Prosecutors in Los Angeles call it the largest case of its type the Justice Department has ever prosecuted: more than $1.6 billion billed to private insurance companies by dozens of purported substance abuse treatment businesses. The department says a father and son controlled the businesses and two Texas recruiters filled them with patients. The charges, announced October 22, are allegations, and none of the four defendants has been convicted.
A father, a son and dozens of purported clinics
Nathan Young, 39, who goes by “Pablo,” and David Young, 71, who goes by “Sancho Lopez,” both of Los Angeles, allegedly controlled dozens of purported treatment companies in and outside Los Angeles. The Justice Department’s release calls them father and son.
Honey Phipps, 42, and Cody Phipps, 36, of Greenville, Texas, allegedly worked as “body brokers,” paid to find patients. The release says they recruited vulnerable people, including unhoused individuals and people at support groups, and that the Youngs directed them.
The billing figure dwarfs everything else announced that day. The more than $1.6 billion is about 89 percent of the more than $1.8 billion in claims the takedown covers, a share worked out here by division, and the HHS-OIG listing of the case puts the total loss at nearly $2 billion.
The release names no insurer and describes no Medicare or Medi-Cal billing in this scheme. For people on Medicare, the money question therefore points somewhere else: what their own coverage costs and which programs help pay it.
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Medicare Savings Programs are the clearest example. These state programs help pay Medicare premiums, and some also cover deductibles and copayments, Medicare.gov says. Applications go through the state Medicaid office, and the 2026 limits start at $1,350 a month in income for one person in the Qualified Medicare Beneficiary tier, with $9,950 in resources.
Other tiers of Medicare Savings Programs reach slightly higher incomes: $1,616 a month for one person in the Specified Low-Income tier and $1,816 in the Qualifying Individual tier. The Qualifying Individual tier requires reapplying every year and is first come, first served. Medicare.gov also says people should apply even if they doubt they qualify.
How the billing allegedly worked
The next-largest piece of the announcement is a roughly $270 million Medi-Cal pharmacy case, per the release. By simple division, the treatment-center billing is about six times that. Hospice schemes totaling over $138 million and an atherectomy case in the $134 million range, both billed to Medicare, sit well below it. The treatment case also outweighs every other defendant group in the announcement combined, though the release gives no single combined figure for those.
Recruits were allegedly lured with flights, cash, housing, cars, gifts, drugs and medications, then enrolled in insurance plans they were not eligible for, so the plans would pay as much as possible. The release says that was the point of the enrollment.
Once recruits were inside, the Justice Department alleges, staff kept some of them there by drugging them or blocking them from leaving. Patients were cycled through to keep billing insurers, whether or not treatment was needed or given. Employees allegedly coached patients to fake symptoms.
The therapy itself allegedly consisted of Zoom sessions that patients could ignore. Insurers were billed for it anyway, prosecutors say.
The counts and the people prosecuting
All four defendants face conspiracy to commit health care fraud and wire fraud, conspiracy to violate the Eliminating Kickbacks in Recovery Act, three counts of health care fraud and two counts of violating that law. Nathan and David Young face five more health care fraud counts and four more under the recovery act.
The FBI, IRS Criminal Investigation and the Drug Enforcement Administration investigated. Siobhan M. Namazi and Erika V. Suhr of the Fraud Division’s Health Care Fraud Section and Assistant U.S. Attorney Haoxiaohan Cai are prosecuting. Assistant U.S. Attorney Tara Vavere is handling forfeiture.
Eight of the 15 defendants in the full announcement were arrested, six due in federal court in downtown Los Angeles and two in Texas. The release does not identify which defendants those eight are. FBI Director Kash Patel said the schemes ran over multiple years and produced $1.8 billion in losses.
Assistant Attorney General Colin M. McDonald, who heads the National Fraud Enforcement Division, said: “we are coming for you – and the data will lead us to wherever you are.”
Darren Lian, the special agent in charge of IRS Criminal Investigation in Los Angeles, said: “Healthcare fraud is not a victimless crime.” He described harm to patients, higher costs and diverted resources.
The strike force program behind the case has charged more than 6,200 defendants since 2007, who collectively billed federal programs and private insurers over $45 billion, the release says. Anyone who suspects a billing scheme can report it through the HHS-OIG fraud reporting page. Every defendant is presumed innocent until proven guilty.
Which Medicare costs could a state program pick up?
The fraud in this case was billed to private insurers, but the costs that reach a retiree’s own budget are Medicare’s premiums, deductibles and drug copays. The programs that trim them are opt-in, so a household that never applies keeps paying the full amount.
The Medicare Cost & Coverage Protection Kit includes 51 state Medicare cost-help packs and a walkthrough of the new Part D out-of-pocket cap. Part 3, Get Help Paying, covers the programs that pay Medicare premiums and cut drug bills.
Open the 51 state Medicare cost-help packs in one kit →
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This article was produced with AI assistance and edited for accuracy against the sources linked above.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
