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Texas terminating deal with main social services contractor
Medicaid, food stamp duties going back to state; official defends system, admits flaws
12:00 AM CDT on Wednesday, March 14, 2007
By ROBERT T. GARRETT / The Dallas Morning News
AUSTIN – Texas' rush to privatize eligibility screening for such programs as Medicaid and food stamps was dealt a huge blow Tuesday as the state announced that it would sever its relationship with the lead contractor.
State social services czar Albert Hawkins said protracted disagreements over money and changes to the private company's role persuaded him to end the state's five-year contract with the U.S. unit of Bermuda-based Accenture Ltd. more than three years early.
The contract had put Texas on track to be the first state to mostly privatize the process of determining residents' eligibility for social programs. But a pilot effort to combine contractors' screening of applicants for Medicaid, food stamps and welfare with the already-privatized Children's Health Insurance Program swiftly encountered turbulence in two Central Texas counties early last year.
Further rollout of the new system, which relies heavily on four privately run call centers, has been postponed repeatedly as applications and enrollment fees were lost and thousands of families complained of abruptly canceled health coverage for their children.
Mr. Hawkins insisted that the state will carefully assess whether to continue outsourcing some functions or pull most back into state government. But his move underscored the fact that the deal hasn't saved any of the $646 million that officials promised.
"The opportunity for savings is delayed until we get the model fully in place," he said. His confirmation by the Senate to a third two-year term as head of the Health and Human Services Commission has been held up, in part because of problems with the call centers.
For now, little will change for Texans applying for services. Mr. Hawkins said he expects the duties will be handed off by Nov. 1. A separate negotiation will now begin on how much the contractor will be paid. Through Feb. 28, the state had paid it $186 million, said a spokeswoman for Mr. Hawkins.
Mr. Hawkins and Accenture spokesman Jim McAvoy dismissed suggestions that the new eligibility system's problems should curb state leaders' enthusiasm for outsourcing.
"I don't really think this is about privatization," Mr. Hawkins said. "It's about still moving forward and achieving the goals of transformation that we set out for our eligibility system," which he said hadn't changed much since the late 1960s.
Mr. McAvoy said, "This has less to say about privatization than about how difficult large [information technology] projects are."
Democrats and state employee groups, though, claimed vindication of their 2003 warnings that the privatization effort would fail – especially when combined with budget cuts and tighter eligibility rules in CHIP, the state-federal health insurance program for children in working-poor families.
"Far too many Texas parents have been left to depend on NyQuil and prayer for health insurance because their children were unfairly denied CHIP coverage," said state Democratic Chairman Boyd Richie. "Republicans have wasted millions of taxpayer dollars on dysfunctional private call centers."
Ed Sills, spokesman for the Texas AFL-CIO, called outsourcing of sensitive government duties "an inherently flawed concept in which the public trust is traded for the corporate profit motive. The Accenture fiasco proved us right at every stage."
Mr. McAvoy responded: "We had problems with the initial pilot. We stabilized it."
Republican leaders also played down the decision to end the Accenture contract.
House Speaker Tom Craddick said that while he expects Mr. Hawkins to fix problems in the new eligibility system, he still likes outsourcing.
"Privatizations in a lot of areas of government have been real positive, have done a lot of great services for us, saving dollars and allowing us to increase our benefits to different programs and facilities," said Mr. Craddick, a Republican who lured one of the call centers to his hometown of Midland.
Senate Health and Human Services Committee Chairwoman Jane Nelson, R-Lewisville, said she just wants a "user-friendly" system for poor people.
"Whether the state is performing the function or a vendor, the critical point is that we make it as convenient as possible for citizens to enroll in our state services and that we make the best possible use of online tools to help in that process," she said.
Rep. Patrick Rose, chairman of the House Human Services Committee, has asked Mr. Hawkins to testify Thursday about the project's past and future.
"The Legislature needs to pass legislation to prevent future mistakes," said Mr. Rose, D-Dripping Springs.
Mr. Hawkins said he had informed legislative budget writers he might need some extra state employees, depending on how much he decides to dial back the outsourcing.
Mr. Hawkins said he was not sure whether call centers would continue to be staffed by employees of Reston, Va.-based Maximus Inc. – an Accenture subcontractor – or by state workers.
He expressed confidence that after the state's review he would continue to hire private companies for a variety of technical support tasks, such as printing and mailing notices to aid recipients, and a Midland operation that copies and scans applicants' personal financial documents into computer systems.
However, Mr. Hawkins said, there would be a "direct trade-off" between spending on state employees and payments to contractors – and little if any impact on the budget.
Advocates for poor families have said the state's original plan for outsourcing got rid of too many of the state eligibility workers who know the programs' differing and often very complex rules about who can qualify. Call center operators, who make between $12 and $15 an hour, initially didn't grasp many of the nuances. Most had to be retrained.
Mr. Hawkins said the whole idea was to test how much could be outsourced before going statewide with a new system.
"We didn't have it calibrated right," he acknowledged. "There needed to be more of those things retained by the state."
The tinkering has ended long times on hold and dropped calls, he said. But critics say it still takes far too long to process applications for Medicaid and food stamps.
In November, Williamson County entered the new system, joining Travis and Hays counties. A new rollout schedule announced Tuesday calls for 28 additional Central Texas counties to be added over the next five months, with Hill County the farthest north.
Mr. Hawkins said no state employees would be fired or demoted for miscalculating how much work should be privatized.
Mr. Hawkins said his agency and the Accenture-led group, the Texas Access Alliance, were unable to agree on financial terms and a revised division of labor that would be needed to carry out a handshake deal they announced in December.
Under that deal, state workers would perform certain functions originally envisioned for the private sector. Also, the state would slash the contract to $543 million, from $899 million. The Dec. 21 deal also called for the contract, originally for five years, to end in 2008 – two years early.
Staff writer Karen Brooks contributed to this report.