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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?

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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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Stroger staff oppose pediatric cuts

County Hospital staff say administration proposals to limit pediatric admissions are “unnecessary and shortsighted” — and come at a cost of millions of dollars in revenues, potentially threatening the long-term viability of of the county’s entire health system.

Staff from Stroger Hospitals Neonatal Intensive Care Unit will speak at the Cook County Health and Hospital System board meeting Friday morning (April 26, 8 a.m., 1900 W. Polk) and will be available for the media shortly after the public comment portion of the meeting ends at 8:15.

They say that earlier this month, administrators told senior staff that patients should be turned away after 17 beds are full — the number was raised to 24 after an impromptu meeting with county health system chief Ram Raju last week, I’m told — due to “patient safety” concerns.

The unit has 54 beds and an average daily census of 29, and the safety issue is unfounded, staff say. Patient outcomes meet all standards, and the unit’s 1-to-3 or less nurse-to-patient ratio is in line with other hospitals — and much better than staffing levels in Stroger’s adult medicine and surgery wards, which far exceed staffing norms, according to a release from NICU advocates.

And in a health system desperate for revenue to fund care for the uninsured, the unit — all of whose patients are covered by Medicaid — generates betweeen $10 million and $14 million a year.

Advocates say they worry that the administration is “manufacturing a financial crisis” that could threaten the entire system county health system, which could provide a pretext for selling off the system.

Will Emanuel back privatization transparency measure?

Community and public interest groups are calling on Mayor Emanuel to support a privatization transparency ordinance that is expected to be considered by the City Council Rules Committee on Wednesday.

The Privatization Transparency and Accountability Ordinance, submitted last November by Alderman Roderick Sawyer (7th) and sponsored by 32 aldermen, would require a cost-effectiveness study and public hearings when the city seeks to contract out services and operations.

Along with a cost-effectiveness study prior to the award of any contract, Sawyer’s ordinance would require a study of possible alternatives in collaboration with unions representing city workers whose jobs could be threatened.  City workers would also be qualified to bid on contracts through their unions.

Noting concerns over unemployment, wage levels and workforce diversity, the ordinance would require that at least half of contract work be performed by city residents, and that contractors pay wages and benefits comparable to what city workers get for the same work.  It would mandate City Council hearings and approval of contracts over $250,000.

“I have a concern about touting a monetary savings if we haven’t thought about the people that will lose a job, the families that could lose a home and the local businesses that could lose a loyal customer,” Sawyer said when he introduced the ordinance.

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More questions: charters, partners, and planning

(This is the second of two posts – part one looks at questions for the Commission on School Utilization including enrollment numbers and savings from closing schools.)

 

Mayor Emanuel, CPS chief Barbara Byrd-Bennett and utilization commission chair Frank Clark have taken the position that “right-sizing” the district has nothing to do with the district’s expansion of charter schools.

One has to do with declining enrollment and snowballing deficits, the other with choice and quality, according to this view.

The argument would work better if CPS’s enrollment and utilization numbers held up; if school closings actually saved significant amounts of money; and if charters consistently offered quality rather than undermining most parents’ first choice – a quality neighborhood school.

Even then, though, it’s hard to separate the proliferation of charters from enrollment declines at neighborhood schools.

[Based on revelations in Tuesday’s Tribune, the separation of school closings and charter expansions is purely strategic; when officials say they are unrelated, they are lying.]

 

A hundred new schools

In the past decade, as CPS lost 30,000 students, it’s opened more than 100 new schools with space for nearly 50,000 additional students, according to a new report from CTU.

While CPS closed scores of schools during that period, the number of schools in the district went from 580 to over 680.

“To the extent excess capacity exists, the main driver is the district’s aggressive charter proliferation campaign,” according to the report.  “The current ‘utilization crisis’ has been manufactured largely to justify the replacement of neighborhood schools by privatized charters.”

Throughout Renaissance 2010, “there was no facilities plan” and facilities decisions were “ad hoc and haphazard,” according to CTU’s report.  Adding to the confusion was the practice of approving charter schools without specifying their location, and some charters’ practice of repeatedly relocating their schools.

“CPS has opened charters haphazardly, without considering how they affect nearby schools,” according to a Sun Times editorial.

As Catalyst points out, new charter schools have been concentrated in the community areas with the largest number of schools listed as “underutilized” by CPS.  North Lawndale, with the most schools now rated as underutilized, has gotten more charter schools than any other community.

In general, those schools aren’t outperforming neighborhood schools, according to Valerie Leonard of the Lawndale Alliance.

 

A new round of failure

While school closings and new charter schools have been concentrated in low-income African American communities, these students are actually better served by neighborhood schools, according to CTU, citing reading score gains 10 percent higher in traditional schools than in charters in such areas.

Meanwhile students in closing schools have suffered mobility-related academic setbacks, faced transportation and security issues, and landed in worse-performing schools – while achievement rates in receiving schools have been adversely impacted.

It looks like the very students whom CPS has failed for a generation – whose schools have been systematically neglected and underresourced – are once again being failed.

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Chicago infrastructure trust – and water privatization?

A new report on private equity takeovers of public infrastructure focused on privatization of water services highlights Chicago’s infrastructure trust and warns of higher costs, degraded service, and diminished accountability.

“The infrastructure trust makes us more vulnerable to a public-private partnership” either to finance water system repairs and upgrades or for an operation-and-maintenance contract, said Emily Carroll of Food and Water Watch, which released the report.  “Taxpayers should be wary of getting a raw deal,” she said.

Mayor Emanuel has said he opposes the sale of Chicago’s water system, but the infrastructure trust is set up specifically to foster public-private partnerships, which Food and Water Watch considers a form of privatization, Carroll said.  In so-called P3s, public control over infrastructure is lost and ratepayers are on the hook for private financing costs, she said.

She points to the experience of Atlanta, which canceled a contract with a private corporation for water system operation in 2002 after huge problems with repairs, including emergency responses, and inflated charges for work done.  When only half the promised savings were realized and revenues fell short, the city requested the company’s billing records and was refused, according to FWW.

Water rates

And while Emanuel recently raised water rates to pay for repairs and upgrades, he could later come back and say more money is needed – and the higher rates would make the system more attractive to private investors, Carroll said.

In investment industry surveys, water systems are rated among the most desirable kinds of infrastructure, according to the report.  One of the Chicago trust’s participants, Macquairie Infrastructure and Real Assets, spent $578 million to purchase a private water company in 2007 – the largest private equity water service deal listed by FWW.

The report cites a trade publication describing Chicago’s $1 billion infrastructure trust as “an industry-backed deal to establish PPPs as a politically and financially viable business.”

Currently “private equity vehicles are armed with over $100 billion” seeking highly profitable investments in public infrastructure around the world, in an attempt “to exploit the lagging recovery of the public sector,” according to the report.

About Chicago it says:  “The city’s primary motivation appeared to be the desire to take debt off city books to give the illusion of reducing its liabilities.  ‘We have a tool here that takes some of the pressure off taxpayers,’ Emanuel claimed.  ‘Use somebody else’s money for a change, rather than theirs.’

“In the real world, however, banks do not provide free lunches.  Chicago will have to repay the private capital investment with interest through user fees.

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Mental health closures causing hospitalizations

With four more mental health centers slated for closing Monday, clinic users and supporters will seek a “pardon” from President Obama tomorrow – and highlight psychiatric hospitalizations that have resulted from the closure of two clinics earlier this month.

The Mental Health Movement will march on Obama’s campaign headquarters, 130 E. Randolph, at 11 a.m., Monday, April 30, to ask for “presidential pardon” for the condemned clinics – and for the clinic users they say will die as a result of the closures.

At 5:15 p.m. on Monday, therapists from the city clinics joined by health advocate Quentin Young will hold a press conference outside the mayor’s office in City Hall to discuss the impact of the closures.

One immediate outcome has been a surge of psychiatric hospitalizations for clients of two clinics closed earlier this month.  MHM knows of 18 such hospitalizations, said organizer Matt Ginsburg-Jaeckle.

One client – who was hospitalized after attempting suicide when she lost her long-time therapist – has been released and is telling her story for a video that MHM will be releasing, Ginsburg-Jaeckle said.

The cost of such hospitalizations (averaging $13,000 each) will eat up any taxpayers savings from clinic closings, according to an MHM report issued earlier this year.

Other issues highlighted in the report include the firing of all bilingual therapists at a time when immigrant communities increasingly need mental health services; the closure of four clinics in South Side communities that have a critical shortage of mental health services; and the diminished capacity of nonprofit providers that are supposed to take up the slack.

MHM members and supporters have been occupying the lot across from the Woodlawn Mental Health Center, 63rd and Woodlawn, since 23 were arrested at a sit-in at the clinic on April 12.  The Woodlawn center is slated for closure Monday.

Infrastructure trust and Red Line extension

Mayor Emanuel’s proposed infrastructure trust will be discussed at a community meeting on the Red Line extension in Roseland on Thursday.

Representatives of Grassroots Collaborative, the NAACP, AFSCME and other groups have been invited for a panel on “threats and opportunities” related to the infrastructure fund at the quarterly meeting of the Red Line Oversight Committee of the Developing Communities Project, said organizer John Paul Jones.

The meeting takes place at 11 a.m. on Thursday, April 19 at Lilydale First Baptist Church, 649 W. 113th Street.

DCP has been pushing since 2003 to extend rapid transit service to the city’s last unserved area.  After being on hold for decades, the project was approved by the CTA in 2009.

The project — which would extend the Red Line from 95th to 130th Street and add four new stations — is proceeding steadily, Jones said, with an environmental impact study and public outreach now underway.  Consultants conducting the environmental study are expected to report tomorrow.

Earlier this year the CTA hired Goldman Sachs, Loop Capital, and Estrada Hinojosa to serve as financial advisers for the modernization and extension of the Red Line.  Jones said it’s possible the infrastructure trust, if passed, could also come into play.

DCP executive director Gwen Rice said the group wants to weigh the benefits of public-private financing and make sure the community is at the table when decisions are made.  One of the group’s priorities is making sure that work on the extension goes to local residents, she said.

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When the infrastructure trust was first announced on February 29, the city’s chief financial officer Lois Scott created a small stir by saying private financing for the Red Line extension could be paid for with distance-based fares.

In her new blog for the Center for Neighborhood Technology, CTA vice chair Jackie Grimshaw rejects the idea.

Read the rest of this entry »

Questions remain on infrastructure trust

Illinois PIRG is calling on aldermen not to approve Mayor Emanuel’s infrastructure investment trust without more public safeguards, and the Grassroots Collaborative is urging a “no” vote on the proposal.

Leaders of community groups and union members in Grassroots Collaborative will hold a press conference Monday, April 16 at 9:30 a.m. on the 2nd floor of City Hall to call on aldermen to vote against the ordinance establishing the trust.

The council’s finance committee holds at hearing on the ordinance at 10 a.m. Monday.

Emanuel’s new tweaks to the ordinance go just partway to addressing the groups’ concerns.  “He’s dealing with the easy stuff,” said Celeste Meiffren of Illinois PIRG.

PIRG has called for far more stringent conflict-of-interest protections than Emanuel has offered: “Members of the board of directors should be free from conflicts of interest and instead should represent Chicagoans as primary stakeholders,” Meiffren writes in a blog post.

She calls for requiring board members to divest from any holdings in companies doing business with the city and in banks investing in the trust, and to agree not to work for them for a period after serving on the board.

As it stands the board looks to be comprised of CEOs and CFOs who will be “controlling taxpayer assets” and “accountable to nobody,” Meiffren said.

She doesn’t think putting an alderman on the board “solves the problem.”  She’d like to see watchdog groups represented on a board structured so that business leaders had a purely advisory role.

More bad backroom deals

Beyond that are larger concerns about the purpose of the trust.  “The ordinance is so vague that worst-case scenarios are really possible,” said Meiffren.

PIRG says the trust should be specifically committed to getting the best deal for the city and taxpayers rather than investors; and each deal should be subject to an independent evaluation to make sure that happens.

“There’s nothing in the ordinance that would prevent another bad backroom deal from happening,” Meiffren said.  “We have a history of bad deals, so we need to go above and beyond to ensure that taxpayers aren’t ripped off again.”

She cites the one project Emanuel has specified for the trust: a $225 million effort to retrofit city buildings for energy efficiency.  “Why can’t we do that with municipal bonds, which will get us a much better interest rate?” she asks.

“Instead of just going to private investors every time, we need a mechanism for determining what the best deal is – that evaluates every deal against other options,” she said.  “Nothing here does that.”

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