Anthony is a mother. Or, at least, that's what the Arizona Health Care Cost Containment System thinks.

In 1993, AHCCCS, the state's indigent health-care program, paid for Anthony to give birth to a healthy, eight-pound, six-ounce girl. AHCCCS records show the cost of the claim was roughly $4,000--a little higher than normal, but then, this wasn't exactly a normal birth.

Actually, Anthony's sister had the baby. She had just moved to Tucson, he says, and hadn't been in Arizona long enough to become eligible for AHCCCS, the state's version of Medicaid. The baby wasn't about to wait, so one day Anthony sealed his AHCCCS identification card in an envelope and mailed it from his home in Flagstaff to his sister's home in Tucson. A couple of weeks later, the baby was delivered--at taxpayer expense.

"Cute kid, too," Anthony says, taking a long pull off a bottle of Coors Light. "Looks just like her mom."

Anthony doesn't express much remorse for what he did--although it's a felony that could land him in federal prison.

But you might think that a male giving birth would at least raise an eyebrow at AHCCCS--or start a light blinking on a computer somewhere. It didn't. The system that should keep this type of fraud from happening doesn't work a lot of the time.

So Anthony's claim was paid, along with millions of others that year. At only $4,000, the claim apparently wasn't large enough to raise questions at AHCCCS. And why should it?

Much larger financial irregularities have made scarcely a dent in AHCCCS' growing national reputation as a model for health-care reform.

When House Speaker Newt Gingrich talks about giving states federal money and the leeway to find their own solutions to social problems, AHCCCS is exactly the kind of program he is talking about.

AHCCCS (often pronounced "access") was the first statewide indigent health system to employ what is known as managed care; it places poor people into Health Maintenance Organizations, which provide them care at a set amount of money per month.

Supporters of the Republican Contract With America repeatedly hold up Arizona's system as a textbook example of how to run the federal health-care system for the underprivileged, Medicaid. National news media have jumped on the AHCCCS bandwagon, too; just two weeks ago, Time magazine trumpeted AHCCCS as a vision for the future of Medicaid.

It is not clear, however, that AHCCCS should be used as a model for anybody's health-care system. Indeed, Arizona's indigent medical system illustrates just how many problems the "devolution" of federal programs to the state and local levels may cause if the Contract With America is implemented fully.

In a series of investigative reports beginning last April, New Times has revealed a wide variety of management problems at AHCCCS--problems that raise questions about whether this particular managed-care system represents an improvement over traditional Medicaid programs. The problems include:

* Repeated mistakes in determining eligibility. These errors have led AHCCCS to pay for medical care for significant numbers of ineligible people--including many who had been dead for years.

* The approval of irregular, possibly fraudulent billings submitted by health plans--even though the irregularities were obvious on the face of the claims themselves.

* The absence of checks and balances that could prevent fraud--and the refusal to use the antifraud systems that have been installed.

All of these allegations are being studied in a myriad of state and federal investigations. Just lastmonth, the regional inspector general for the U.S.Department of Health and Human Services announced that her office is working with the U.S.Department of Justice on an investigation of AHCCCS fraud and waste.

The General Accounting Office, an investigative arm of Congress, has also begun to probe claims of waste at AHCCCS, as have the Health Care Financing Administration (the federal department that administers Medicaid monies) and the Arizona Attorney General's Office.

Most knowledgeable observers agree that the system for delivering indigent medical care in this country must be overhauled if runaway health-care costs are to be controlled.

AHCCCS officials claim their program saves substantial amounts of money over traditional Medicaid systems, even as it provides high-quality care and reduces fraud.

Those claims, however, are disputed by the intense scrutiny the program is drawing from law enforcement authorities--scrutiny that, sources say, could lead the federal government to demand the return of as much as $200 million in misspent health-care funds.

The Arizona Legislature approved the state's participation in Medicaid in 1974. Until then, state lawmakers had been willing to go without huge federal health-care subsidies to avoid what they considered oppressive guidelines on how the money should be spent. That left the tab for poor people's health care at the level of county government.