Legislature outsources state Medicaid

The Legislative Council’s Review Committee signed off on a long-term contract with a computer technology firm to process claims for the state Medicaid system.

The value of the contract is an estimated $203 million.  It is with HP Enterprise Services LLC, which is part of Hewlett Packard of Palo Alto, California.

Medicaid officials say the new processing system will improve the state’s efforts to reduce waste and fraud. Last year in Arkansas the Medicaid program spent $4.8 billion in state and federal funds to provide health coverage to the elderly, children from low-income families, the poor and people with disabilities. The federal government pays more than 70 percent of the cost of Medicaid in Arkansas, and will pay 90 percent of the cost of the new contract with HP Enterprise.

The state also contracts with private companies to store data from the Medicaid system and to administer pharmaceutical benefits.

The length and complexity of the contract with HP Enterprise highlights a developing issue that legislators will address in the 2015 session—the need to strengthen oversight of state agency contracts with private companies.

The legislative Review Committee analyzes the numerous state contracts with private firms.  The Senate chairman of the committee said he would introduce legislation during the 2015 regular session to increase scrutiny over contracts because they are large and complex. For example, the top 10 state contracts with private companies are now valued at about $1.3 billion and they are with corporations that use sophisticated technical skills.

The bidding process can be much more complex than it used to be.  The state is not merely purchasing commodities such as concrete but also sophisticated services like data analytics.

Many agencies contract with computer firms. The state prison system’s nine-year contract to provide medical care to inmates is valued at $647 million. A spokesman for the prisons said that it costs the state an average of $320 per inmate per month.

The Department of Human Services contracts with private firms to provide treatment, therapy, assessments and rehabilitation for the thousands of Arkansans who qualify for Medicaid and other services.

The new Medicaid contract is required by the federal government in part to prevent fraud and abuse.  In the past few decades all 50 state governments have converted their data and filing to electronic and digital computers.

States now use computers to store information about people’s health, tax status, professional licenses, motor vehicles, voter registration and criminal backgrounds. Those computers are constant targets of hackers trying to commit identity theft and scammers trying to defraud benefits systems.

A new generation of thieves is using computers to defraud government benefits systems, from filing fake tax returns and unemployment cases to submitting fraudulent Medicaid claims.

On the bright side, however, computers enable government inspectors to detect and prevent fraud. For example, Pennsylvania ran inmate data through its computers and learned that thousands of prisoners were fraudulently collecting unemployment. Several states now match income tax returns with unemployment claims to make sure people who get benefits are truly out of work.

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