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Lawmakers want to privatize Medicaid eligibility

Published January 25, 2011 10:49 am

Health reform • Some question need to fix what they say isn't broken.
This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

In 2007, Utah lawmakers told the Department of Health to transfer control of determining who is eligible for Medicaid to the Department of Workforce Services.

The move was meant to bring applications for health, food stamps, welfare and other low-income programs under one roof, and was supposed to save up to $4 million.

Instead, Medicaid eligibility determination costs more than doubled, say lawmakers who are again looking to outsource the program — this time, to a private company.

Details are scarce. What privatizing Medicaid eligibility would mean, for example, to the 986 state workers who now screen applicants for the programs is unclear.

But leading the charge is Sen. Dan Liljenquist, who is pressing health officials to "at least explore the option" and solicit bids.

Utah's Medicaid budget is $1.8 billion and growing, consuming 18 percent of the state's general fund and projected to consume 36 percent by 2020, said the Republican from Bountiful. That's without the expansion of the program in 2014 under federal health reform.

That growth has meant cutting services for others in need, namely the disabled, said Liljenquist. "Our most needy are getting the shaft, and I can't stand that."

While not opposed to privatization, Workforce Services officials aren't convinced it would reap dividends. Advocates are more skeptical, questioning the need to fix what they say isn't broken.

Meanwhile, the contractor drawing the most attention from lawmakers is Affiliated Computer Services Inc. (ACS), a lead player in Indiana's flawed attempt to make a similar change.

ACS was among half a dozen government contractors summoned to the Utah Capitol last week to pitch their ideas for improving Medicaid.

Headquartered in Dallas and recently acquired by Xerox, the information technology outsourcing company boasts $20 billion in earnings and has 130,000 employees around the globe. It already contracts with governmental agencies in Utah. Many of its top executives work at one of four offices here, including Chief Operational Officer David Bywater.

The Brigham Young University graduate told lawmakers his company could shave 20 percent off Utah's eligibility costs, which translates to about $10 million.

The company would pay less for labor and provide more efficient technology and operations, Bywater said. He added the company would pay transition costs up front, to be repaid by the state over five to seven years.

ACS was warmly received by lawmakers, who especially liked the idea of being able to hold the company financially accountable for mistakes.

"It's attractive to me to have another throat to choke," said, Liljenquist. "This is a Fortune 500 company. They know what they're doing."

He said some Workforce Services employees would likely go to work for ACS, although they may not get the same pay and benefits.

Lawmakers' concerns stem from a 2008 audit that found the cost for determining Medicaid eligibility rose $28 million after applications were consolidated with the other programs in 2007.

Workforce Services officials don't dispute the findings, but note the merger happened amid the biggest technology overhaul in state history — the agency's $79 million revamp of a case management system which had been in place since the 1980s.

The new Electronic Resource Eligibility Product, or eREP, launched in 2009.

But in a test run the year prior, case managers had to work in both systems, which increased their workload at time when laid off Utahns were flooding Medicaid, said Geoffrey Landward, workforce services' general counsel.

The agency has since reduced its operational costs by $11 million, he said.

Case managers are trained on all programs, he said. Applications are automated and can be done online. When new cases come in, eREP divvies up the work for employees across the state.

Soon, eREP will send e-mails and text messages to clients with updates and reminders of paperwork deadlines, Landward said. "We don't know what privatization has to offer. We know what we're doing and we're quite proud of it."

Kristen Cox, executive director of Workforce Services, said de-coupling medical programs from the rest of eREP "would cost us millions."

And the agency would have to retain some case managers, Landward said, since federal law requires state employees to be the ultimate decider on who qualifies for Medicaid.

National advocates doubt there's much room for improvement in Utah.

In Indiana "a big part of what the contractor was offering was new computer systems and a modernized business delivery model," said Stacy Dean, an analyst at the Center on Budget and Policy Priorities in Washington, D.C. "It isn't clear what a contractor has to offer [Utah] on any of these fronts."

kstewart@sltrib.com —

Flawed privatization in Indiana

Citing an inefficient and antiquated public benefits eligibility system, Indiana Gov. Mitch Daniels in 2006 hired a consortium of private companies, led by IBM, to handle applications for the state's programs.

But three years later, after clients reported long waits, lost files and wrongful denials, the governor canceled the contract. The state took back some work from Affiliated Computer Services Inc., the lead sub-contractor, but renegotiated a contract to have ACS run call centers, document imaging and other technology introduced by IBM.

The state is suing IBM for more than $1.3 billion for breach of contract and actions that included denying Medicaid to a dying cancer patient and a nun, according to The Associated Press.

IBM countered with its own lawsuit, asking for $52.8 million in deferred payments and equipment costs that it said the state still owes it as part of the 10-year contract.






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