Over the nearly eight years of his term, Gov. Gavin Newsom has been too busy to engage with us on the fraud, abuse and death rife in California’s private-pay addiction treatment industry. He could have transformed it with a wave of his leadership wand — but, alas, he did not.

I longed to troll Newsom over these last days of his term from event to event to press him on why, oh why, oh why?! — but my editors were wiser. What matters now is not what Newsom didn’t do, they said, but what the people who want to replace him would do. Which is, I guess, why they make more money than me.

Anyway, we asked both Xavier Becerra and Steve Hilton to chat about how their leadership might save both money and lives on this very nonpartisan front (as addiction doesn’t care if you’re a Democrat or a Republican when it kills you). Becerra’s campaign sent a statement; a fiery Hilton called as he raced across San Francisco from campaign stop to campaign stop, pointing out landmarks to others in the car, and sketching how he’d fix things in this crazy industry where the money is in relapse, not recovery.

This is on my mind not just because I’ve spent much of the past 10 years documenting this mess, and not only because the U.S. Department of Justice (not, pointedly, California state authorities) just arrested operators we’ve been writing about for years. On Oct. 18, I was on a panel at a UCLA Friends of the Semel Institute screening of the powerful documentary “Shuffle” along with — drumroll please — A. Thomas McLellan, deputy director of the White House Office of National Drug Control Policy during the Obama administration. McLellan fashioned the piece of Obamacare that’s been twisted by hucksters to obscenely lucrative and deadly ends: the bit that requires insurers to cover (endless) rounds of addiction treatment and repeals lifetime caps on said treatment.

Fraudsters have turned that into “The Shuffle,” where “clients” (not “patients”) are paid to enroll in treatment programs; signed up for health insurance benefits (premiums sometimes paid for by the treatment programs themselves, a pittance when they can bill hundreds of thousands of dollars); subjected to expensive, repeated and unnecessary urine testing (“liquid gold”); and hunted by “body brokers,” akin to human traffickers, who are paid to put “heads in beds.”

When a treatment cycle is complete, “clients” are often encouraged to use drugs again so they can test “dirty” and start the lucrative treatment cycle anew.

The painfully personal documentary by filmmaker Benjamin Flaherty documents all this through three “clients” who ping-pong from center to center dozens of times, are paid to enroll and then relapse. One doesn’t survive. The film opened a horrified McLellan’s eyes to how good intentions have been warped, and he has some ideas on how to fix it, too.

Yes, Obamacare laid the groundwork that allows fraud to proliferate, but California’s woefully low bars to entry (yes folks, I could start my own private-pay rehab and so could you!), combined with insipid under-regulation, failure to enforce even the most mealy-mouthed laws and the lack of criminal penalties for criminal behavior, have made things in the Golden State much worse. There’s a hell of a lot that can be done at the state level to save lives as well as money, even as we await fixes to Obamacare that must be tackled by Congress.

“California legislators and regulators have for years turned a blind eye to the problem,” said Allen Nelson, who sponsored the screening. Nelson’s son Brandon had no substance issues but suffered from mental illness; he was allegedly in a state-of-the-art psychiatric facility which turned out to be an unlicensed sober home run by Sovereign Health in a tract house. Brandon was not given his medication and hanged himself from the sprinkler system in 2018.

Derelict, Nelson called it. “The state of California, by not taking any meaningful action, is complicit, leading to preventable deaths.”

Eight years after the FBI raided Sovereign, its CEO, Tonmoy Sharma, was arrested and charged with making some $200 million worth of fraudulent insurance claims, doing unnecessary urinalysis tests and paying illegal kickbacks to “body brokers” who steered addicts Sovereign’s way. (Sharma has pleaded not guilty, cobbled together a half-million-dollar bail and mocked the charges, saying “you can indict a ham sandwich.“) The FBI is probing other addiction treatment providers, but it’s slow going.

“Clients were sometimes dumped onto the street like garbage when their health benefits expired,” Nelson said. “Human beings were being used as ATM machines. Disgusting. It continues to this day.”

Becerra

Fraud is a non-starter for Becerra, said spokesman Jonathan Underland.

“He spent years prosecuting fraud as Attorney General, and as governor he will continue rooting it out, holding every bad actor accountable,” he said by text.

We’re enormously pleased that the heir-apparent actually acknowledged our fervent queries, and ardently hope that this issue remains on his radar and that he does not follow in Newsom’s footsteps. Please. Earnestly engage to stop these gruesome practices!

His opponent offers a few specific ideas on how to attack it …

Hilton

The Republican candidate for governor said that these failures spring from an almost pathological focus on inputs rather than outcomes.

“You see that in the language of everybody involved — they constantly speak about how much we’ve invested, how much we’ve spent on facilities and resources. It’s all about the inputs. They never talk about the outcomes. That’s what we need to change,” Hilton said.

As a strategy director to British Prime Minister David Cameron, Hilton championed a restructuring how public services are delivered. Investors fronted money; the government established explicit, measurable outcome targets for programs, such as a specific drop in crime or homelessness; and if providers met or exceeded those targets, the government paid back investors with money saved. If the program failed to hit its targets, investors were out of luck.

“Payment by Results,” the idea was called. A program applying it to recidivism in the criminal justice system set concrete outcomes for people leaving prisons and jails; funding for housing, job training and intensive supports depended on shrinking new offenses among the cohort by a set percentage. The program surpassed its goal, and the model has spread to other countries.

“It’s a simple and obvious point,” Hilton said. “We can change all this with sensible policy.”

Hilton would also end “harm reduction” as an ideology and practice — things like needle exchange programs and drug-testing kits designed to meet users where they are, rather than demanding total abstinence. “It’s an Orwellian term that sounds attractive but is incredibly cruel and destructive,” he said.

As he headed to his next engagement, Hilton took a swipe at Becerra and the Democrats, saying, “They truly don’t care about delivering results, as long as their budgets increase every year and they can brag about how much they’ve invested.”

McLellan

So there were four of us on the stage of the James Bridges Theater in UCLA’s Melnitz Hall on Oct. 18.

There was Flaherty,
the “Shuffle” director; Dr. Helena Hansen, professor, interim chair of psychiatry and biobehavioral sciences at the David Geffen School of Medicine, and interim director of the Semel Institute for Neuroscience and Human Behavior; Allen Nelson, activist and Brandon’s father; and me.

But looming over us, some 20 feet tall, was the giant face of McLellan, joining via Zoom, projected onto the screen and looking, honestly, like God himself. He is, indeed, a towering figure in the field — distinguished researcher and founder of the Treatment Research Institute, lifetime achievement awards from the American Society of Addiction Medicine and the British Society of Addiction Medicine, former editor-in-chief of the Journal of Substance Abuse Treatment, scientific advisor to the World Health Organization and the American Psychiatric Association — and a man who lost his own son to addiction.

Never ever ever, McLellan said, when he was advocating for addiction treatment as an essential health benefit, could he have imagined the grotesque abuses that would follow. It absolutely must remain as an essential health benefit, he said — but other things must change.

How? Programs must adhere to evidence-based treatment, which includes medication-assisted treatment, cognitive therapies and peer supports. Addiction should be managed as an ongoing, chronic condition — like diabetes or heart disease — rather than in the 30-60-90 day bursts of acute crisis care which dominate now. It must be married to mainstream medical care — hospital and primary care networks where auditing, professional oversight and routine screening are standard — to eliminate the “rehab silos” so highly susceptible to fraud.

Others

Nelson, Brandon’s father, has a simple idea that no California lawmaker has been willing to carry as a bill: Require private treatment programs, paid for with private and health insurance dollars, to meet the higher quality bars that public treatment programs, paid for with taxpayer dollars, must meet.

“Surprisingly they have two radically different standards,” he said. Requirements are much more stringent for Medi-Cal programs and include vetting operators, staffing requirements and oversight and enforcement. Yet no legislator has been willing to introduce a simple bill requiring all addiction treatment programs to meet those Medi-Cal standards.

“I cannot wrap my head around what the rationale is for the state to have two different standards for the same treatment,” Nelson said. “It makes no sense. Shouldn’t everybody be treated equally and receive the best care?”

Filmmaker Flaherty points to the 80/20 rule for health insurers. They’ve been lackadaisical about battling fraud and overbilling because of this bit built into the Affordable Care Act, generally requiring insurance companies to spend at least 80% of collected premiums on healthcare and quality improvement. The other 20% can go to overhead and profits.

Dave Aronberg, the state attorney who fought “The Shuffle” in Florida, explains it this way: “(A)n increase in premiums is a sure way to increase profits. That is, the more a company pays out in claims, the more profits it can keep. This can lead to some perverse incentives, such as a possible financial windfall for insurers who pay inflated claims to corrupt providers. At the very least, the 80/20 rule suppressed an insurance company’s fraud-fighting libido.”

Indeed. Repeat stints in treatment have cost up to $1 million over a single year for a single “client.”

California could also tighten up requirements for providers (lawmakers sent a bill to Newsom that would have required licensing for outpatient treatment — where the bulk of it happens, but he vetoed it in 2019). It could also put teeth into body brokering laws (criminal penalties were scrubbed from the bill passed in 2020) and create minimum quality standards for sober homes (Newsom vetoed this for homes with government contracts in 2023).

Becerra! Hilton! One of you fix this!

“As you watch the film,” Nelson told the audience on Sunday, “hundreds, perhaps thousands, of people looking to better their lives are in the process of being shuffled. This abuse must stop.

“My heart goes out to others here who have unnecessarily been sentenced to a lifetime of grief like our family because of these deplorable rogue operations.”