center for public policy priorities texas association of area agencies on aging outsourcing issues...
TRANSCRIPT
Center for Public Policy Priorities www.cppp.org
Texas Association of Area Agencies on Aging
Outsourcing Issues and Concernsin Public Benefits Administration
November 30, 2006
Celia Hagert, Senior Policy [email protected]
Center for Public Policy Priorities www.cppp.org
The Big Picture
Center for Public Policy Priorities www.cppp.org
Pros and Cons of Privatization
Center for Public Policy Priorities www.cppp.org
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
Center for Public Policy Priorities www.cppp.org
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)
Center for Public Policy Priorities www.cppp.org
• 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.
Stepping Back: What are the Problems IE&E is Supposed to Fix?
Center for Public Policy Priorities www.cppp.org
• 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
Stepping Back: What are the Problems IE&E is Supposed to Fix?
Center for Public Policy Priorities www.cppp.org
• 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• Out-of-date technology can lead to duplication of effort -- unnecessary “red tape”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
Stepping Back: What are the Problems IE&E is Supposed to Fix?
Center for Public Policy Priorities www.cppp.org
Downsizing Increased Workload
Center for Public Policy Priorities www.cppp.org
Caseloads Rise and Fall, Staffing Does Not Keep Pace
Caseload and Staffing Changes, 1995-2006
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Clients
Total Staff
Center for Public Policy Priorities www.cppp.org
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
Center for Public Policy Priorities www.cppp.org
A Vicious Cycle
High turnover rates
Staffing
shortages
Heavy workload
OUTCOMES:• System doesn’t work• Client services suffer• Public confidence in
system is undermined• Alternative
approach/fix sought
Center for Public Policy Priorities www.cppp.org
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?
Center for Public Policy Priorities www.cppp.org
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
Center for Public Policy Priorities www.cppp.org
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
Center for Public Policy Priorities www.cppp.org
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
Center for Public Policy Priorities www.cppp.org
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 www.cppp.org
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
Center for Public Policy Priorities www.cppp.org
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 www.cppp.org
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 www.cppp.org
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.
Center for Public Policy Priorities www.cppp.org
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.
Center for Public Policy Priorities www.cppp.org
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 www.cppp.org
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 www.cppp.org
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.
Center for Public Policy Priorities www.cppp.org
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 www.cppp.org
Loss of Staff
FY 2007 figure includes both state and contract staff
Staff* and Caseload Changes, 1997-2007
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
1997 2004 2007
Cas
eloa
ds (
reci
pien
ts)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Elig
ibilit
y S
taff
Food Stamps Medicaid TANF Total Staff
Center for Public Policy Priorities www.cppp.org
Heavy Use of Temporary Staff
Permanent vs. Temporary Staff
6,920 6,6376,247
5,612
6,309
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Permanent FTEs
Temporary FTEs
Total
Center for Public Policy Priorities 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 www.cppp.org
Texas CHIP Enrollment
0
200,000
400,000
600,000
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.
High: May ’02: 529,271
Sep. ’03*: 507,259
Nov. ’06: 321,341
Center for Public Policy Priorities www.cppp.org
Children’s Medicaid
Center for Public Policy Priorities www.cppp.org
Child Medicaid and CHIP Enrollment Combined
1.5
2.0
2.5
3.0
Jan 0
2
Apr 0
2
Jul 0
2
Oct 0
2
Jan 0
3
Apr 0
3
Jul 0
3
Oct 0
3
Jan 0
4
Apr 0
4
Jul 0
4
Oct 0
4
Jan 0
5
Apr 0
5
Jul 0
5
Oct 0
5
Jan 0
6
Apr 0
6
Jul 0
6
Oct 0
6
En
rollm
en
t (m
illio
ns
)
0.5
1.5
2.5
3.5
4.5
5.5
6.5
Ch
ild p
op
ula
tio
n (
mill
ion
s)
Sources: Enrollment from Texas Health and Human Services Commission; Texas State Demographer's 0-17 Population Estimates
Sept. ’03: 2,150,543
Oct. ’06: 2,020,710
Estimated child population growth of almost 70,000 per year
Combined CHIP/Child Medicaid Enrollment
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%
Total 893,470 903,786 10,316 1.2%
•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 www.cppp.org
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
Center for Public Policy Priorities www.cppp.org
For more information or to sign up for our free E-Mail Updates, visit
www.cppp.org
Center for Public Policy Priorities www.cppp.org
Use of This Presentation
• The Center for Public Policy Priorities developed these slides for use in making public presentations. The data may become outdated. While you may reproduce these slides, please give appropriate credit to CPPP.
© CPPP