The Gullibles and the Profiteers “California really is the land of the golden OUGHT, which exists in opposition to the old cold IS.”

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Start with this AI summary, because it does a pretty good job of summarizing how this fraud started (spoiler alert: government money)

AI Overview

The landmark Mental Health Parity and Addiction Equity Act passed in 2008 required insurers to cover drug and alcohol treatment on par with medical care. While intended to help vulnerable populations, a lack of oversight and massive insurance payouts inadvertently sparked an explosion of rampant fraud, particularly in "sober home" and treatment networks. [1, 2, 3, 4, 5]

Unscrupulous actors and "body brokers" capitalized on the new law through several highly lucrative, illegal schemes: [1, 2, 3]

  • Patient Brokering & Kickbacks: Centers and sober homes paid illegal bribes and kickbacks (e.g., free rent, cash, or travel) to recruiters or the patients themselves. Patients were then cycled through multiple rehabs simply to bill their insurance. [1, 2]

  • Billing for Ghost Services: Facilities billed private insurance and state programs for expensive treatments and therapies that were never provided, or for care from clinics that were already closed. [1, 2]

  • Fraudulent Urine Drug Testing: Many centers charged insurers exorbitant amounts for highly frequent, unnecessary drug testing, sometimes billing for as many tests as possible without possessing licensed professionals on staff. [1, 2, 3, 4, 5]

  • Intentional Relapse: In the most extreme cases, corrupt operators actively encouraged patients to relapse and bought multiple health insurance policies in the patients' names to maximize fraudulent billing potential. [1, 2, 3]

The combination of the parity law and the subsequent Affordable Care Act provisions opened a floodgate of easy insurance dollars. This turned localized, scrappy addiction recovery networks into multi-billion dollar industries, resulting in a wave of federal indictments, FBI investigations, and state crackdowns. [1, 2, 3, 4, 5]

The fraud extends nationwide — Florida’s a hotbed of for-profit rehab centers as is Portland, Maine, and pretty much everywhere between. Here’s the Substack essay, focused on California, that triggered this post this morning:

Constituencies

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….. So: Arresting drug addicts who use in city parks or intervening in their drug abuse and self-destructive behavior in any negative way is cruel. Helping and supporting them, bringing food to their tents in the park where they do drugs all day, is being warm and kind.

This is the premise we’re operating on in Los Angeles: enabling behavior is decency. You give things to the homeless, and support their choice, and protect them from consequences that might follow their own behavior. Mean vs. nice.

There are a few wrinkles, though.

First, the practice called “harm reduction” pays, and harm reduction needs addicts. It’s a lucrative industry. “The Skid Row Care Campus, located at 442 S. Crocker Street in Los Angeles, costs approximately $26 million a year to operate, according to the LA County Department of Health Services. It is run by three nonprofits: Homeless Health Care Los Angeles, Social Model Recovery Systems, and Wesley Health Centers. The facility distributes needles, pipes, aluminum foil, and condoms as part of its harm reduction services.”

Second, the giant RV encampments are a business. “Vanlords” buy old RVs and rent them, on the street and without services like sewage hook-ups or water, to the homeless. They’re often towed into place, because they don’t work. The thing being rented is the shell, the walls and the roof. When you see people living in poverty and desperation in ratty old dark RVs, dumping human waste in the street, that’s somebody’s rent farm.

Third, “body brokers” recruit drug addicts all over the country and ship them to Los Angeles so rehab facilities can bill health insurance for them. This is how so many drug addicts end up in California. I hadn’t realized until tonight, but this practice has become so obvious that even Hollywood noticed.

Fourth, drug addiction is married to sex trafficking. Five minutes around Skid Row or MacArthur Park make this obvious, unless you’re a very important journalist and you work for the New York Times, in which case it’s a dark MAGA conspiracy theory.

The city put a bunch of portable toilets on the streets in Skid Row, a decade ago, but removed them because they had doors that latched. Guess how that ended. From the Los Angeles Times, back when they still allowed themselves to notice the city:

A few hours after a homeless guy named Virgil died of an overdose in the portable toilet, the blue plastic outhouse at 6th and San Julian streets was back in business. Not as a toilet, but as a house of prostitution.

Five portable toilets stand at that corner in the darkened heart of skid row. T.J. says she sometimes has a customer in each of them -- a john in every john -- and scurries from one to the next, taking care of business.

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Pimps, drug dealers, vanlords, body brokers, harm reduction NGOs with budgets for free needles: There’s money to be made. Unless somebody takes it all away.

Homelessness is the foundation of a predatory culture. It’s a locus of profound and sustained predation. And California is full of warm and kind people who are…helping. You know, “helping.” They’re very angry at Spencer Pratt for being so mean.

We’ll see.

(Just one) Example:

$26M Skid Row campus: Violence, drug use surge at 'Meth Mansion' as officials stay silent

Published May 29, 2026 6:07 PM PDT

LOS ANGELES - A taxpayer-funded homeless services campus in the heart of Skid Row is at the center of a growing controversy, as dramatic video shows open drug use and drug deals just steps from its entrance. The Los Angeles Police Department reported a surge in violent crime, including four homicides in four months, and community leaders say they warned city and county officials years ago that this was coming.

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The Skid Row Care Campus, located at 442 S. Crocker Street in Los Angeles, costs approximately $26 million a year to operate, according to the LA County Department of Health Services. It is run by three nonprofits: Homeless Health Care Los Angeles, Social Model Recovery Systems, and Wesley Health Centers. The facility distributes needles, pipes, aluminum foil, and condoms as part of its harm reduction services.

…..

According to federal tax records reviewed by FOX 11, Homeless Health Care Los Angeles has seen its revenue grow from $3.2 million in 2011 to more than $20.6 million in fiscal year 2024, with nearly 96% coming from government sources.