Arizona Medicaid Official Continued Role After License Expired

Arizona House Republican leaders say they discovered that the Chief Medical Officer of the state’s Medicaid agency, AHCCCS, has been serving without a valid medical license since August. The revelation has raised concerns about oversight and accountability at an agency that provides health care to more than 2 million Arizonans.

Expired License Raises Oversight Questions

Dr. Theresa Costales, a psychiatrist, became AHCCCS Chief Medical Officer in January 2025. Records from the Arizona Medical Board show her license was due for renewal on April 9, 2025. She did not renew it. The license remained valid only during a statutory grace period, which ended on August 9. After that date, the license expired.

Despite the expiration, Dr. Costales continued to serve as CMO. In that role, she advises on clinical policy and acts as an expert witness for the state. These duties normally require an active medical license. For comparison, the Arizona Department of Corrections requires its Chief Medical Officer candidates to “possess a valid, unrestricted Arizona medical license” before employment.

Republican Leaders Call for Accountability

House Speaker Steve Montenegro said such a lapse “should never happen in a healthcare agency responsible for millions of people.” He argued that the failure undermines public trust in state government.

House Majority Leader Michael Carbone added that verifying a license takes minutes. “That it slipped through the cracks at the highest level of medical leadership is completely unacceptable,” he said.

House Majority Whip Julie Willoughby voiced concern about ongoing programs overseen by AHCCCS. She pointed to the rollout of the controversial Home and Community Based Services (HCBS) assessment tool. “Were those reviews guided by a CMO whose license had expired? If so, how can families trust the data or the decisions that came from it?” she asked.

Speaker Pro Tempore Neal Carter criticized Governor Katie Hobbs’ administration. “This isn’t a small oversight—it undermines confidence in one of Arizona’s largest healthcare agencies,” he said.

AHCCCS Role in State Healthcare

AHCCCS is the state agency that administers Medicaid and other healthcare programs, serving over 2 million low-income and medically vulnerable residents. The Chief Medical Officer plays a central role in guiding policy decisions, reviewing clinical standards, and advising in legal or regulatory matters.

Medical directors making clinical decisions are typically required to maintain an active license to ensure current qualifications. Lapses in licensure can raise legal and ethical questions about the validity of decisions made during the period without proper credentials.

Broader Implications for State Leadership

The incident comes at a time when AHCCCS faces heightened scrutiny. Families of individuals with developmental disabilities have already raised concerns about how the agency rolled out the new HCBS assessment tool. Republican lawmakers now argue that decisions related to that tool may lack credibility if the state’s top medical officer was not properly licensed.

The issue also feeds into larger debates about administrative oversight within the Hobbs administration. Lawmakers say this case highlights weaknesses in internal checks designed to ensure compliance with professional standards.

What Comes Next

It remains unclear what immediate steps AHCCCS or the governor’s office will take. Questions remain about whether Dr. Costales will renew her license, whether she will remain in her position, and whether past decisions made under her leadership will be reexamined.

For now, Republican leaders continue to call for answers. They argue that the situation underscores the need for strong accountability in agencies managing vital services for Arizona residents.