Evizda

In a story most in the media missed, protestors gathered under the dome at the Mississippi state capitol earlier this year to oppose a bill that would allow the state Department of Human Services (DHS) to privatize everything from child protective services to nutrition programs for the elderly.

The bill, HB 1009, which later passed, started out as a way to allow the Mississippi DHS to hire private contractors to collect child support payments — something which Mississippi had flirted with in the past, with less than impressive results.

From 1995-2000, a wealthy but little known firm called Maximus, Inc. had been hired to collect overdue child support payments in Mississippi and, according to a joint legislative committee report, on average, had higher costs but collected less in payments than the state did during the same five-year period. During the February 2013 debate on the new bill in the state Senate, the Associated Press quoted Senator Hob Bryan as saying “I remember the disaster that Maximus was.”

But memories of that failed experiment did not stop Republican lawmakers from expanding HB 1009 to include a broad provision to allow the Mississippi DHS to privatize any of its functions by contracting out to private companies.

“Outsourcing aid for people can’t work. It’s designed to make a profit,” Mississippi state representative Jim Evans told CMD. Evans had joined other legislators to stop what they saw as the potential corporate takeover of a public agency providing essential services to vulnerable citizens.

Despite the now lengthy list of failed — and often disastrous — attempts at privatizing social services in states across the country, Mississippi Governor Phil Bryant signed the bill into law this spring.

Mississippi protestors had good reason to be concerned. The privatization of social services has in the past resulted in some spectacular failures.

The Denver Post found a shocking pattern of abuse when it conducted an in-depth investigation of the privatization of Colorado’s foster care system a decade ago. The Post reported that numerous children were molested, abused, and even died in foster home after the state started contracting with businesses that failed to ensure they were placed in safe homes. The state also paid three times as much to place a child in private foster care as it did in homes that were supervised by the counties.

More recently, Indiana Governor Mitch Daniels’ attempt to transform the state into a privatized utopia failed spectacularly in the health and human services area. Indiana’s 2006 experiment involving a $1.16 billion contract awarded to a consortium of firms including Affiliated Computer Services, Inc. (ACS), went so badly, that the Governor cancelled the contract at an unknown cost to the state, and the state legislature even considered banning privatization altogether.

Before Indiana privatized these services, it had one of the lowest rates in the country for incorrectly denying or ending access to food stamps, but in 2008, under for-profit outsourcing, that error rate jumped 13 percent according to the LA Times, resulting in kids going hungry and grandmas losing their Medicaid coverage. The human cost of these failures is all too real. WTHR News in Indiana, reported on the story of Ronald Alexander who died in 2009, more than a year after being wrongly denied Medicaid benefits and despite his frequent and frustrated attempts to get the help he needed.

Many blamed ACS, the main subcontractor on the project, for the repeated problems. By 2009, the state cancelled its contract and attempted to institute a hybrid method, transferring some functions back to the state government.

In a lawsuit after the outsourcing effort collapsed, Judge David Dreyer wrote, “ACS failed to make any serious effort with respect to its portion of the responsibilities, and was instead lobbying the state, directly and through its lobbyist, to replace IBM as the general contractor on the project.” Dreyer continued: “This story represents a ‘perfect storm’ of misguided government policy and overzealous corporate ambition.”

Many question whether these services — aimed at helping the elderly, single parents, and foster children — should ever be delivered with a profit motive. As Bob Jacobson of the Wisconsin Council on Children and Families put it, “If you’re a corporation whose very mission is to increase shareholder value that is automatically in conflict with a social service agency whose sole purpose is to meet the needs of people in the program.”

Hired to manage Wisconsin’s privatized welfare to work program known as “Wisconsin Works,” the Maximus firm had billed the state nearly half a million dollars in improper or questionable expenses, including $195,745 that it spent on promotional materials, $15,741 spent on items such as “hotel rooms in Lake Geneva” and parties and $1,498 that it had spent on flowers, according to a Wisconsin Legislative Audit Bureau report.

Lawmakers subsequently called for the termination of the corporation’s $46 million contract with the state.

It’s not just in Wisconsin that Maximus has been documented ripping off taxpayers.

In 2007, a whistleblower came forward accusing the corporation of defrauding Medicaid in the District of Columbia. In response, Maximus agreed to pay $30.5 million in a settlement with the Department of Justice.

Remarkably, despite this history, in 2011 Maximus was given a $21 million rebid to manage Wisconsin’s foster care administration through 2016.

Jacobson noted that in the early days of privatizing social services in Wisconsin, contracts with Maximus and others were set up in such a way that “the profit motive was built in to deny benefits.” That is, whatever money Maximus saved the government by not enrolling eligible individuals, it got to keep. “There was all sorts of money being siphoned off to build big houses for CEOs and it was perfectly legal,” Jacobson told CMD.

In Tennessee, Maximus controlled the Davidson County Child Support Enforcement Office for more than 20 years until last July when the county terminated its contract. One juvenile court magistrate observed, “We have three full-time magistrates ready to hear cases, and our dockets have never been completely full [under Maximus]…we were being underutilized.”

Maximus had little incentive to round up parents who consistently fail to make their mandated child support payments since the government offers money to address the problem of low collection rates. In other words, for Maximus and other companies, doing the job well could mean losing money that it could otherwise keep for itself.

Despite this record, Maximus continues to be awarded numerous significant government contracts. Most recently, on October 3, 2013 a U.S. Department of Education contract was announced, to provide services including a call center and to process payments from federal student loan borrowers. That contract begins at $143.3 million, but could run as high as $848.4 million.