America’s Medicare and Medicaid programs face a persistent and costly threat — not from abroad, but from fraudsters operating openly in residential neighborhoods, billing the government hundreds of millions of dollars for services never delivered, patients who never showed up, and prescriptions nobody needed.
The latest and most brazen example comes from Flushing, Queens — one of the most densely populated immigrant neighborhoods in New York City. There, federal prosecutors have unveiled a $120 million scheme built on a concept most Americans have never heard of: the social adult day care center (SADC).
What Is a Social Adult Day Care Center?
Social adult day care centers are Medicaid-funded facilities designed to provide seniors with socialization, supervision, personal care, and meals within a structured community setting. New York State added SADC as a covered Medicaid service in 2014, and the program rapidly expanded — making $2.4 billion in payments between January 2019 and October 2024 alone, according to the New York State Comptroller’s Office.
On paper, these centers serve a genuine and important purpose: helping elderly, chronically ill, or disabled individuals remain in their homes and communities rather than entering nursing facilities. They give seniors a place to gather, socialize, receive monitoring, and stay connected.
In practice, however, prosecutors and auditors have documented a pattern across New York City in which some of these centers have been used as vehicles for systematic fraud — exploiting close-knit immigrant communities, paying seniors illegal bribes, and billing the government for services that were never provided.
The Queens Case: $120 Million, One Pharmacy, Two Day Cares
In February 2026, federal prosecutors unsealed a criminal complaint in Brooklyn charging two Flushing men in what the DOJ described as a scheme that allegedly drained $120 million from Medicare and Medicaid over a decade.
Inwoo Kim, 42 — operating under aliases “Tony Kim” and “Long Jin” — owned two social adult day care centers (Royal Adult Daycare and Happy Life Inc.) and a pharmacy, all located in the Flushing neighborhood of Queens. His alleged co-conspirator, Daniel Lee, 56, also known as “Daniel Yang” and “Donghee Yang,” served as program director at Happy Life.
According to the U.S. Department of Justice, the scheme ran for a decade — from 2016 to 2026 — and resulted in Medicare and Medicaid paying approximately $120 million for prescription drugs and day care services that were either medically unnecessary, never provided, or fraudulently obtained through bribery. Medicaid alone reportedly paid Kim’s day care businesses $62 million, while Medicare paid his pharmacy $58 million for prescription drugs.
The mechanics of the fraud were strikingly simple. Kim and Lee allegedly:
- Paid cash kickbacks and supermarket gift cards to elderly Medicaid and Medicare recipients to lure them into enrolling at Kim’s day care centers and filling prescriptions at his pharmacy
- Billed the government for services and prescriptions that were never provided
- Submitted claims exceeding the facilities’ permitted capacity — billing for more patients than the buildings could physically hold
- Coordinated the payments via text message, with Kim writing to a co-conspirator: “Please give the $10,000 to the Korean members first”
- Withdrew large amounts of cash from controlled bank accounts to fund the ongoing bribery operation
Investigators were initially tipped off by some of the New York seniors who had been bribed — people who, upon reflection, reported the suspicious activity to authorities.
“The defendants allegedly turned a pharmacy and social adult day care centers meant to help senior citizens into a $120 million Medicare and Medicaid fraud scheme,” said Assistant Attorney General A. Tysen Duva of the Justice Department’s Criminal Division.
Both men face up to 10 years in prison if convicted of conspiracy to commit health care fraud.
Not an Isolated Case — A Pattern Across the City
The Queens case is among the largest SADC fraud charges filed in New York to date, but it is far from the only one.
Just weeks before the Queens charges were filed, two Brooklyn-based recruiters pleaded guilty to a separate $68 million scheme in which they steered Medicaid recipients to Brooklyn social adult day care centers operated by Zakia Khan. According to the DOJ, Khan and her employees bribed patients with cash and gifts from 2017 through 2024, then billed Medicaid for care that was never delivered. The laundered proceeds were funneled through shell companies to generate the cash needed for ongoing bribery payments.
In a broader audit released in February 2026, the New York State Comptroller’s Office identified over $285 million in questionable payments made to social adult day care centers — including $28.6 million paid to facilities that had already been terminated from care networks specifically due to fraud, waste, and abuse. Strikingly, when one insurance plan terminated a facility for fraud, other plans sometimes continued to pay it.
Auditors also found SADCs billing for more patients than their buildings could hold. One center with a maximum capacity of 323 people allegedly served 530 members on a single day — a physical impossibility, and evidence of mass fraudulent billing.
How the Scheme Works: A Step-by-Step Anatomy
The social adult day care fraud playbook, as described across multiple federal prosecutions, follows a recognizable pattern:
Step 1 — Target a vulnerable community. Fraudsters identify close-knit senior communities, often within immigrant neighborhoods where social ties are strong and trust in community institutions is high. Flushing’s Korean-American senior population was the primary target in the Queens case.
Step 2 — Offer cash to join. Seniors receive cash payments, gift cards, or other financial incentives to “enroll” in the day care center and/or fill prescriptions at a partnered pharmacy — whether or not they need those services.
Step 3 — Bill the government for phantom services. The center submits Medicaid claims for daily attendance and care, even when seniors never showed up, or appeared briefly to receive their payment and left.
Step 4 — Expand the fraud. Once seniors are enrolled and receiving payments, they are steered toward additional services: medically unnecessary prescriptions, durable medical equipment (such as wheelchairs for people who don’t need them), or home health care that was never delivered.
Step 5 — Scale rapidly. Because Medicaid reimbursements are recurring and volume-based, fraudulent operators rapidly open additional locations and expand their patient rolls — doubling or tripling their billings within months.
The Broader Crisis: Documented Fraud Across New York’s Medicaid Program
The SADC fraud is part of a larger, documented pattern of Medicaid program abuse in New York. New York State’s combined state and federal Medicaid spending reached $115.6 billion for nearly 7 million people in fiscal year 2025 — a figure that Governor Kathy Hochul’s own budget plan described as growing at “unsustainable levels.”
The scale of documented fraud is staggering:
- A $100 million home health care fraud committed by Brooklyn-based Marianna Levin, sentenced in 2023 to four and a half years in prison
- An $11 million fraud by the former CEO of Hopeton Care, who allegedly used diverted Medicaid funds to purchase a luxury vacation home and a $250,000 Bentley
- $3.5 million in Medicaid transportation fraud in Orange County, involving false billing and cash payments to beneficiaries
- The consumer-directed personal assistance program (CDPAP), which Governor Hochul publicly described as “one of the most abused programs in the history of New York,” ballooned to $12 billion in annual spending by 2025
The U.S. House Energy and Commerce Committee has expanded its Medicaid fraud probe to include New York as part of a 10-state investigation, with committee chairman Brett Guthrie stating: “Fraud shouldn’t be a partisan issue. It’s our most vulnerable Americans who are most at risk from fraudsters diverting precious resources intended for critical, needed care.”
Why It Keeps Happening
Several structural factors allow social adult day care fraud to persist and proliferate:
Weak oversight. The State Comptroller’s audit found that the New York Department of Health failed to adequately monitor SADC programs, allowing terminated providers to continue receiving payments and overlooking billing anomalies that should have triggered immediate review.
Rapid growth without proportional scrutiny. As the number of SADCs grew rapidly across New York City, regulatory capacity failed to keep pace. Centers opened and began billing before proper inspections were completed.
Community trust as a weapon. Fraudsters specifically target insular communities — Korean-Americans in Flushing, Bangladeshi-Americans in Brooklyn — where social pressure and cash payments can persuade seniors to participate in schemes they may not fully understand.
Diffuse responsibility. Medicaid managed long-term care plans, the state Department of Health, and federal agencies each hold partial oversight responsibility — creating gaps that sophisticated fraudsters can exploit.
What Needs to Change
Federal and state prosecutors are acting, but enforcement alone cannot solve a systemic problem. The following reforms have been proposed by investigators, auditors, and healthcare policy experts:
Real-time billing analytics. Automated systems should flag claims that exceed facility capacity, show suspicious patterns of same-day enrollment and billing, or involve providers already terminated from other networks.
Cross-network termination enforcement. When one managed care plan terminates a provider for cause, that termination should automatically apply across all plans — a gap the State Comptroller’s audit specifically identified.
Stricter enrollment verification. Medicaid enrollment for SADC services should require regular independent assessments confirming medical necessity, conducted by parties with no financial relationship to the provider.
Community education. Seniors — particularly in immigrant communities — need accessible information in their native languages explaining that accepting cash or gifts from healthcare providers in exchange for enrollment is illegal, and that they will not be prosecuted if they report such offers.
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The social adult day care fraud unfolding in Flushing, Brooklyn, and across New York State is not merely a law enforcement problem — it is a symptom of a healthcare system that has become, in the words of those closest to it, dangerously easy to steal from.
When a pharmacy owner and two day care directors can allegedly collect $120 million in fraudulent Medicaid and Medicare payments over a decade — operating openly in a major American city — the failure is not just criminal. It is structural.
Every dollar fraudulently billed to Medicare and Medicaid is a dollar unavailable for a senior’s legitimate medication, a disabled person’s home care, or a child’s doctor visit. Healthcare becomes less affordable not only because of rising costs, but because hundreds of millions — and potentially far more — in public funds are at risk of diversion by those who have learned to exploit gaps in an imperfectly monitored system.
The arrests in Queens are a start. But the real work — redesigning oversight, closing structural gaps, and making fraud exponentially harder — is still ahead.
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Sources
- U.S. Department of Justice, Office of Public Affairs — “Two Queens Men Charged with $120M Adult Day Care and Pharmacy Fraud on Medicare and Medicaid” — February 10, 2026
https://www.justice.gov/opa/pr/two-queens-men-charged-120m-adult-day-care-and-pharmacy-fraud-medicare-and-medicaid - Office of the New York State Comptroller — “Medicaid Program – Oversight of Social Adult Day Care Programs” — February 6, 2026
https://www.osc.ny.gov/state-agencies/audits/2026/02/06/medicaid-program-oversight-social-adult-day-care-programs - U.S. Department of Justice, Eastern District of New York — “Eight Individuals Charged in $68 Million Social Adult Day Care and Home Health Care Scheme” — October 9, 2024
https://www.justice.gov/usao-edny/pr/eight-individuals-charged-68-million-social-adult-day-care-and-home-health-care-scheme - Office of the New York Medicaid Inspector General — “Social Adult Day Care Fraud Revealed” — February 2026
https://omig.ny.gov/news/2026/social-adult-day-care-fraud-revealed - U.S. Department of Health and Human Services, Office of Inspector General — “Two Queens Men Charged with $120M Adult Day Care and Pharmacy Fraud” — February 10, 2026
https://oig.hhs.gov/fraud/enforcement/two-queens-men-charged-with-120m-adult-day-care-and-pharmacy-fraud-on-medicare-and-medicaid - Newsweek — “New $120M Medicare, Medicaid Scam Uncovered by Trump DOJ in New York” — February 9, 2026
https://www.newsweek.com/medicaid-medicare-fraud-scam-donald-trump-doj-ny-11492293 - The Washington Times — “NYC men charged with running decade-long $120M fraud scheme through adult day cares, pharmacy” — February 9, 2026
https://www.washingtontimes.com/news/2026/feb/9/nyc-men-charged-running-decade-long-120m-fraud-scheme-adult-day-cares/ - The Hill — “Two men charged in $120M adult day care fraud scheme in Queens” — February 9, 2026
https://thehill.com/regulation/court-battles/5730272-120m-stolen-healthcare-fraud/ - City Journal — “New York’s Medicaid Problem: Fraud, Waste — and Political Largesse” — March 2026
https://www.city-journal.org/article/new-york-medicaid-fraud-waste-uncontrolled-spending-growth - U.S. House Energy and Commerce Committee — “House’s Medicaid Fraud Probe Expands to 10 States” — February/March 2026
https://energycommerce.house.gov/posts/icymi-new-york-post-feature-house-s-medicaid-fraud-probe-expands-to-10-states-including-new-york-california-combat-rampant-waste - IRS Criminal Investigation — “Two Queens Men Charged with $120M Adult Day Care and Pharmacy Fraud” — February 2026
https://www.irs.gov/compliance/criminal-investigation/two-queens-men-charged-with-120m-adult-day-care-and-pharmacy-fraud-on-medicare-and-medicaid
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