Drug rehabs lure in patients for insurance money—then leave them on the street

None of it had gone as expected. Months earlier, Lichtenberg said, a man he knew from a past prison stay had promised to help if they ever wanted to kick their meth habits. The man texted photos of rehabs that looked like Hollywood mansions for movie stars, with swimming pools and hot tubs. They wouldn’t have to pay a cent, he said, including for their flight to California—and he would help them sign up for a health insurance policy that would cover the rehab costs.

When they arrived, the facilities looked nothing like the photos, the couple said. They were shuttled between properties where illicit drugs were common and treatment included logging onto crowded video calls.

They relapsed often. They switched programs. For Lamb alone, various operators billed her insurance for more than $500,000 over seven months, according to her insurance records. One day last fall, their insurance benefits ran dry, and they were ordered to pack up and leave.

“What should we do?" Lichtenberg, 48, asked their program manager.

“If you don’t want to live on a park bench, I suggest you get a tent," he replied. For almost a year, the green tent that Lichtenberg bought at Walmart with $77 borrowed from his mother served as a home in a dusty encampment here known as the Dice.

Fraud has become a multimillion-dollar problem in America’s booming rehab industry, according to state officials, lawsuits filed by insurers and former clients, and federal indictments and convictions.

The rehabs are often in locations that people might be tempted to travel to, such as beachside cities in Florida. It’s become especially prevalent in California, where operators have discovered a steady stream of revenue by luring people with addiction from across the country and billing their private insurance. Lawsuits and federal cases allege that rehabs can charge insurance hundreds of thousands of dollars for a few months’ stay, but offer little in the way of treatment.

When the money runs out, they kick the patients out without support or referrals, regardless of whether or not they’ve recovered—a practice known as “patient dumping" or “curbing."

In court filings, these rehabs generally blame the insurers for trying to get out of paying for legitimate treatment by filing lawsuits.

Patients often come through recruiters—widely known as body brokers in the industry—who are paid to target people addicted to drugs with promises of recovery in glamorous California seaside rehabs. Many sign patients up for private insurance plans that offer high reimbursement rates and few restrictions, according to insurance experts. They focus on rural areas with high rates of drug use and few options for rehab, so they can argue to insurers that travel is necessary.

Patients themselves rarely pay premiums. Instead, brokers help them purchase plans under the Affordable Care Act, where federal subsidies can mean no out-of-pocket costs for people below a certain income. They also broker patients who are on their parents’ insurance.

Federal and state law prohibits paying for patient referrals. But the insurance money is so good that it makes it worthwhile for rehab centers to pay to recruit patients—often referred to as clients—and fly them across the country.

California’s high concentration of rehab facilities and large population continue to make it a magnet for operators hoping to be overlooked by overburdened regulators. A 2024 report by a state oversight body found that California regulators are late to investigate complaints at treatment facilities or to come down on unlicensed facilities advertising services that require a license.

California’s Department of Health Care Services said it has strengthened its licensing and certification process and is working to make investigations more timely. Recently enacted laws in California have imposed fines for body brokering and licensing violations.

Putting recovering addicts out on the street can also be illegal. California law mandates that licensed rehab facilities offer patients a return ticket home if they had provided travel to the state.

Far from families and friends, dumped patients join the swelling ranks of the homeless.

“They’re just churned like cattle until they’re dead or homeless on the streets," said Dan Kreitman, who ran the special investigations unit at insurer Centene, and oversees the Healthcare Fraud Prevention Partnership, a partnership between government officials and stakeholders in the healthcare system.

In one stark example, some California rehabs have zeroed in on Oklahoma, a state with a high rate of addiction and a Blue Cross & Blue Shield plan that paid well for out-of-state care. In some cases, brokers falsified addresses for people who didn’t live in Oklahoma to get them on the plan, patients said. Blue Cross & Blue Shield of Oklahoma alleged in a 2024 lawsuit against seven entities, including brokers and rehab centers, that just a handful of programs in California caused it to make $36 million in wrongful payments between 2021 and 2024. The entities denied the allegations.

Blue Cross changed its policy in January 2025, limiting out-of-state rehab coverage. The insurer declined to comment.

A $500,000 bill

Robert Millspaugh’s insurance documents show how lucrative the rehab business can be.

The 54-year-old Arkansas man said a broker posing as a fellow patient at his rehab in Las Vegas helped him sign up for a Blue Cross & Blue Shield policy—using fake documentation to make it look like he lived in Oklahoma.

Millspaugh recalled how he was flown to California from Las Vegas in April 2024 with promises of an oceanfront rehab for his meth addiction, only to find that the rehab center was a South Los Angeles apartment packed with 21 people. Four people were bunked in rooms so small that two could barely stand side-by-side, according to Millspaugh and another former resident. Drugs were everywhere and staff was nowhere to be found. He lost 8 pounds in six days because there wasn’t enough food. Photos he took of the site showed bare rooms and a refrigerator with little food.

He never saw a clinician other than logging into video calls that photos show included dozens of people. He wasn’t required to participate or even be on camera.

He was moved from property to property 12 times in five months, according to Millspaugh and insurance documents. One benefits statement for two weeks in June 2024 shows Rodeo Recovery LLC charging $110,000 for his care. The charges in a July statement, billed by Antioch Rehab, ran to $27,600 for a six-day stay.

Millspaugh said the transfers were often from sober living homes back to the detox intake center in South Los Angeles. To the insurer, it would look like he had relapsed, which he said he had not during that time. Insurance documents show rehabs continued to bill for new inpatient detox treatment repeatedly over half a year.

Robert Millspaugh found charges for services he said he didn't receive.

“It was just a holding facility for human trafficking. And they was getting paid to do it," he said.

Ultimately he threatened to expose them for insurance fraud, he said. A broker told him they’d fly him back to Arkansas, but instead put him on a plane to Las Vegas. An airline agent was able to get him on a flight back to Arkansas for free in August 2024.

When Millspaugh logged in to his insurance portal, he found five different LLCs charged an average of $26,000 a week for services he said he didn’t receive. In total, Blue Cross was charged half a million dollars over five months, according to his insurance records.

He’s back in rehab.

‘Drug dens’

The various entities that billed Millspaugh’s insurance are affiliated with a company called 55 Silver, which is run by a man known to clients as Pablo. The 38-year-old entrepreneur’s given name is Nathan Young.

One major insurer and five former clients or families of former clients have sued Young and his various entities. Another 70 have filed claims, which are precursors to lawsuits.

Aetna alleges in a lawsuit filed last year that Young and others defrauded the insurer of at least $40 million for fabricated addiction treatment at about a dozen facilities Aetna described as “drug dens." The suit alleges that Young operates a network of properties and LLCs that obtain clients through illegal broker payments to take advantage of insurance benefits.

“They often shuffled patients throughout programs for seemingly no reason other than to prolong benefits payments," Aetna says in the lawsuit.

Reuven Cohen, an attorney representing Young, said that rehab operators take on tremendous risk to help society because they are at the mercy of insurers, which make it difficult to provide services to those in need. “Aetna chose to sue Mr. Young to avoid paying him the millions of dollars of unpaid claims they owed," Cohen said.

Since January, state officials have revoked licenses for five of Young’s facilities over allegations including falsifying records, according to documents from the state regulator.

Derrin O’Neill, a former body broker who said he worked for about a dozen rehab owners including 55 Silver, said he and another broker were paid almost $3 million over two years for recruiting clients. Ultimately, O’Neill quit the business in 2020 and forwarded information documenting rehabs that paid him to the Orange County district attorney.

The district attorney’s office is investigating, according to people familiar with the matter.

Young doesn’t allow kickbacks and in instances when he or managers discovered that a team member had “improperly incentivized" patients, that person was fired, said Cohen.

A screenshot from one of Nathan Young's YouTube videos.

“I believe everyone, regardless of their past, deserves a chance at a healthy life, and despite a relentless series of baseless attacks on me and my work, I will do whatever I can to offer them a path to be productive members of their communities," Young said in a statement.

In a YouTube video about Young setting up a rehab posted one year ago titled “Nate the great," Young says, “It’s all about helping people."

Young’s clinics request that clients be on-screen for therapy sessions and pass frequent drug tests, Cohen said. Young “believes his clients remain sober for six months or more at an unprecedented rate for similarly situated facilities that offer treatment services to underserved and lower-income populations," he said.

55 Silver referred to Dylan Jones as a former patient who successfully kicked his longtime meth addiction at one of its rehabs.

“I hear a lot of people talk crap about them, but the reality is that’s a direct reflection of who you are, because you’re not doing the work, you’re not willing to change," said Jones, 45.

Jones said he met someone at a homeless shelter in Oklahoma who told him about 55 Silver. After he was flown to Los Angeles last year, Jones said he talked to a therapist for the first time in his life, which helped get at the root of his drug habit.

After several months, Jones was on a break from the program to visit family in the Midwest when he got the news the insurance was being cut off. Jones moved to Delaware, where he pays to live at a sober living home. He said he’s been sober for 18 months.

Dozens of other former clients and families who lost loved ones to overdoses at Young’s facilities have filed claims against Young and his partners in recent months. Many of the former clients were dumped beginning in late 2024 at a dangerous homeless encampment in Los Angeles known as Skid Row when their insurance stopped paying or wasn’t paying enough, said Karen Gold, an attorney who said she is representing more than 70 former 55 Silver patients or their families.

Kicked out

Penny Lamb and Jeffery Lichtenberg’s journey from Oklahoma also went through 55 Silver.

The man who had promised help with rehab extolled the benefits of 55 Silver and helped sign them up for Blue Cross policies.

Lichtenberg told him that he wanted to go to a rehab where he would be allowed to smoke cannabis. When they arrived in Los Angeles, the driver handed them a blunt to smoke and drove them to a rundown apartment complex.

“There’s no swimming pool; there’s no Jacuzzi," Lamb said. “It barely had air conditioning."

They were struggling with meth addiction, but the staff at 55 Silver insisted on admitting Lichtenberg—but not Lamb—as an opioid addict, he said. A medical professional Lichtenberg met on a brief video call prescribed him buprenorphine, a medication that can help opioid addicts with withdrawal. Buprenorphine itself is an opioid.

“I was higher than when I went into the program," he said.

Cohen, Young’s attorney, said that Young hires licensed professionals to determine individual treatment for clients, including what medications to prescribe.

Eventually, after a dispute with a 55 Silver house manager who Lichtenberg alleges asked them to buy him drugs, the couple was booted. They switched to a different program run by a separate operator, which soon kicked them out after Oklahoma Blue Cross’s change in policy.

Young and his managers take reasonable precautions to keep illicit drugs out of their facilities, Cohen said, but he added that “there is no foolproof way, particularly in this population, to forestall relapse dynamics, to block every imaginable supply vector, or to cover every blind spot."

On a sunny July day in Simi Valley, Lamb sat in a camping chair outside of their makeshift home while Lichtenberg mixed cups of water with watermelon-flavored electrolyte powder, her favorite. Lamb worked as a cook at Amazon Fresh, while Lichtenberg made money selling cigarettes at the encampment. They tried their best to keep clean.

They often thought about going home to Oklahoma to be near family. But for Lamb the past was still painful, and Lichtenberg knew too many people there who’d get him into trouble.

By September, growing desperate for a place to live, they set out for a sober living home across the country in North Carolina that they’d heard about from a friend. This time, they took a Greyhound bus. This time, they pay rent. Now, they are both working and are almost a month sober.

“It’s different because I feel like they care and aren’t just interested in a paycheck," Lamb said.

Write to Zusha Elinson at zusha.elinson@wsj.com and Julie Wernau at julie.wernau@wsj.com