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Arizona Gov. Katie Hobbs has signed legislation increasing oversight of sober living homes, two years after state officials announced that a Medicaid fraud scheme had targeted Native Americans seeking drug and alcohol treatment.
The bill, sponsored by three Republicans, amends state law for the regulation and licensing of sober living homes. It places new demands on the Arizona Department of Health Services, though a lawmaker from the Navajo Nation expressed concern that the bill does not go far enough in addressing root causes of the fraud.
Hobbs’ office announced late Friday that the bill, expected to take effect in the fall, was among dozens she had signed into law. The governor did not explain her decision to sign the legislation but she has been vocal in her support of reforms over the past two years to help authorities “go after bad actors.”
The legislation’s passage comes after ProPublica and the Arizona Center for Investigative Reporting reported in January that former state Medicaid officials had failed for years to stem the $2 billion fraud scheme, despite repeated warnings. Starting around 2019, people were lured into substance abuse treatment programs and housed in sober living homes where operators often allowed patients to continue using drugs and alcohol, according to officials. Meanwhile, many providers excessively billed the state’s American Indian Health Program, Medicaid insurance available to tribal citizens, for treatment they did not deliver.
At least 40 people died in sober living homes from the spring of 2022 to the summer of 2024 as the crisis escalated, Maricopa County Medical Examiner records reviewed by the news organizations showed. Victims’ advocates say they are certain the scheme’s toll is far higher. In interviews, victims’ relatives told ProPublica and AZCIR that they had been left in the dark about the circumstances of their loved ones’ deaths, including not knowing the names or addresses of the facilities where their family members had been staying because no one had informed them.
“I believe that this bill will set standards,” Rep. Cesar Aguilar, a Democrat from Phoenix, said before voting for the measure. “It will force businesses to actually help the most vulnerable.”
The League of Arizona Cities and Towns, a nonprofit that lobbies on behalf of municipalities and that supported the measure, said in a news release that a noteworthy component of the bill includes “mandating timely reporting” to the Arizona Department of Health Services — in addition to family members and emergency contacts — when a resident dies, overdoses or suffers severe harm in a facility. The health department will also be required to notify local governments when new licenses are issued to operators of sober living homes, which the league said will “improve transparency and community awareness.”
Under the bill, the health department’s director will set standards and requirements for sober living homes to maintain a drug- and alcohol-free environment and promote health and addiction recovery. Health officials could revoke or suspend licenses depending on the severity of a violation or issue fines of up to $1,000 for each day that a violation goes unaddressed.
At a minimum, the health department will conduct annual inspections of facilities and report to lawmakers on the number of complaints received regarding licensed or unlicensed facilities and how many resulted in investigations or other enforcement actions.
The bill received bipartisan support. However, critics said it did not address additional factors that contributed to the fraud scheme: Many victims stayed in unlicensed facilities and, despite warnings, the Arizona Health Care Cost Containment System, the state’s Medicaid agency, was slow to grasp the scope of the fraud and stop it.
It wasn’t until May 2023 that AHCCCS and the governor, who took office that year, announced a sweeping investigation of hundreds of facilities and launched a hotline to help victims who were recruited into fraudulent programs or displaced after AHCCCS suspended payments to the businesses. The agency has since enacted a series of reforms in response to the fraud. In an interview last year, a deputy director for AHCCCS also acknowledged that the agency’s American Indian Health Program lacked safeguards for fraud.
Supporters of this year’s bill have touted support from tribes.
Reva Stewart, who is Diné and an advocate for victims of the scheme and their families, opposed the bill. She anticipates the measure will make it more burdensome for licensed facilities to help people seeking treatment, while failing to stop the unlicensed homes, where most of the harm was done. ProPublica and AZCIR found that officials’ botched response to the crisis resulted in Native Americans losing access to behavioral health services that were being provided to them.
Sen. Theresa Hatathlie, a Democrat from Coalmine Mesa on the Navajo Nation, was also critical of the legislation. She voted against it, noting that a bill she sponsored last session would have required more accountability not only from the health department related to its oversight of the homes but also from the Arizona Corporation Commission, where the businesses must be registered.
Hatathlie, whose niece died in one of the homes, said this year’s Republican sponsors of sober home legislation did not include her in their discussions.
“We’re actually not solving the problem,” she said during a Senate floor vote last month. “So to say it’s good enough now, when we still have people dying and getting lost in the system, is a disservice to human lives. These are my relatives. These are my family members.”
Sen. Frank Carroll, the bill’s lead sponsor, didn’t immediately respond to an email and phone calls requesting comment.
Maria Polletta, a senior reporter and associate editor at AZCIR, contributed reporting.
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We are still reporting. Do you have any information on how exclusions made the tariff exemption list? You can reach out to Robert Faturechi on Signal at 213-271-7217.
After President Donald Trump announced sweeping new tariffs earlier this month, the White House released a list of more than a thousand products that would be exempted.
One item that made the list is polyethylene terephthalate, more commonly known as PET resin, the thermoplastic used to make plastic bottles.
Why it was spared is unclear, and even people in the industry are confused about the reason for the reprieve.
But its inclusion is a win for Reyes Holdings, a Coca-Cola bottler that ranks among the largest privately held companies in the U.S. and is owned by a pair of brothers who have donated millions of dollars to Republican causes. Records show the company recently hired a lobbying firm with close ties to the Trump White House to make its case on tariffs.
Whether the company’s lobbying played any role in the exemption is unclear. Reyes Holdings and its lobbyists did not respond to questions from ProPublica. The White House also did not comment, but some industry advocates say the administration has rebuffed requests for exemptions.
The resin’s unexplained inclusion on the list exemplifies how opaque the administration’s process for crafting its tariff policy has been. Major stakeholders are in the dark about why certain products face levies and others don’t. Tariff rates have been altered without any clear explanation for the changes. Administration officials have given conflicting messages about the tariffs or declined to answer questions at all.
The lack of transparency about the process has created concerns among trade experts that politically connected firms might be winning carve-outs behind closed doors.
“It could be corruption, but it could just as easily be incompetence,” a lobbyist who works on tariff policy said of PET resin’s inclusion. “To be honest, this was such a hurried mess, I am not sure who got into the White House to talk to folks about the list.”
During the first Trump administration, there was a formal process for seeking an exemption from tariffs. Companies submitted hundreds of thousands of applications making the case for why their products should be spared. The applications were public, so the machinery of the tariff crafting process could be more closely examined. Such transparency allowed academics to subsequently analyze thousands of the applications and determine that political donors to Republicans were more likely to be granted exemptions.
In Trump’s second term, at least thus far, there has not been a formal application process for tariff carve-outs. Industry executives and lobbyists are making their case behind closed doors. The Wall Street Journal’s editorial board last week called “the opacity of the process” for getting an exemption “the Beltway Swamp’s dream.”
In the executive order formalizing Trump’s new tariffs, including baseline 10% tariffs for almost all countries, exemptions were broadly defined as products in the pharmaceutical, semiconductor, lumber, copper, critical minerals and energy sectors. An accompanying list detailed the specific products that would be spared.
But a ProPublica review of that list found many items that don’t fit neatly, or at all, in those broad categories, and some items that fall squarely within the categories were not spared.
The White House exclusions list, for example, included most types of asbestos, which is not generally considered a critical mineral and doesn’t seem to fit in any of the exempted categories. The cancer-causing mineral, which is not generally considered critical to national security or the U.S. economy, is still used to make chlorine, but the Biden administration’s Environmental Protection Agency banned imports of the material last year. The Trump administration has signaled it may roll back some of those Biden-era restrictions.
A spokesperson for the American Chemistry Council, which had pushed back on the ban because it could hurt the chlorine industry, said the trade group played no role in lobbying for asbestos to get a tariff exemption and didn’t know why it was included. (Two major chlorine companies also showed no indication of lobbying on the tariffs in their disclosure forms.)
Other items that landed on the list, despite not falling into exempted categories, are far more innocuous. Among them: coral, shells and cuttlebone, a part of the cuttlefish that is used as a dietary supplement for pets.
PET resin also doesn’t fit neatly in any of the exempted categories. It’s possible the administration counted it as an energy product, experts said, because its ingredients are derived from petroleum. But other products that would have met that same low bar were not included.
“We are as surprised as anybody,” said Ralph Vasami, executive director of the PET Resin Association, a trade group for the industry. The resin, he said, has no application for the exempted categories, unless you count the packaging those products come in.
During the fourth quarter of last year, the same period when Trump won the election, records show Reyes Holdings, the Coca-Cola bottler, enlisted Ballard Partners to lobby on tariffs. During the first quarter of this year, when Trump was inaugurated, records show that Ballard began lobbying the Commerce Department, which shapes trade policy, on tariffs.
The firm has become a destination for companies looking for an in with the Trump administration. It once lobbied for Trump’s own company, the Trump Organization, and its staff has included top officials in the administration, such as Attorney General Pam Bondi and the president’s chief of staff, Susie Wiles. Brian Ballard, its founder and a prolific fundraiser for Trump, was named by Politico “the most powerful lobbyist in Trump’s Washington.” He was one of two lobbyists from the firm who lobbied on tariffs for Reyes Holdings, federal disclosure records show.
The billionaire brothers behind Reyes Holdings, Chris and Jude Reyes, also have their own political ties. While they have given to some Democratic candidates, the bulk of their political donations have gone to Republican causes, campaign finance disclosures show. And after Trump’s first election win, Chris Reyes was invited to Mar-a-Lago to meet privately with Trump.
The PET resin carve-out isn’t just a break for Reyes Holdings. It’s a boon to other firms that buy the resin to manufacture bottles and the beverage companies that use them. Earlier this year, the CEO of Coca-Cola said the company would transition to using more plastic bottles in the face of new tariffs on aluminum, a plan that might have been dashed if the thermoplastics were also hit with new tariffs. Disclosure records show the company also lobbied this year about tariffs on the Hill, but the documents don’t provide detail about which policies in particular, and the company did not respond to questions from ProPublica. (Coca-Cola has looked to make inroads with Trump, donating about $250,000 for his inauguration, and the CEO presented Trump with a personalized bottle of his favorite soda, Diet Coke.)
Another industry that appears to have done relatively well lobbying for carve-outs from the recent tariffs is agriculture. The exemption list includes various pesticide and fertilizer ingredients.
The American Farm Bureau Federation, an agricultural lobby, took credit for some of those exemptions in an analysis posted on its website recently, calling exemptions for peat and potash “hard fought for by agricultural organizations such as the American Farm Bureau Federation” and “a testament to the effectiveness of farmers’ and ranchers raising their collective voice.”
There are a number of other imports that don’t neatly fall into any of the exempted categories but might if the categories were defined loosely.
One example is sucralose, the artificial sweetener. Its inclusion will largely help companies that use the product in food and beverages. But sucralose is also sometimes used in drugs to make them more palatable. It’s not clear if the White House gave it a pass under the pharmaceutical exemption or for some other reason.
Even for the items that were spared, the reprieve may just be temporary.
The broad categories exempted are largely industries that are being investigated by the administration for potential future tariffs under its authority to administer levies to protect national security.
Alex Mierjeski and Agnel Philip contributed research.
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