By the tip of 2020, Kentucky’s newly elected Gov. Andy Beshear had one objective above all others: Hold individuals alive. The state was battling two cruel threats. COVID-19 was killing a whole bunch of individuals every month, and lethal drug overdoses have been among the many highest within the nation. Calling dependancy a illness that breeds in isolation, Beshear anxious individuals would cease looking for therapy for concern of contracting COVID-19.
So Beshear got down to make drug therapy simpler to entry. Kentucky joined greater than 40 different states in lifting some restrictions on Medicaid, which served a lot of the Kentuckians enrolled in substance abuse packages: Restoration facilities have been allowed to supply costly therapy to purchasers with out looking for approval from state Medicaid insurers.
By 2023, because the pandemic waned, different states restored Medicaid necessities that therapy facilities acquire prior approval earlier than offering dependancy therapy. Kentucky stayed the course. That yr, suppliers supplied greater than 1,100 spots for individuals looking for long-term therapy that enables them to stay in a facility, a state document and extra slots per capita than every other state.
However because the Medicaid payments for all that therapy began piling up, so did the warnings.
In 2024 letters to Beshear’s administration and in at the very least three public conferences, specialists throughout the well being trade stated that on account of the 2020 modifications, drug therapy suppliers have been billing an excessive amount of for subpar care that was resulting in worse outcomes. By December 2025, the Kentucky legal professional basic’s workplace stated Medicaid fraud in drug therapy had turn into a main “space of concern.”
Regardless of the warnings, the Beshear administration did little to rein within the skyrocketing state spending.
Virtually all these warnings got here true.
In a February 2025 assembly about hovering Medicaid prices, Kentucky Medicaid Commissioner Lisa Lee stated the earlier yr’s spending on behavioral well being and dependancy therapy had reached an unprecedented $2.3 billion. Stuart Owen, who works for a Kentucky Medicaid insurer, informed a state advisory committee months earlier that a lot of that spending was pushed by the drug therapy trade, together with “unscrupulous suppliers who’re exploiting the heck out of that for cash.”
The payout was particularly profitable for one firm, Habit Restoration Care. ARC was Kentucky’s largest drug therapy supplier and the most important recipient of state funds between 2019 and 2025. This spring, the Lexington Herald-Chief, in partnership with ProPublica, reported on how ARC exploited Kentucky’s loosened spending controls and should have falsified billing.
Beshear has been unapologetic about state spending on drug therapy. In an interview in early June with ProPublica and the Lexington Herald-Chief, he pointed to the continued decline in drug overdose deaths as proof that he made the appropriate alternative when he didn’t drive therapy facilities to point out that pricey drug restoration companies have been medically crucial earlier than treating individuals for dependancy.
“If we’d gone again in time too early and adjusted issues too drastically, what number of extra individuals would have died that we’ve saved? With 4 straight years of drug overdose decreases, they will throw blame at me,” Beshear stated. “We’ll speak about {dollars}, however there are individuals’s youngsters which might be nonetheless alive immediately as a result of they have been in a position to get dependancy therapy companies and get them rapidly.”
Whereas Kentucky’s overdose deaths declined considerably between 2020 and 2025, specialists stated the drop was not distinctive. Different states hit onerous by the opioid epidemic additionally noticed year-over-year decreases in deadly overdoses, together with states that didn’t loosen Medicaid billing guidelines, like Tennessee and West Virginia.
Tutorial research principally agree that the drop within the loss of life price across the nation had extra to do with declining opioid prescriptions, a rise in the usage of the drug naloxone to reverse overdoses, and much less fentanyl within the drug provide. Medicaid and behavioral well being specialists in Kentucky have stated in state hearings that a few of the companies drug therapy corporations billed essentially the most for weren’t straight related to a decline in overdose deaths.
Nonetheless, Kentucky’s insurance policies allowed ARC and different corporations to invoice increasingly more for companies like peer help teams slightly than these led by a licensed physician or therapist. At one time ARC handled about one-third of the Kentuckians looking for drug therapy within the state; greater than half of the companies it billed for have been the identical lower-level companies that Medicaid specialists warned have been being abused, based on state knowledge.
The FBI has been investigating ARC for 2 years, and extra not too long ago, the corporate’s troubles have intensified. This week the Division of Justice introduced it had reached a $16 million settlement with ARC over Medicaid fraud allegations. The corporate directed workers to falsely invoice Medicaid for companies like peer help, based on the allegations, which stem from a 2023 whistleblower lawsuit filed by three former ARC workers.
The settlement resolved the allegations, the Division of Justice stated, and there was no willpower of legal responsibility. In one other investigation, the DOJ final month indicted ARC’s chief, Tim Robinson, for wire fraud and cash laundering for a separate alleged scheme to defraud a number of lenders. He has pleaded not responsible to these prices.
The corporate stated in April it “has by no means knowingly or fraudulently billed Medicaid for companies, and there’s no proof that the group inspired workers to falsify group notes for billing functions.”
ARC has over the past two years been pressured to shut most of its services, leading to a 56% lower in long-term residential therapy beds statewide, based on the newest knowledge out there.
By 2025, Republicans had seen sufficient and handed a invoice requiring therapy facilities to hunt approval from insurers earlier than offering therapy companies. Beshear vetoed the invoice, saying it “will put up limitations to and delay healthcare for Kentuckians.” Republicans overrode the veto, citing waste, fraud and abuse.
A Raft of Warnings
At public conferences and in letters all through 2023 and 2024, Medicaid insurers and actuaries warned that Beshear’s choice to not reinstate the spending guardrails sooner had allowed billing abuse by drug therapy suppliers to proliferate.
A few of these Medicaid insurers despatched warning letters to suppliers, some who have been suspected of overbilling, on how you can appropriately invoice. A minimum of one additionally tried to restrict extreme billing by setting its personal tips for companies deemed “intensive, excessive value and/or have the potential for overutilization,” based on a memo from Passport by Molina Healthcare, considered one of Kentucky’s Medicaid insurers, referring to see help companies. Peer help is much like a 12-step program.
In August 2024, the Kentucky Affiliation of Well being Plans, which represents the state’s Medicaid insurers, despatched a letter telling the state Cupboard for Well being and Household Companies that weak oversight had allowed “pointless” spending on therapy and that the companies therapy facilities have been billing essentially the most for weren’t main to raised well being outcomes for sufferers.
The letter warned that dependancy therapy suppliers have been overbilling for companies that weren’t primarily based on proof or offered by a licensed physician or therapist.
A part of the answer, the affiliation stated in subsequent public hearings, was to reinstate the spending guardrails, referred to as prior authorization, that Beshear had eliminated in the course of the pandemic. The prior authorization course of is meant to stop suppliers from billing fraudulently or excessively for medically pointless companies by forcing suppliers to get permission from insurance coverage corporations earlier than administering care.
Tom Stephens, president of the group representing Kentucky’s 5 Medicaid insurers and the letter’s creator, stated in an interview that it was not the primary time Medicaid insurers had shared considerations with the Beshear administration; it was “merely one instance of considerations that had been raised over time.”
Requested about this letter, Beshear spokesperson Scottie Ellis wrote that the governor “monitored the considerations expressed publicly and people shared together with his administration” and that the state well being company labored with Medicaid insurers to deal with them. Ellis declined to reply follow-up questions on what particular measures the administration took throughout that point.
Extra warnings adopted. The following month, Somerset Mayor Alan Keck additionally wrote to the Beshear administration asking it to reinstate Medicaid spending controls.
Keck, whose rural southeastern Kentucky county was hit onerous by opioids, informed the state well being secretary that therapy facilities throughout his area have been recruiting sufferers from out of state and utilizing firm addresses to determine residency for them so as to invoice Kentucky Medicaid. He additionally stated some corporations have been fraudulently billing Medicaid by misrepresenting the companies they offered.
“Our communities are seeing an inflow of sober residing services which might be benefiting from Kentucky’s Medicaid system and the lax necessities that linger from the Covid-19 pandemic,” Keck wrote to then-health Secretary Eric Friedlander.
Keck, who misplaced a Republican main for governor in 2023, stated not too long ago that Friedlander by no means responded to his letter. He believes Beshear’s administration ought to’ve executed extra to rein within the drug therapy trade’s “explosive development.”
Beshear’s spokesperson didn’t tackle questions on whether or not the administration responded to Keck.
In November and December 2024, officers from Anthem and WellCare, two Medicaid insurers, strengthened their considerations in conferences with legislators and Medicaid officers.
We’re taking a more in-depth take a look at how ARC handled the individuals who got here to the group looking for assist with their sobriety. In case you’re a present or former shopper or worker, we wish to hear from you.
The state’s personal knowledge from that interval helps the insurers’ declare that the state was paying closely for companies that required little or no time from licensed docs and therapists: Kentucky behavioral well being suppliers have been paid greater than $147 million for peer help companies in 2023 and 2024, Lee, the state Medicaid commissioner, informed lawmakers in February 2025. Throughout that point, Medicaid funds for psychoeducation jumped from $40.4 million to greater than $168 million.
Psychoeducation is often part of common appointment when a clinician explains a analysis and therapy plan to a affected person. A lot of the cash spent in Kentucky on psychoeducation went to ARC. Medicaid insurers warned Kentucky was one of many solely states that allowed this service to be billed for individually, and suppliers have been abusing it.
On the coronary heart of all of this was the suspension of prior authorization, which had served as the one test on the overuse and overbilling for low-quality care. With out it, Kentucky’s therapy panorama grew to become a Medicaid free-for-all, stated Shelby Steuart, a professor who research well being coverage on the College of Maryland.
“It simply grew to become a chance for individuals to generate income,” she stated.
When requested about these warnings and the explanations Beshear didn’t reinstate Medicaid spending guardrails sooner, the governor’s workplace stated his choice “helped save lives.”
Ellis, the spokesperson for Beshear, stated in an e mail that amid the general public warnings, the Cupboard for Well being and Household Companies, the state’s well being company, met with Kentucky’s Medicaid insurers “to debate considerations” in regards to the spike in spending on drug therapy.
She stated that the administration despatched a letter in November 2024 to make clear when and how you can invoice for sure companies Medicaid insurers had flagged, which resulted in a greater than $100 million decline in billing from 2025 to 2026. However, because the legal professional basic’s Workplace of Medicaid Fraud and Abuse Management informed lawmakers in December 2025, billing elevated by $40 million for different companies that specialists warned have been being abused.
Ellis stated the insurance policies ought to be measured by lives saved. “Ultimately, actions taken by Gov. Beshear and his administration have decreased overdose deaths for 4 straight years,” she stated.
“Willfully Ignorant, Derelict in Their Duties”
In 2024, ARC disclosed what it known as billing errors that resulted in overpayments from the state, based on emails obtained via Kentucky’s open information legal guidelines.
About that point, Kentucky’s Medicaid insurers started to lift questions on extreme billing and began to sever contracts with the corporate. ARC turned to the state’s well being company for assist, asking the well being secretary to delay reinstating spending controls and to enact a system that might drive Medicaid insurers to proceed working with ARC.
“Time is of the essence,” ARC founder Robinson wrote in a September 2024 e mail to Friedlander.
Beshear’s administration balked at forcing insurers to work with the corporate, however in the end declined to reinstate tighter spending controls. That yr ARC was paid a document $103 million by Kentucky Medicaid, principally for companies Medicaid insurers warned have been being abused.
In a June interview, Beshear defended that call and denied that his 2020 order led to an increase in Medicaid fraud or abuse.
Beshear stated that by the point Kentucky’s Republican-controlled legislature reinstated spending controls in July 2025, he was within the means of coordinating with the state’s well being company to enact some spending guardrails, however acknowledged that “admittedly, the Cupboard was most likely taking too lengthy,” he stated.
Republicans have accused Beshear of mismanaging the state’s Medicaid program. Through the 2025 legislative session, they revoked the governor’s energy to make modifications to Kentucky Medicaid with out their permission. Beshear vetoed that invoice, which included a provision to reinstate tighter spending controls, however the legislature overrode his veto.
Republican Sen. Chris McDaniel, who championed the invoice, stated in March 2025 that Beshear’s administration “needed to be considered one of three issues: willfully ignorant, derelict of their duties, or complicit. It was simply an excessive amount of cash in a single area for them to not have recognized higher.”
Beshear in June stated he’ll take the hit; on the finish of the day, he stated, the tide of dependancy in Kentucky has receded, and it was value it.
“If we proceed at this tempo, there’s an opportunity we finish an epidemic that began in our lifetime,” Beshear stated. “Opening up companies via Medicaid on the whole to extra individuals has been considered one of, if not the, most essential issues we’ve executed to get individuals again on observe.”
