“This Kind of Fraud Has Been Happening for Decades in California”

California’s welfare machine is bleeding billions a year. And, as we recently reported, few programs are more troubled than the state’s $30 billion, Medi-Cal backed In-Home Supportive Services Program.

IHSS has become one of the nation’s largest fraud magnets, losing as much as $12 billion to scam artists every year. The program sounds compassionate: pay people to care for their disabled and elderly family members at home, rather than warehousing them in facilities. But the system’s design created perverse incentives that all but guarantee corruption.

A growing cadre of whistleblowers has confirmed what the numbers suggest: IHSS is not merely plagued by accidental waste but has become a way for criminals to get rich quick.

The latest of these is a former California law-enforcement official who has worked on Medi-Cal fraud cases. Our source has seen IHSS fraud happen on an industrial scale: homes run by “overlords” who stuff them with sickly Californians, cut off from their families, to pocket the state’s money. 

Yet the state doesn’t care. Fraud routinely goes unpunished, as California judges downgrade felony charges and let sympathetic offenders off with community service; meantime, IHSS can’t seem to recover a single stolen dollar.

This interview, conducted on the condition of anonymity, has been edited for length, clarity, and to preserve anonymizing details.

City Journal: How widespread is IHSS and Medi-Cal fraud?

Source: It’s been around forever. This kind of fraud has been happening for decades in California. The problem is that, even when we press charges, judges just plea cases down because they consider them insignificant.

CJ: What level of fraud gets investigated or prosecuted?

Source: I wasn’t going to go after $5,000. I had to look at it and say, “Whoa, this is crazy fraud.” In my view, it’s worth a look if the probable fraud totals over $200,000. But when I tried to volley a $500,000 alleged fraud case over to the FBI, they said that wasn’t enough for them even to look.

The justice system ends up reducing fraud charges down to a misdemeanor and giving offenders community service. They never go to jail—that’s just the way California operates. As a member of law enforcement, you put your heart and soul into a case, turning every stone to prove that the suspect is a dirtbag. Then it goes to trial, and his case gets pled down, because the government sympathizes with IHSS providers.

The way the government looks at it, these people are doing God’s work. They’re doing work nobody wants to do. Nobody wants to wipe the rear ends of these old people, so why are we going to penalize the provider when he’s just trying to help?

CJ: What makes the IHSS system so vulnerable to fraud?

Source: It’s really easy to take advantage of because there’s no checks. No one is checking. The system is based on trust. They trust that you’re telling the truth. They trust that you’re doing your job. They trust that everything is on the up-and-up when you submit your timecard. Fraud is all over the place.

Social workers have caseloads of roughly 200 or 300 people, and their visits are announced. When they show up, the house is in tip-top shape. Meantime, the patients are living in subpar conditions. It’s really easy to hide the abuse.

CJ: Are there meaningful background checks for IHSS providers?

Source: It’s not really a law-enforcement background check. They just scratch the surface. (Editor’s note: California requires background checks for IHSS providers but allows those with criminal records to get exemptions for all but the most heinous crimes.)

CJ: What do large-scale fraud operations look like?

Source: There’s one person—I always call them the overlord, because there’s really no other word for it—who buys or rents 15 to 20 houses and turns them into IHSS homes. He puts up false walls and gets ten people in the garage. That’s basically the formula. One fraudster even tried to bring people in from abroad to be the caregivers.

CJ: What happens to people in these homes?

Source: Once you end up in one of these homes, they kind of take ownership of everything. Magically, the homes get access to your bank account and become your power of attorney. They hold your cellphone so your family can’t contact you. You have families reaching out, saying, “I can’t get a hold of my grandpa. Every time I go over there, they don’t open the door.”

In one case, fraudsters took advantage of a victim and sold the victim’s house, stole the victim’s money, and moved the victim into [another home], where they basically kept the victim in poor condition. The fraudsters sold the house for several times what the victim had originally paid.

CJ: What has happened to the overlords?

Source: An IHSS fraudster who went to prison kept collecting IHSS payments through a family member. When IHSS found out, the family member was removed from the program after defrauding it of a substantial sum.

That money just sits there. No one is going to chase it. The government is not going to claw it back or try to freeze assets. By the time anyone noticed, it was too late to bring a case.

CJ: Where do the worst abuses tend to occur?

Source: It’s in the unlicensed homes where real, real bad things are happening, because no one can monitor them.

CJ: What is the most common type of IHSS fraud?

Source: We call it ghost billing. Fraudsters either bill for services that weren’t provided or bill for people who are no longer in their care.

One example is false timecards. Providers bill for patients who are in the emergency room, for example, or back with their family. In one case, the provider was actually in another state and was billing while the victim was in and out of the hospital—for wounds that the provider caused.

CJ: What role do doctors play in IHSS fraud?

Source: You have doctors that travel to these homes and try to visit once a month. When you look at their billing, they’re billing 75 patients in one day—and that’s impossible. There’s no way a doctor can see 75 people in a day. You notice trends. Some doctors do auto-billing, sending out 200 or 300 bills on certain days. Doctors will also exaggerate the patient’s symptoms and say, “yes, this person needs care.”

CJ: Why isn’t fraud caught earlier?

Source: Even if a patient’s Social Security number is being simultaneously used by IHSS and a skilled nursing facility, the facility won’t be notified. Staff aren’t going to tell the patient, “Wait a minute. Somebody else is using your Social.” The databases don’t talk to one another. We can only connect the dots after the fact—seven months, eight months, a year into the fraud. That creates potential problems with the statute of limitations.

CJ: Couldn’t IHSS’s system flag something simple, like ten recipients at the same address?

Source: The IHSS database is sophisticated and would be able to do that. But they don’t have those kinds of checks in place. The only people who really know who’s in the house are the social workers, because they’re the ones going out there. But a social worker doesn’t “own” the home. Multiple social workers can be assigned to different recipients at the same house.

In a perfect world, you’d have a dataset that shows, “Okay, on Elm Street, we’ve got three IHSS homes and six people living in each home.” But it doesn’t work like that. You have to go in and look it up individually, type in the address, and go, “Oh, we’ve got ten recipients here.”

CJ: What happens after fraud is identified? Is the money recovered?

Source: My contact at IHSS explained that they send the fraudster a bill and say, “You owe us this money,” but there’s zero follow-up. They don’t garnish these individuals’ wages.

CJ: Would unannounced visits help uncover more fraud and prevent elder abuse?

Source: Yes. These assessments are scheduled, giving bad guys time to clean the house and get the recipient washed in advance.

CJ: What other changes would you recommend?

Source: The background checks seem insufficient. Disqualifying people with any felony conviction whatsoever would seem a good place to start. Under the current system, recipients might have a false sense of security that their providers aren’t criminals.