Medicaid contract raises questions of privatization, access to health care

Medicaid contract raises questions of privatization, access to health care

In the fine print of the Medicaid reform bill passed this summer was a plan for the cash-strapped state to save $350 million by contracting with a private company to investigate fraud.

Since the contract with Maximus Health Services was signed, both advocates and state workers have raised concerns. Chief among them is the price of the two-year, $76.8 million deal when it’s estimated that Illinois is already struggling with a budget deficit of more than $40 billion.

Advocates also worry that the company has a financial motive to show it’s doing a good job by booting many people from the healthcare program. The contract calls for Maximus to be paid based on how many cases it evaluates and makes a recommendation to remove or keep.

Fran Tobin, an activist with the Alliance for Community Services, said he has little faith that the contract will meet its goals without hurting low-income communities.

"How could it possibly make sense to spend money the state doesn't have? The only way the contract makes sense is if people are going to be knocked off Medicaid," Tobin said. "People are going to lose services and medical care whether they deserve it or not."

State legislators who back the bill say the hope is that the opposite will be true.

Sen. Heather Steans, the main sponsor of the bill called the SMART Act, said finding fraud will mean "we don't have to do as many cuts and reductions to the Medicaid program."

Under the contract, Maximus will electronically scan the data of all Medicaid recipients in Illinois and determine whether they are eligible based on their income, residency and immigration status, said Mike Claffey, a spokesman at the Illinois Office of Communication and Information.

The company will then recommend cases that it believes should be purged from the program. However, Claffey said, state employees will make the final decision about whether to remove someone.

Making a Profit

There are two main concerns about the contract, said John Bouman, executive director of the Shriver Center on Poverty Law. One is whether the process to determine who should be eliminated won’t be corrupted by Maximus’ interest in its bottom line. The other is ensuring that the company accurately does its job.

"This has been kind of a highly politicized issue,” said Bouman, "and no matter what the Department (of Human Services) does they will be criticized for being too slow or too careful by the Republicans and they will be criticized by the people who care about the beneficiaries for being too fast and not careful enough."

We tried to get comment from Maximus on some of the concerns about the contract. A woman who answered the phone at the company’s Reston, Va. headquarters referred us to its Illinois office. No one at that office returned our calls, and a spokesman at the company’s headquarters would only refer us to Claffey.

Henry Bayer, the executive director of the state workers union AFSCME, worries that the contract will set a precedent in governmental work.

He called the contract a cover for widespread privatization of determining who is eligible for Medicaid, a process he that he described as a “core governmental function.”

“The DHS implementation plan not only contracts out important work now performed by state employees to private, for-profit vendors, it may also result in Illinois families being unfairly deprived of medical care,” Bayer said in a letter to the Illinois Department of Human Services.

A long history

Allowing private companies to oversee welfare reform has a rocky history. Maximus came under fire in 2000 for reports showing it had billed Wisconsin questionable expenses while managing its welfare funds.

And in a case that involved Armonk, N.Y.-based IBM Corp., Indiana cut short a ten-year contract with the company to privatize much of its welfare system after a decline in the standards of service.

The state became embroiled in a legal battle with IBM and was recently ordered to pay the company $12 million for equipment the state kept after it cancelled the contract.

But in a time of tight state budgets, privatization has become more common, and Maximus has played a central role. The multi-million dollar global company was part of one of the first welfare privatization efforts in Los Angeles County in the late 1980s and now it has contracts for welfare-related services in over 40 states.

Maximus has worked with the state before. On a smaller scale, it worked in Illinois’ Child Support Division at Human and Family Services for the last 15 years.

Claffey, the state’s spokesman, said the previous experience with Maximus was “excellent." In regards to scandals around welfare privatization in Maximus’ history, Claffey said officials continue to talk with Maximus about incorporating lessons learned from previous issues to help guide Illinois Medicaid verification program.

Cutting the fat on Medicaid?

Steans is confident Maximus can do a better job than state workers of identifying people who are not eligible for the program.

"One thing we have been hearing a lot is that we are not very good at checking the (Medicaid) rolls and making sure that people on the rolls should be on," she said.

Rep. Tom Cross, a Republican, said the contract with Maximus is the solution to improving the program.

“The goal (of the contract) was what was the most economical and efficient approach to figure out who belongs on Medicaid,” said Cross. “The consensus was the best way is to have  an outside company do that.”

Cross estimated that 300,000 to 400,000 people are receiving Medicaid funding when they are ineligible. He said these figures were from conversations with individuals working with Medicaid patients.

“That’s why you have a system that you can’t afford,” said Cross.

Some experts say the extent of Medicaid fraud is often overstated.

Robert Kaestner, a professor at the University of Illinois Chicago, told Illinois Issues: “There is some research that shows people don’t (game) the system as much as is implied by some. Some of the legislators claimed 20 percent of people are income-ineligible because we haven’t verified their income. I think that is a very high number and not likely.”

Bouman of the Shriver Center emphasized that the state was trying for accuracy. Contracting out the work to wade through Medicaid’s polls is also filling a gap that was partly created by the budget in the first place, he said.

"For at least ten years they (state workers) have been losing staff in the state budget crunch, so there is a backlog,” he said

The only way to make sure that Maximus fulfills its contract correctly will be to closely watch the proceedings.

"It will involve keeping an eye on the procedures they set up, the notices that they use. That way we supervise the contract to make sure that everything is fair,” said Bouman. “Ultimately, the contractor is only going to make recommendations regarding eligibility. The department itself will need adequate staff to deal with administrative appeals and pushback that comes from people that disagree with Maximus' determination.”

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