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Medicaid privatization deal called expensive, inefficient

The debate over privatization is currently playing out in a dispute over a contract with a private firm to “scrub” the state’s Medicaid rolls.

In fact, contrary to the privatizers’ claims, it looks like the deal is a huge waste of money.

Last month an arbitrator ordered a $76 million, two-year contract with Maximus Inc. cancelled by the end of the year, finding that it violated subcontracting provisions in state welfare workers’ union contract.  Maximus uses data-mining technology to identify ineligible Medicaid recipients.

Last week, the Alliance for Community Services called on the state to immediately cancel the contract, arguing it has resulted in unjustified disqualification of Medicaid recipients.

The editorial board of the Chicago Tribune, meanwhile, has called on Governor Quinn to appeal the arbitratrator’s ruling — or for the General Assembly to enact a legislative fix — saying the privatization deal is the best way to cut Medicaid costs.

But is it?


In a June 20 ruling, arbitrator Edwin A. Benn found that the Maximus deal violated provisions in the state’s contract with AFSCME restricting the contracting out of bargaining unit work unless there’s a clear advantage in terms of economy and efficiency.  The state hadn’t demonstrated that, he said.

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Human services in the Age of Austerity

Clients and welfare workers from the state’s human services system will discuss attacks on public services coming under the guise of austerity — including a privatization contract that an artbitrator recently ordered shut down — at a public meeting Monday.

The Alliance for Community Services is sponsoring the meeting on health care and human services at 6:30 p.m, Monday, July 8, at Teamster City, 300 S. Ashland.

Ralph Martire of the Center for Tax and Budget Accountability will discuss the state’s fiscal crisis.

“The reality is, we’re not broke,” said Fran Tobin of Northside Action For Justice, one of the initiators of the alliance.  “There’s lots of wealth in the state, but our regressive revenue system is failing to tap into it.”

Human service clients and welfare workers will tell stories of difficulties caused by a chronically understaffed system, said Steve Edwards, a retired union activist.

One source of problems is a new DHS pilot program — poised for expansion — that shifts from case-based to task-based organization of office work.  Under the program, caseworkers have been shifted to “teams” devoted to specific tasks.

“You have former caseworkers — who have college degrees in specific fields and a year of additional training — spending all day opening mail,” he said.  Everyone’s work goes into a single pile, with no one responsible for the ultimate disposition of particular cases.  It means clients no longer have a caseworker who they can call to address problems.

“They’ve blown up accountability,” Edwards said.  “It looks to me like sabotage.”

“Under the rhetoric of increasing efficiency, they’re clearly making things worse,” Tobin said.  “It’s insane.”

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County Neglects Millions in Medicaid Funds

With a proposal to triple Cook County’s sales tax reportedly under consideration, the county has failed to collect tens of millions of dollars in federal reimbursements for Medicaid and Medicare patients, according to a new report detailing the county’s “structural deficit.”

The failure of the Bureau of Health Services to establish a billing system has cost the county at least $40 million a year, said Heather O’Donnell of the Center for Tax and Budget Accountability, co-author of a new analysis of Cook County’s revenue system.

The report offers a big-picture view of budget issues in order to advance discussion of long-term solutions, “rather than just putting another finger in the dike,” O’Donnell said.

Deficits Loom

Despite being constitutionally required to have a balanced budget, Cook County has run annual deficits for several years, according to the report — over $200 million in fiscal year 2002 and $479 million in fiscal year 2006.

Even with severe cuts in this year’s budget, a deficit over $120 million is expected, the report said. At current levels of services and revenue growth, the report projects annual shortfalls of a half billion dollars by 2010 and a $1.5 billion in ten years.

The county has been plugging budget gaps for years without addressing the basic problem: the revenue system doesn’t grow with the economy, while many costs of essential county services outpace inflation, O’Donnell said.

Property taxes, which provide a quarter of the county’s $2.8 billion operating budget, have been capped at $720 million for the past ten years; the second largest tax source, the sales tax (providing 13 percent of revenues), “only partially grows with the economy” because Illinois law excludes consumer services, the largest and fastest growing segment of the state’s economy, according to the report.

Medicaid Cuts

Meanwhile federal Medicaid cuts have reduced reimbursements by $139 million in the last two years. Medicaid funds now provide just half of the $810 million health budget, down from 65 percent three years ago, according to the report. And new federal regulations mean the county will get $500 million less in Medicaid funds in the next five years.

At the same time health care costs are increasing sharply, and demand for public health services is rising steadily.

The first step in addressing revenue issues is to begin collecting federal and state Medicaid and Medicare funds that are being lost because “the county doesn’t have a billing system in place to collect those dollars,” O’Donnell said.

Leaving Money on the Table

“It’s unconscionable that you have a public health system that is hanging by a thread, and they are leaving money on the table,” she said. Earlier this year the county “closed clinics and laid off doctors and nurses — and if nothing is done they are going to have another round of cuts next year,” she noted.

While the county needs to find revenue sources that grow with the economy, “they can’t ask taxpayers to pony up with higher tax rates when there are federal dollars they could go after if they had a billing system in place,” O’Donnell said. “They have a public duty to collect the revenue that is due to them” from other agencies.

CBTA expects to release a second report analyzing revenue alternatives for the county in coming weeks.

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