Queens Day Care Operators Charged in $120 Million Medicaid Scam, Threats Included for Good Measure

An audacious fraud in Queens exposes systemic vulnerabilities in Medicaid oversight and the peculiar pressures of New York’s social safety net.

In the early hours of “payday” in Flushing, Queens, a phalanx of elderly residents shuffled towards a nondescript storefront. They queued not for medical care or social companionship, but for fistfuls of cash—kickbacks for enrolling in local adult day care centres. According to a federal complaint unsealed last week, the orchestrators of this spectacle, Daniel Lee and Inwoo Kim, siphoned off $120 million from Medicaid over a decade, threatening vulnerable seniors and gaming the American welfare state with methodical zeal.

Federal prosecutors allege Lee, 56, and Kim, 42, ran Royal and Happy Life Adult Day Care with little intention of serving clients’ needs. Instead, the pair lured elderly Medicaid recipients—many recent immigrants from East Asia—with monthly bribes: $500 simply to sign up, which curiously diminished to $300 if patients actually availed themselves of the facilities. Worse, those who talked openly about the payouts or showed inconvenient curiosity were expelled, pressured, or harangued. Vigilance was reserved not for patients’ well-being, but for the silence and obedience necessary to keep the grift humming.

The alleged conspiracy, mapped in painstaking detail by Department of Justice filings, operated with a grim efficiency. Local physicians, home health aides, and acupuncturists were enlisted to write unnecessary prescriptions for pricey pain patches—specifically Diclofenac Epolamine—which patients, in turn, were compelled to fill at Kim’s own dispensary. Each 60-pack earned Kim $525 and the seniors a $100 slice, in a circular economy of mutual self-interest and state largesse.

Authorities only stumbled upon the operation’s scale after Lee was arrested at JFK airport with $40,000 cash and a South Korean passport, having caught wind of the feds’ net closing in. His alleged co-conspirator Kim now faces similar scrutiny. Both men, now out on six-figure bail, confront up to a decade behind bars if convicted of healthcare fraud. No pleas have been entered.

The sheer size and longevity of the scheme portend an uncomfortable reality for New York City: the city’s Medicaid program, projected to cost $33 billion in fiscal year 2024, remains notoriously porous. Frauds like this one are rarely the work of criminal masterminds. Instead, they exploit apathy, cross-check gaps among agencies, and the complex interplay of language, immigration status, and social isolation that defines many urban enclaves. In Flushing—a neighborhood where nearly 7 in 10 residents are foreign-born and public information is disseminated in half a dozen languages—the fraudsters’ command of both community mores and bureaucratic nuance proved particularly lucrative.

For New York, a city dependent on a sprawling social infrastructure, such revelations matter. Adult day care centres, by design, serve a vital function: they provide supervision, social integration, and relief for working families. The spectre of SADC (social adult day care) fraud, however, risks corroding trust and eroding political support for these vital programs. Already, the city’s Human Resources Administration faces withering questions about whether oversight has kept pace with both demographic change and the digital sophistication of the most enterprising cheats.

Downstream effects are not merely fiscal; they ripple through a kaleidoscope of public priorities. Each dollar redirected from public programs reduces available resources for legitimate services—while undermining faith in the state’s ability, and willingness, to draw a line between assistance and avarice. Programs serving immigrant seniors, in particular, now risk scrutiny and perhaps a chilling effect, as regulatory zeal emboldens landlords, insurance contractors, or care providers to act with undue suspicion.

A nationwide malaise, met with patchwork remedies

Peculiarly, New York’s misadventures are hardly unique. The Department of Health and Human Services has labeled SADC fraud “common and pervasive” nationwide; similar cases have surfaced from Los Angeles to Miami, each riffing on the same themes of incentivised attendance, predatory pharmacy tie-ins, and complicit clinicians. Nationally, Medicaid improper payments (a polite euphemism for errors, waste, and fraud) are estimated at a staggering 15% of total spending—an amount that dwarfs individual fraud busts but is largely baked into actuarial assumptions.

Internationally, such schemes typify American ambivalence towards welfare delivery: a blend of generosity, fragmentation, and ambiguous moral hazard. In Denmark or Singapore, such care is either universality funded and tightly monitored, or strictly means-tested, with far less room for inventive entrepreneurs. The American system, with its thicket of overlapping agencies and local actors, seems almost to invite opportunism—especially in cities like New York, where enforcement must continually play catch-up with those best attuned to its blind spots.

What is particularly notable about this case, at least to our sceptical editors, is not its size but its imitative character. Lee and Kim ran their operation with a cynicism that evokes both the banality and baneful efficiency of petty corruption elsewhere: the spreadsheet audits, the linguistic double standards, the targeted “familial” preferences in distributing the loot. Yet if their enterprise is dispiriting, so too are the agencies and incentives that abetted it—under-resourced auditors, overworked social workers, and perverse payment formulas that reward volume, not value.

Reform, alas, will not come easily. Past reactions to such scandals have usually erred on the side of showy criminal prosecutions and sweeps, without much reckoning over why so few eyes are trained on the river of cash flowing through small storefronts in the outer boroughs. More robust data-sharing between city, state, and federal authorities would help, as would requiring prescription audits directly tied to day care attendance figures. Yet any fix must reckon with the reality that many SADC users are genuinely needy, and that over-policing risks trading one scandal for another: that of neglected, isolated elderly New Yorkers abandoned to penny-pinching bureaucracy.

Fraud, it must be admitted, will persist wherever benefits are doled out and oversight remains tepid. But $120 million signals less a loophole than a yawning chasm—one that neither indictment nor indignation alone will plausibly close. As policymakers wrangle over budgets and regulators ponder digital remedies, the city might look to its immigrant communities for input, rather than suspicion, in building a system both more open and less gullible.

That, if nothing else, would be an honest day’s work. ■