigged bidding process. Reuters reported the complaint, filed in Brooklyn federal court, names State Health Commissioner Dr. James McDonald, Medicaid Director Amir Bassiri, and Georgia-based Public Partnerships LLC (PPL) as defendants.
The lawsuit targets the Consumer Directed Personal Assistance Program, or CDPAP — a Medicaid program that lets over 250,000 disabled New Yorkers hire their own caregivers, often family members. DOJ says the state ran a "sham" bid to hand PPL a sole contract worth up to $11 billion, costing taxpayers "hundreds of millions" extra while leaving 300,000 aides unpaid, according to The Hill.
A Rigged Bid Driven by Governor's Office Pressure
The DOJ says PPL was pre-selected before the bidding even began. Internal state emails, cited in the complaint, show senior officials disqualified "dozens" of qualified bidders for "invalid or trivial reasons." Officials allegedly acted in direct response to "pressure from the governor's office," according to WKBW.
Lawmakers later found draft budget language that would have given PPL a no-bid contract before any formal request for proposals was issued. The 2024 state budget deal set the transition in motion, promising roughly $500 million in annual Medicaid savings by replacing about 600 local administrators with one single company, WKTV reported.
PPL's Billing Tactics Drained Funds Meant for Caregivers
PPL won the contract by bidding a flat fee of $68.50 per member per month. But DOJ alleges the company then billed managed care organizations at far higher hourly "direct care" rates — money that was supposed to flow only to caregivers. The complaint cites a 2024 internal PPL email in which a company leader wrote, "I think this hourly rate game is going to become our hobby," according to The Hill.
The bidding rules had explicitly stated that direct care funds "could not be used as a cost reimbursement or profit" for PPL. DOJ says the company violated that rule, generating unauthorized profits while aide pay stalled or arrived late. Thousands of caregivers reported missing paychecks around the April 1, 2025 transition deadline, triggering separate litigation against PPL, WKBW reported.
Federal Intervention Escalates From Pause Order to Full Fraud Suit
Federal involvement started smaller. In March 2025, a Brooklyn judge issued a temporary restraining order pausing parts of the CDPAP transition. DOJ's Consumer Protection Branch stepped in then, raising "significant concerns" about health data privacy violations and whether patients had been misled about enrollment, KMPH reported.
The June 2026 lawsuit goes much further. DOJ now seeks to freeze all of PPL's gross revenue under the contract and appoint a temporary receiver to stop what it calls ongoing "siphoning of funds." Assistant Attorney General Brett Shumate called the state's failure to police PPL an "egregious betrayal of public trust." The court-ordered receiver, if granted, could force a full restructuring of the program mid-year.
New York and PPL Push Back, Call Suit Politically Motivated
Governor Kathy Hochul's office, though not named as a defendant, called the lawsuit a "weaponization of the justice system" by the Trump administration during an election year. The state argues the overhaul cut out "administrative middlemen" and has saved taxpayers over $1 billion, according to Reuters.
PPL also denied the allegations, saying its transition followed all legal procedures and was upheld by state courts in 2025. The response has drawn bipartisan skepticism. Republican Rep. Mike Lawler called it a "damning indictment of cronyism," while Democratic Rep. Ritchie Torres had earlier called for federal investigations into the "rotten" procurement process, WND reported.
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