Ozier Muhammad/The New York Times
Clients of R & G Social Adult Day Care Center in Brooklyn can get takeout lunch. Some travel to the center by bicycle.
Scores of elderly Russian immigrants played bingo under the chandeliers of a former funeral parlor in Brooklyn on a recent Monday, with a free dinner and door-to-door transportation from anywhere in the city.
Nearby, older people speaking Chinese filled a supermarket-size storefront with vigorous games of table tennis, billiards and mah-jongg, and ordered free lunch from a takeout menu featuring minced pork, beef and salty fish.
In Bensonhurst, Brooklyn, at the new R & G Social Adult Day Care Center, known locally among elderly immigrants for luring clients with cash and grocery vouchers, most people there for lunch did not stay to eat. Instead, many walked briskly toward the subway carrying bags stuffed with takeout containers, and two elderly men rode away on bicycles with the free food.
Not a wheelchair or walker was in sight at these so-called social adult day care centers. Yet the cost of attendance was indirectly being paid by Medicaid, under Gov. Andrew M. Cuomo's sweeping redesign of $2 billion in spending on long-term care meant for the impaired elderly and those with disabilities.
Such centers have mushroomed, from storefronts and basements to a new development in the Bronx that recently figured in a corruption scandal. With little regulation and less oversight, they grew in two years from eight tiny programs for people with dementia to at least 192 businesses across the city.
Managed care companies, financed by Medicaid, pay the centers to provide services to members. But the door swings both ways: Centers also refer new clients to the companies.
Managed care became mandatory last year for people receiving home services who are eligible for both Medicaid and Medicare. The idea is to try to control spending, but about a third of the 92,000 people so far enrolled in the system statewide are newcomers to such services, many responding to aggressive marketing by social day care centers.
Centers collected over $25 million from managed care plans in the first nine months of 2012, at roughly $93 per person per session, according to state figures. The managed care companies are paid by Medicaid; in New York City, the rate is about $3,800 a month per member.
"The whole thing is going to end up costing the state much more money," said Valerie Bogart, a lawyer with New York Legal Assistance Group who specializes in advocacy for frail elderly and disabled people. "It's really up to the managed care plans to be the watchdogs now, and it's like the fox watching the chicken coop, because they have an incentive to make money from these centers, too."
It was not supposed to play out this way. The bold Medicaid overhaul, part of a grand bargain with the state's most politically powerful health care players, has been promoted as a national model for curbing costs and reversing the incentives for fraud. It transferred tens of thousands of recipients of long-term care from a system in which providers billed Medicaid for each service to managed care, in which a capped monthly rate must cover all services to a company's enrollees.
With the largest Medicaid budget in the country, $54 billion, New York is trying not only to rein in runaway spending, but also to "rebalance" it, away from costly institutional care, like nursing homes and medical models known for overbilling, to inexpensive supports that keep people safely in their communities.
In that context, Jason Helgerson, the state's Medicaid chief, defended the rapid expansion of social-model adult day care, saying that without a chance to socialize and connect with others, Medicaid clients would suffer a decline in health that would add costs. But when a reporter described some of the practices observed at centers, he expressed surprise and anger.
"The idea that people are bicycling home from managed long-term care is a complete misnomer," Mr. Helgerson said. "The idea that they're playing Ping-Pong — I guess they could be wheelchair-bound Ping-Pong players, but otherwise it's fraud and they are not eligible."
Beneficiaries are supposed to be impaired enough to need at least 120 days of help with tasks like walking, bathing or taking medication. But managed care companies, not government agencies, are now mainly in charge of determining eligibility, typically by using nurses to assess each potential member.
"It is being gamed," said an executive at a managed care company, speaking on the condition of anonymity. "There are just plums in the payment system. And the state will choose to be blind about this until something happens, which is what they did with nursing homes."
Mei-Yu Liu contributed reporting.
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