Transcript Slide 1

Texas Association of Area Agencies on Aging
Outsourcing Issues and Concerns
in Public Benefits Administration
November 30, 2006
Celia Hagert, Senior Policy Analyst
[email protected]
Center for Public Policy Priorities
www.cppp.org
The Big Picture
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Pros and Cons of Privatization
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What is “IE&E”?
• Modernization of eligibility determination and
enrollment:
–
–
–
–
Better technology/greater automation
Centralized and paperless computer system
Remote application options
More partnerships with nonprofits
• Outsourcing development, administration, and
partial staffing of system
• Significant staffing reductions & office closures
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Arguments for Outsourcing
the IE&E Project
• Private sector has expertise, capital
to modernize
• Help state meet central challenge of
serving growing number of clients
with fewer resources
• HHSC estimated $210m in additional
savings over 5 years (9% > than
savings in state-run IE&E)
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Stepping Back: What are the Problems
IE&E is Supposed to Fix?
• Labor-intensive process costly for states,
burdensome for clients, especially working
families
• Eligibility determination is complicated,
driven by complex federal and state laws
designed to
– target benefits to those who need them most,
– keep program error or fraud at a minimum,
and
– Ensure prudent stewardship of taxpayer
money.
Center for Public Policy Priorities
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Stepping Back: What are the Problems
IE&E is Supposed to Fix?
• Clients are not easy to serve:
– majority have incomes below the poverty
level;
– many are elderly, have disabilities, or grapple
with language barriers.
• Each program serves a distinct clientele
and rules vary considerably, which makes
determining eligibility even more difficult.
• Constant policy changes pose challenges for
both workers and clients
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Stepping Back: What are the Problems
IE&E is Supposed to Fix?
• Legislature has not provided necessary
resources to ensure effective
administration
• Out-of-date technology can lead to
duplication of effort -- unnecessary “red
tape”
• Chronic underfunding exacerbates existing
challenges
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Downsizing Increased Workload
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Caseloads Rise and Fall, Staffing Does
Not Keep Pace
Caseload and Staffing Changes, 1995-2006
7,000,000
14,000
6,000,000
12,000
5,000,000
10,000
4,000,000
8,000
3,000,000
6,000
2,000,000
4,000
1,000,000
2,000
0
Clients
Total Staff
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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Services to clients suffer
• Less than half of eligible households
get Food Stamps
• Half of uninsured kids (@700K)
eligible for Medicaid/CHIP, but not
enrolled
• Clients frustrated, deterred
• Lawsuits related to customer service
shortcomings
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A Vicious Cycle
Heavy workload
High turnover rates
Staffing
shortages
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OUTCOMES:
• System doesn’t work
• Client services suffer
• Public confidence in
system is undermined
• Alternative
approach/fix sought
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Does Outsourcing Hinder or Help?
• Experience suggests some functions most
efficiently performed by government
directly; others best contracted out.
• States must identify which kinds of
activities fall into each category
• Avoid decisions based on generic
assumptions about competition or
ideological preferences.
• Overarching question is: do the benefits of
outsourcing outweigh the risks?
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Overview of Challenges
• Competition is limited
• Hard to measure performance
• Hard to design contracts to adapt to
caseload/policy changes
• Changes role of government,
demands new expertise, additional
resources
• Challenges increase risk
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Limits on Competition
• Most commonly cited reason for
outsourcing is increased competition =
improved quality & lower cost
• However, competition for the right to
administer a program differs from
competition to provide the service itself
• These differences may undermine
government’s ability to reap the benefits of
competition
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Limits on Competition
• No competitive market for eligibility determination
• Winning bidder must make huge investment to
enter the market – start-up costs are significant
• Companies able to respond in essence assume
monopoly power
• Any competition effectively ends upon the signing
of contract
• Cost & disruption of awarding contract, transition
to contractor means contracts likely to run for
many years
• Competition eliminated for long periods of time
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Limits on Competition
• Lack of a competitive market increases risk that
contractor will be unable to perform as promised
– Bidders lack present capacity to offer services
– Selecting contractor involves great deal of speculation
by state
• If contract awarded based on lowest bid, bidders
may grossly underestimate cost in order to win
contract
• Disruption, cost & risk of finding new contractor
(or rebuilding public system) may force state to
stay with contractor even if performing poorly or
demanding higher price
• At this point, state must pay contractor more or
let services to clients suffer
Center for Public Policy Priorities
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Limits on Competition Increase Risk
• State assumes most of risk in inherent
uncertainty over costs of outsourcing
eligibility determination
• If contract price proves to be more than is
needed, contractor keeps the profits
• If price proves inadequate, contractor has
leverage to ask for more money
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Hard to Measure Performance
• Key factor in predicting success in outsourcing:
– Clear accountability for results
– Clear criteria for performance
– Clear public objectives (increase or reduce
caseloads?)
• Government functions that require exercise of
judgment to weigh competing priorities difficult to
outsource
• Private companies may be well suited for certain
functions related to public benefits
administration, including straightforward service
such as
– Processing payments
– Data processing
– Computer systems design
Center for Public Policy Priorities
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Hard to Measure Performance
• Steps required to determine eligibility for public
benefits range from simple, objective functions to
complex, subjective determinations.
• More objective acts (i.e., scanning documents or
helping to fill out application) easy to measure and
therefore more conducive to outsourcing.
• More subjective determinations (i.e., identifying
disability that prevents applicant from meeting
program requirements) harder to measure and
therefore less conducive to outsourcing.
Center for Public Policy Priorities
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Program Integrity vs. Program Access
• Eligibility determination requires accommodating
(or balancing) different policies that may conflict
— i.e., controlling for fraud while encouraging
maximum participation.
• Designing a contract that strikes appropriate
balance between competing priorities of
program integrity and program access is
extremely difficult.
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Contract Must Be Flexible
• Public benefits system lacks stability: caseloads
rise and fall unexpectedly due to economic
circumstances or policy changes.
• Designing a contract that adapts to changes in
participation is difficult.
• If contract does not increase reimbursement
when caseloads go up, then contractor has
incentive to create barriers to families seeking
services.
• If payments are conditioned on outcome of
eligibility determination, then contractor has less
incentive to focus on program integrity or
emphasize services with potential to reduce
reliance on public assistance, i.e., job training.
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Risks Reduce Potential for Savings
• Any savings are likely to come from reductions
in services, i.e., closing offices or reducing staff.
• Those reductions can be achieved by the state,
without outsourcing, if cutting costs is primary
goal.
• Outsourcing alone offers no immediate ways of
producing significant efficiencies.
• Many federal rules governing public benefits
cannot be changed simply because states find
that they are not efficient.
• Where there is flexibility to simplify, state can
adopt changes without outsourcing.
Center for Public Policy Priorities
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Impact of Outsourcing
on State Government
• Outsourcing changes role of government
and creates new responsibilities:
– Developing requests for bids
– Negotiating contracts
– Monitoring performance
– Enforcing compliance
• States need to determine whether they
have capacity to play this role, and
• Include costs of contract monitoring and
enforcement when determining whether
outsourcing is cost-effective.
Center for Public Policy Priorities
www.cppp.org
Mitigating the Risks
• Clearly specify the role and responsibility of the
contractor (and subcontractors).
• Determine appropriate costs.
• Be able to develop clear and measurable
performance criteria.
• Because contracting problems are inevitable,
states should begin on a limited scale.
• Conduct intense evaluation of pilot before
relinquishing significant control of system.
• Prepare for dramatic change outsourcing will have
on state roles and responsibilities.
• Be able/willing to commit additional resources
needed for effective contract monitoring &
enforcement.
Center for Public Policy Priorities
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Audit of IE&E Contract
• Comptroller’s audit alleged serious flaws in
design of the contract
• Criticized HHSC for its failure to monitor
and enforce the contract
• Faulted the state for moving too quickly to
implement new system without adequate
testing or contingency planning
• Poor planning, execution resulted in the
loss of critical numbers of state staff and
jeopardized services to low-income
Texans.
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Problems with IE&E
• Technical problems
• Poor training of contractor staff
• Staffing shortages
Lead to:
• >100K kids lose health coverage between Dec
05 and Sep 06.
• Large backlog of applications in pilot area
• Rollout on hold indefinitely, though TIERS (new
computer system) is being expanded
• Serious delays in application processing in most
metro areas; error rates also on the rise
Center for Public Policy Priorities
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Loss of Staff
4,000,000
14,000
3,500,000
12,000
3,000,000
10,000
2,500,000
8,000
2,000,000
6,000
1,500,000
4,000
1,000,000
Eligibility Staff
Caseloads (recipients)
Staff* and Caseload Changes, 1997-2007
2,000
500,000
0
0
1997
Food Stamps
2004
Medicaid
2007
TANF
Total Staff
FY 2007 figure includes both state and contract staff
Center for Public Policy Priorities
www.cppp.org
Heavy Use of Temporary Staff
Permanent vs. Temporary Staff
8,000
7,000
8,000
6,920
6,637
6,000
5,000
6,309
6,247
5,612
7,000
6,000
5,000
Permanent FTEs
4,000
4,000
Temporary FTEs
3,000
3,000
Total
2,000
2,000
1,000
1,000
0
Center for Public Policy Priorities
0
www.cppp.org
Timeliness
Percent of Applications Processed Timely
Region
Food Stamps
Medicaid
TANF
01
94.3%
97.2%
95.8%
02
89.5%
94.4%
93.6%
03
68.5%
79.5%
74.8%
04
93.5%
96.3%
95.9%
05
84.6%
90.7%
91.8%
06
71.0%
77.0%
66.1%
07
81.0%
53.4%
81.9%
08
96.1%
97.8%
96.6%
09
94.3%
95.3%
96.8%
10
94.4%
93.4%
93.6%
11
90.2%
95.9%
91.9%
*00
93.2%
63.0%
52.9%
TOTAL
81.1%
82.3%
81.6%
Region 00 includes transactions processed by Centralized Benefits Section,
Assistance Response Team & Customer Assistance centers.
*
Center for Public Policy Priorities
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Texas CHIP Enrollment
600,000
Sep. ’03*:
507,259
High: May ’02:
529,271
Nov. ’06:
321,341
400,000
200,000
0
May
'00
Nov
'00
May
'01
Nov
'01
May
'02
Nov
'02
May
'03
Nov
'03
May
'04
Nov
'05
May
'05
Nov
'05
May
'06
Nov
'06
Source: Texas Health and Human Services Commission
*Sept. ’03 is the beginning of the state fiscal year in which
CHIP cuts/policy changes started taking effect.
Center for Public Policy Priorities
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Children’s Medicaid
Center for Public Policy Priorities
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Child Medicaid and CHIP Enrollment
Combined
6.5
Enrollment (millions)
5.5
Estimated child population growth
of almost 70,000 per year
2.5
Sept. ’03:
2,150,543
3.5
2.0
2.5
Combined CHIP/Child
Medicaid Enrollment
Oct. ’06:
2,020,710
Ju 2
l0
O 2
ct
0
Ja 2
n
0
A 3
pr
0
Ju 3
l0
O 3
ct
0
Ja 3
n
0
A 4
pr
0
Ju 4
l0
O 4
ct
0
Ja 4
n
0
A 5
pr
0
Ju 5
l0
O 5
ct
0
Ja 5
n
0
A 6
pr
0
Ju 6
l0
O 6
ct
06
pr
0
A
n
1.5
0.5
02
1.5
Ja
4.5
Child population (millions)
3.0
Sources: Enrollment from Texas Health and Human Services Commission;
Texas State Demographer's 0-17 Population Estimates
Center for Public Policy Priorities
www.cppp.org
Adult Medicaid Trends - Statewide
Dec-05
Nov-06
Dec 05 to
Nov. 06
Change
Aged and
Disabled
687,177
716,845
29,668
4.3%
Cash
Assistance
31,876
25,651
-6,225
-19.5%
Maternity
93,617
99,147
5,530
5.9%
Other
Parents
64,656
57,274
-7,382
-11.4%
893,470
903,786
10,316
1.2%
Total
•CAVEAT: Travis and Hays County Medicaid enrollment DECLINED for
adults from December 2005 to November 2006 (-1.5%, -5.4%).
•Points to problems with the IE&E pilot and TIERS
Center for Public Policy Priorities
www.cppp.org
Adult Medicaid Trends - Pilot Area
Dec-05
Aug.-06
Dec 05 to
Aug. 06
Change
Travis
25,044
24,640
-404
-1.6%
Hays
2,684
2470
-214
-8.0%
Texas
877,326
892,196
14,870
1.69%
Source: Texas Health and Human Services Commission
Center for Public Policy Priorities
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Error Rates Increase
Center for Public Policy Priorities
www.cppp.org
Challenges for Advocacy
• Outsourcing brings new challenges and changes
the role of advocacy groups.
• May have to divert significant resources, develop
new areas of expertise to respond effectively in a
privatized system.
• The National Center for Law and Economic
Justice has developed guidance that
– Helps advocates analyze/address issues related to
privatization of public assistance programs
– Identifies areas for advocacy and strategies to make
the contracting process more responsive and
accountable to clients and public concerns
(http://www.nclej.org/files/privatization.pdf)
Center for Public Policy Priorities
www.cppp.org
Challenges for Nonprofits
• Nonprofit community has a lot at stake,
especially if outsourcing shifts more
responsibility to the client.
• Shift will affect nonprofits’ mission and
resources.
• Contracting with the state to take over
portions of the application process may
pose new liabilities for nonprofits.
• Contracting may alter nonprofits
relationship with the state and potentially
compromise their ability to advocate on
behalf of their clients.
Center for Public Policy Priorities
www.cppp.org
A Final Word…
• Nonprofits are uniquely poised to exert a
positive influence on changes taking place
in Texas.
• Nonprofit community can shape these
efforts in a way that will improve outcomes
for low-income families.
• Nonprofit organizations need to take an
active part in planning and development
process, both because they have so much
to offer and so much at stake.
Center for Public Policy Priorities
www.cppp.org
Privatization is Here to Stay
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For more information or to sign up
for our free E-Mail Updates, visit
www.cppp.org
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