Report: Privatized Medicaid program serves fewer people, costs more

AUSTIN - The privatization of a state program that transports poor Texans to medical appointments has cost the state hundreds of millions of dollars more while serving fewer than half as many people, according to a Legislative Budget Board report that some officials tried to withhold from the public.

In the five years since Texas began privatizing the management of the Medical Transportation Program, the number of Medicaid recipients using the program has dropped from 350,000 to 150,000, the number of substantiated complaints has doubled, administrative costs have quadruped and the overall per-ride cost to the public has nearly tripled, the report authors found.

The privatization effort was designed to reduce fraud, and anti-fraud measures may have caused some of the drop in users. Still, the budget board found, privatization has left out thousands of people and cost taxpayers an estimated $316 million more than would have been spent if the state still was running the program.

Despite the problems, and in spite of a promise to put the program out for bid again, the Texas Health and Human Services Commission recently renewed all of the contracts until 2018, the budget board report noted.

The problems were caused, in part, by a sloppy procurement process, the report concluded. The Health and Human Services Commission solicited applications from companies to manage different regions of the state, but it picked several firms that its own evaluators had determined were not the best options, according to the report's authors.

Texoma Area Paratransit System, for example, was ranked last among four applicants to run a 16-county region in North Texas.

"It did not demonstrate even a basic understanding of medical transportation services or program requirements," evaluators determined.

The nonprofit still got the job.

Another company, American Medical Response, was hired to oversee two regions in West Texas and South Texas even though a state audit previously had found that 19 percent of its drivers had criminal histories and 16 percent had invalid driver licenses.

"Cost and quality issues have been due in part to procurement and contract management failures," the budget board wrote in the report, which urged the state to re-do the procurement and enact safeguards to save money.

Report almost withheld

The 17-page report was among a series of Legislative Budget Board staff "efficiency" reports that almost were withheld from the public. The board's director, Ursula Parks, told lawmakers last month that she had been directed by Lt. Gov. Dan Patrick not to release the reports. The board ultimately released the reports at the request of House Speaker Joe Straus.

In a statement, a Patrick spokesman said the lieutenant governor "did not direct (the Legislative Budget Board) to stop the publication of any specific recommendation."

"The lieutenant governor directed the LBB to focus on their principle mission, which is developing the budget, and to leave policy-making to elected officials," said the spokesman, Alejandro Garcia, who declined to answer questions on the Medical Transportation Program.

The Health and Human Services Commission declined a request for an interview, but spokeswoman Carrie Williams issued a statement defending the hiring of companies that did not receive the highest scores by evaluators.

"The decision was made to award contracts to a larger contractor pool to comply with the legislation and prevent the program from being beholden to a smaller number of contractors," Williams said.

Senate budget writer Jane Nelson, who sponsored the 2011 legislation that ordered the privatization effort, said the report was flawed because it "assumes there was no fraudulent activity" taking place prior to the privatization.

"(Senate Bill 8) was an omnibus fraud bill responding to systemic fraud and waste," said Nelson, R-Flower Mound, in a statement. "We are always looking for ways to improve our programs."

Decline in performance

The program is required by the federal government and only serves Medicaid recipients who have no other way to get to appointments for therapy, dialysis and other needs. It has come under fire before: In the past, when the state used a fee-for-service model that paid transportation entities directly for each person transported, there were concerns the program did not serve enough Medicaid recipients and that there was fraud.

At one point, the state estimated that 24 percent of Texas children enrolled in Medicaid - roughly 650,000 kids - needed transportation and were not getting it.

An internal audit also found that program spending on rides before the transportation actually took place increased from $19 million to $53 million between 2008 and 2011. There was no process in place to ensure that rides actually were given after the payments were made, the audit noted.

In response to those concerns, officials undertook the privatization effort. It started as a pilot program but, as noted by the budget board, the Legislature decided to expand it statewide before the results of the pilot were compiled.

The statewide effort divided Texas into 11 regions and hired contractors to manage each. Lawmakers decided to pay a set rate based on the number of Medicaid recipients in each region.

As a result, the state did not ask the applicants vying for contracts to submit any information about their cost estimates, a decision the budget board now says may have been unwise.

The budget board also questioned the decision to give contracts to companies that did not get the highest scores.

In all, the state only gave contracts to the highest-scoring vendor in four of the 11 regions in the state.

"In regions where the highest-scoring vendor won (the contract), complaints and access trends improved compared to the other regions," the report said. "In regions where the highest scoring vendor was not awarded a contract, complaints increased and access to services decreased."

Statewide, the decline in performance has been dramatic.

In 2011, when there were concerns about whether the program was reaching enough Medicaid recipients, about 9.8 percent of all recipients used the program.

Today, the program serves just 3.8 percent of Medicaid recipients, according to the budget board report.

Despite the smaller number of users, the number of substantiated complaints about not getting picked up on time - or not getting picked up at all - has risen from 3,041 in 2011 to 5,379 in the past year, according to the report.

The percentage of users filing a complaint has risen from 3.5 to 12.9 percent.

The increase in costs occurred despite the smaller number of users, fueled by a massive increase in "administrative costs," according to the report. Those costs accounted for 11 percent of claims in 2011 and 47.8 percent in 2016. That is a higher ratio than in any other year that the budget board analyzed.

In 2015 alone, the state spent about $120 million more on the program than it would have under the old system.

Promise to re-procure

The health commission has taken some action against contractors, including the cancellation of agreements with Texoma Area Paratransit System and another vendor.

According to the budget board, the commission also promised last April to re-procure all of the Medical Transportation Program contracts using a more competitive system as soon as possible.

The commission, however, recently renewed all of the contracts last summer until August 2018, the budget board said.

Williams, the commission spokeswoman, said officials still were planning to do a re-procurement but did not give any date for when that will happen.

"In response to feedback from clients and providers, and as part of our internal improvement processes, we're looking at ways to make our program better and more cost effective," Williams said in her statement. "This includes initiating a statewide re-procurement of contracts."