Legislative Malpractice

Under the guise of saving money, the Right shreds health and human service


Dave Mann

The state’s $10 billion budget gap this session created a Darwinian legislative calculus at the Capitol. Bills that cost the state money, no matter how sensible, were nonstarters; measures that purportedly saved money, no matter how radical, were put on the fast track to floor votes. To pass bills in this environment, legislators dusted off their best used-car-salesman routine and argued that their recycled pet legislation really was a new, “efficient” approach that would “streamline government” and save money.

This was how Rep. Arlene Wohlgemuth (R-Burleson) and fellow conservatives sold House Bill 2292, a massive rewrite of the state’s social services safety net. “House Bill 2292 will streamline government. will allow us to devote our resources to improving the delivery of care to those who need it in Texas,” said Wohlgemuth during the June 1 floor debate on HB 2292, minutes before the House passed the measure. “I think that we are being good stewards of the public’s money by making it easier for clients to access those services.”

In reality, the bill neither makes government more efficient nor provides better services. During the next two years, the legislation will scrunch 11 existing state agencies into four, all under the control of an ultra-powerful, governor-appointed commissioner. The Legislative Budget Board estimates the bill will save the state about $1 billion in the next two years. But most of those savings aren’t gleaned from increased government efficiency (the state, despite all rhetoric to the contrary, runs a fairly lean government; Texas spends less per resident than any other state in the country). The majority of the bill’s savings come from cutting numerous, fairly inexpensive healthcare services for the poor, and from wiping out thousands of state jobs by privatizing several core state functions. One provision, for example, would let drug companies like Pfizer care for Medicaid patients.

If HB 2292 isn’t about saving money, what are the real motivations behind this mammoth reorganization of how the state helps struggling Texans? Beneath its façade, Wohlgemuth’s bill is a grab bag of radical right policy initiatives and a step toward a long sought after goal: the very elimination of the social contract forged in the New Deal whereby society through its government takes responsibility for helping the most vulnerable among us. To accomplish this, the bill aims to neuter state government by cutting all but the most essential services, and then turns those basic programs over to private companies. “This doesn’t streamline,” snorts Rep. Garnet Coleman (D-Houston). “You mean cut.”

The cuts to state health and human services in the 311-page bill are too numerous to list here. Some of the highlights: The bill slashes services under the Children’s Health Insurance Program and erects bureaucratic barriers that will boot an estimated 160,000 kids off its rolls. It abolishes entirely the section of Medicaid that offers temporary aid to families who, because of illness or accident, can’t cope with crushingly high medical bills—dispatching this program will deprive 10,000 people each month of medical coverage. And the bill shrinks nursing home residents’ “personal needs” allowances by 25 percent, from $60 per month to $45 (nursing home residents use this money to buy necessities like shampoo, toothpaste, and shoes). The personal needs allowance reduction will save the state an almost inconsequential $18 million over the next two years, or roughly 1/100th of 1 percent of the $118 billion biennial budget.

While many of these cuts could prove disastrous for thousands of poor families, they’re also easy to undo. Programs can always be reincarnated; funding levels can be restored. The more substantive changes in HB 2292 will be almost impossible to reverse. Simply put, the bill will transform the health and human service arms of state government for decades, if not permanently. By 2005, it will eliminate more than 3,000 state employees and hand several core functions over to large corporations, some of which have been major political players in Austin recently.

The loss of thousands of state salaries and the assumed savings from privatization account for more than 10 percent of the bill’s estimated cost reductions, according to the Legislative Budget Board. But the dirty secret of privatization, people in the industry say, is that it doesn’t often save much money. Governments mainly outsource the programs they don’t want to deal with. It’s not about conserving money so much as foisting your headaches on someone else.

Private companies have long handled such mundane government tasks as filing minor paperwork and collecting trash. But should for-profit corporations determine who enrolls in Medicaid? Under HB 2292, they will. The bill establishes as many as four privately run call centers charged with determining which families are eligible for state programs and enrolling them in Medicaid, CHIP, Supplemental Security Income, welfare and food stamps. Eligibility determination and enrollment for these programs are currently scattered through several agencies. The thought of interacting with a sprawling statewide call center for all social programs probably strikes fear into the heart of anyone who’s ever called a state Department of Motor Vehicles or, for that matter, the Texas Workforce Commission and its notorious 15-minute wait times.

The company pursuing the call center contract is a Dallas-based outfit known as Affiliated Computer Services (ACS), which is fast becoming one of the world’s biggest outsourcing companies. ACS runs Medicaid programs in 13 states. In Texas, the company has four major state contracts, including the state’s Medicaid contract that was awarded last November. This means, starting in January, ACS will be in charge of processing claims from Texas Medicaid clients and paying the doctors who provide the services. But ACS isn’t satisfied. It’s been a force in Austin this session trying to extend its burgeoning monopoly of state contracts. It gave $50,000 to the privately financed gubernatorial inauguration in January and has tapped a top-notch lobbying team to push its interests, including Bill Messer, a well-connected lobbyist who served on House Speaker Tom Craddick’s transition team; former State Sen. David Sibley; and Dan Shelley, a former aide to ex-Gov. George W. Bush.

One state senator, in private, went so far as to term HB 2292 a handout for ACS. The company stands to earn quite a bit if it wins the call center contract. But if ACS runs call centers that determine how many people enroll in programs like Medicaid, that creates a potential conflict of interest with ACS’s other state contracts. In the newly awarded Medicaid deal, for example, ACS makes money by keeping administrative costs low. So the fewer Medicaid cases ACS handles, the lower its administrative costs, and the more money it stands to make. If ACS runs the call center too, and is essentially the gatekeeper to the program, ACS would have a financial incentive to admit as few people as possible into Medicaid. Officials with the Health and Human Services Commission acknowledge the potential conflict of interest, and say they will look at the issue when awarding the contract.

ACS isn’t the only company likely to grow from HB 2292’s amputations of government. Major drug companies such as Pfizer should be downright giddy over HB 2292’s creation of so-called disease management programs in which they will care for some of the state’s most vulnerable Medicaid patients. To understand how this will come about requires a trip into the arcane machinery of Medicaid. Essentially it works this way: To get a handle on the spiraling cost of prescription drugs, HB 2292 creates a preferred drug list for Medicaid, which is a list of commonly used drugs that doctors must prescribe to Medicaid clients (to give out drugs not on the list, doctors can get approval from state officials). In exchange for getting their drugs on the list, pharmaceutical companies must offer their medications to the state at reduced cost or give the state cash rebates. The state is getting a massive group discount on drugs for its Medicaid population. It’s a program that has worked well on the federal level with Medicare for more than 20 years. The preferred drug list concept has widespread support because, if done correctly, it could save the state $300 million during the next two years, make drugs more affordable for Medicaid clients, and still allow drug companies to earn money.

But under HB 2292, drug companies, in lieu of paying the state cash rebates, will be allowed to run disease management programs in which companies like Pfizer would care for the state’s most expensive Medicaid patients. “It’s like if I owe you $100, but instead of giving you $100, how about you send all your dry cleaning to my business and have all your friends send their dry cleaning to me as well,” says Jesse Romero, a public interest lobbyist with the Center for Policy Alternatives. The conflicts of interest in turning treatment of poor Texans with AIDS and severe mental illnesses over to for-profit drug companies such as Pfizer are obvious. Consumer groups worry disease management programs are simply a way for pharmaceutical companies to push their own drugs on Medicaid patients. “Disease management can work really great if they’re an independent source,” says Lisa McGiffert of Consumers Union. ” you can’t trust it.”

Proponents of disease management say it will save the state money. But there’s some evidence to suggest disease management could in fact cost money. Florida is the only other state to have instituted drug-company-driven disease management programs. A recent study by a Florida state agency concluded the Sunshine State could save $64 million more next year by terminating such programs.

When asked about HB 2292, Wohlgemuth said, “It’s a great bill. Since I’ve been here—and my first session was in 1995— wanted to make it easier to access services. That’s what this does.” She said critics of the bill simply don’t like the idea of privatization, even if it will save the state money.

But it became clear during the June 1 House floor debate that the motivation behind some provisions in Wohlgemuth’s bill isn’t fiscal prudence but a deep hatred of government health care programs. At one point during the debate, Human Services Committee Chair Carlos Uresti (D-San Antonio) asked Wohlgemuth why the bill guts numerous services from CHIP, including coverage of wheelchairs, mental health care, and eye glasses, among many others. He noted that cutting those services saves only $66 million during the next two years, a meager sum in a $118 billion budget. “This is a policy decision, is it not?” asked Uresti. (That’s Capitol-speak for “we could pay for it if we wanted to, right?”)

“Yes,” Wohlgemuth replied.

Uresti then walked to the front microphone and railed against the bill. “This is just another attempt to prevent as many little children as possible from receiving medical care,” he said. “Pro-verbs 29:18 says, ‘Where there is no vision, the people will perish.’ I respectfully suggest to you that this bill has no vision.”

Uresti was only half right. Wohlgemuth’s bill isn’t about saving money, but it does have a vision. It’s a plan that comes straight from the pages of a health care policy report released in late February by the Texas Conservative Coalition, a caucus of the House’s most conservative members, of which Wohlgemuth is president. The 78-page report is the product of 18 months of research by the group’s policy arm and reads like a primer for HB 2292. Many of the report’s policy suggestions reappeared almost verbatim when Wohlgemuth filed her bill a month later. On page one of the report, under the introductory heading “The Truth About Health Care,” the coalition wrote, “Conservatives must combat years of fascination with government programs and the left’s increasing willingness to reform health care by turning it over to the government. More government cannot and will not help health care, and it is hard to think of anything ‘socialized’ that is either an improvement or satisfying. Simple, cosmetic changes to the system are not sufficient—fundamental changes to the structure of the system must be made.”

HB 2292, with its emphasis on fewer services for the needy and more corporate control over tax dollars is the Radical Right’s vision for state health and human services. With a new Republican majority and a huge deficit this session, they saw the means and opportunity to implement it.