Privatized services stumbling

Defenders say savings, efficiency in social aid programs will take time

01:04 AM CDT on Sunday, May 28, 2006
By ROBERT T. GARRETT / The Dallas Morning News

AUSTIN – Texas' health and welfare agencies are undertaking the most sweeping and rapid privatization of social services in the country, but the experiments are plagued with problems.
Tens of thousands of aid recipients can't get through to privately run call centers. Thousands more poor families are complaining that their children were wrongly denied health insurance. At state hospitals and schools for the mentally impaired, head nurses must slog through new and burdensome online payroll duties.

Conservative policymakers who championed privatization predicted it would save money and make services more efficient. But so far, the state has had to dial back its savings estimates and rescind planned layoffs of hundreds of eligibility workers.

Liberal policy analysts and advocates for the poor say Texas rushed into outsourcing without a good plan or enough testing. Some lawmakers in both parties vow to re-evaluate the push, especially before the state begins next year to privatize a highly sensitive task – caring for abused and neglected children.

Others, such as conservative commentators and Albert Hawkins, Gov. Rick Perry's point man on social services, defend privatization. They insist change will be worth the initial pain as private firms help the state trim administrative fat, verify recipients are eligible and better serve the needy.

And, they note, privatization is here to stay, because Republican legislative leaders won't go back to – or pay for – old ways of checking eligibility and running programs.

"It makes so much sense that the only reason that someone would be opposed to this is that they're beholden to state employees," said former Rep. Arlene Wohlgemuth, R-Burleson. She pushed through the 2003 law that strongly encouraged using privately run call centers and other cost-cutting techniques.

Ms. Wohlgemuth said she's "absolutely astounded" that critics "would like to take this system back to the dark ages," when employed adults had to take off work to go to field offices and wait in lines to apply for benefits for their children.

Celia Hagert, an expert on food stamps who monitors the call-center push for the progressive Center for Public Policy Priorities, said the state has actually had to spend more to determine eligibility. The state cancelled 1,000 layoffs this month and has sent managers and workers to various cities to fix glitches, she said.

"We've deployed an untested, badly performing system that's causing people to lose benefits," Ms. Hagert said, noting that 108,000 fewer children are enrolled in health insurance programs than were six months ago. State agencies "are asking the Legislature for more money to keep the administrative functions afloat. The exact opposite of what they promised is what's happening now."

Mr. Hawkins, the state health and human services commissioner, has acknowledged the problems. But he and conservative supporters say they are temporary, the result of the transition to privatization. Other analysts are concerned the problems will only grow as more state functions are outsourced.

What's happened

As the debate intensifies, the state faces a host of challenges:

•About 42 percent of the nearly 60,000 people who called a children's health insurance call center in Midland from May 15 to May 21 hung up before they could reach an operator. The contractor, a group led by Bermuda-based Accenture Ltd., blamed the delays on an unexpected surge in calls.

•Turnover has soared among the $8-an-hour operators hired by an Accenture subcontractor. In one week this month, 15 operators quit at the Midland call center, and 23 left an adjoining operation that handles applicants for welfare, food stamps and adult Medicaid coverage. That's a workforce turnover of about 10 percent in seven days.

"Midland is a very competitive employment market right now," with a joblessness rate of 3 percent, said Accenture spokesman Jim McAvoy. He vowed that the company will intensify its recruiting efforts.

•Average wait times for callers trying to apply for welfare, food stamps and adult Medicaid coverage exceeded 20 minutes on six days in March. Waits dropped to under a minute or two in April. But on two days this month, they leapt to about 13 minutes.

Mr. McAvoy attributed the surge to a state demand that each operator receive at least 40 hours of extra training. "The good news is we are already seeing results" from that training, he said.

•The state said this month that a call center run by Accenture in San Antonio can't perform its main job – gathering all information needed so a state worker can quickly decide on applications by adults in a tryout area, Travis and Hays counties. Computer systems don't talk to one another and don't allow the state to track how fast cases are resolved, said Stephanie Goodman, spokeswoman for the Health and Human Services Commission.

•Repeated delays in rolling out the system beyond metropolitan Austin forced the state to offer $1,800 retention bonuses to 1,000 state workers whose jobs were scheduled to be eliminated this year; 900 others will still get pink slips. More than 2,000 have quit and have not been replaced since October 2004. (Other than to insure children, Dallas-area residents probably won't start using the call centers until next year.)

•Low-level and midlevel managers, especially those who oversee dozens of employees at state mental hospitals and schools for the retarded, have complained that they can't care for patients and students because a separate outsourcing has saddled them with time-consuming payroll and time card processing tasks.

The state shifted duties of nearly 500 human resources workers in the five agencies that Mr. Hawkins oversees to Convergys Corp. of Cincinnati. It has promised "enhancements" that will ease criticism by Mr. Hawkins and the affected managers.

"What Texas is attempting to do is a radical transformation of service delivery," said Stacy Dean, a former federal budget official who monitors privatization efforts for the liberal Center on Budget and Policy Priorities in Washington.

She said the state ignored warnings that fast changes would be a technological and human gamble.

Florida spent fours years testing a similar though mostly state-run system, and Pennsylvania, Washington and Utah bit off only small chunks of the job for starters, she said. But Texas officials tried to award an $899 million contract and convert the whole state in 14 months.

"They thought they could pull it off without testing the waters," Ms. Dean said. "It's that sort of Lone Star bravado – 'we can do it when nobody else can, and experience from other states isn't relevant.' "

But Jason Turner of the conservative Heritage Foundation describes Texas as an innovative defender of taxpayers.

"Looking beyond the government service-delivery monopoly for improvements ... has a long and well-established pedigree," said Mr. Turner, who favored private competition as a designer of former Wisconsin Gov. Tommy Thompson's welfare overhauls and as former New York Mayor Rudolph Giuliani's welfare commissioner.

The early bumps in Texas are no surprise, Mr. Turner said.

"When major systems undergo a changeover from public to private, start-up failures of various kinds always occur," he said.

Political effects

Still, early problems have put Republicans – in both Austin and Washington – on the defensive.

Last week, Texas' eligibility call centers were debated briefly on the floor of the U.S. House. Democrats offered a provision to shut down Texas' plan but relented.

Twenty Republicans from Texas circulated a letter urging colleagues to allow the experiment to go forward. They said it will offer convenient, after-hours service to the state's poor and feeble.
Comptroller Carole Keeton Strayhorn, an independent candidate for governor, has accepted the invitation of one moderate Republican and two liberal Democrats in the Legislature to scrutinize the call center contract. She has accused Mr. Perry of implementing the plan "in haste" and has said the contract creates conditions ideal for "profiteering."

In the Legislature, even Republicans have criticized the call centers.

"We should have moved much more quickly to act on the problems," said Sen. Jane Nelson, R-Lewisville, who heads the Senate committee overseeing health and welfare programs. She called the call center problems "inexcusable" and said, "Either get the problems fixed or I assume it would be a violation of the contract, and yank it back."

Mr. Hawkins hasn't financially penalized Accenture's group over the problems, though he says he's considering it.

And he concedes that savings have been minimal so far. But he said changes were inevitable because of recent budget cuts.

"Some people, when they're looking at something new, tend to compare against some ideal or something that was perfect," Mr. Hawkins said. "Well, the old system wasn't perfect, either."
Rep. Vilma Luna, D-Corpus Christi, a key House budget writer, says the state shouldn't have put itself at the mercy of private contractors. But she predicts that it won't pull back.

"I don't know where we will end up," Ms. Luna said. "My sense is there will be some effort to make the call center model work. But it may have to be modified."

E-mail rtgarrett@dallasnews.com

Gauging gains and setbacks

Here's a look at the progress of the state's efforts to outsource social services:

WHAT: Call centers and new eligibility system

COST: $899 million for a five-year contract

PRECEDENT: Some. About 60 percent of the money is for new privatization. The rest reflects computer and children's health insurance call-center duties formerly performed by other vendors.

WHO: Texas Access Alliance, led by Accenture Ltd.'s U.S. subsidiary

WHEN: Awarded in June 2005

PROGRESS: Uneven. Delays in the rollout have cost the alliance $50 million in variable fees, state officials say. The vendor says it expects to make that up with higher program enrollments than the state projects. The state is weighing penalties for poor performance.

WHAT: Processing of payroll, benefits, job applications and performance reviews for the state's five health and human services agencies and their 46,000 employees

COST: $85 million for a five-year contract

PRECEDENT: None

WHO: Convergys Corp. of Cincinnati

WHEN: Awarded in October 2004

PROGRESS: Uneven. Though 95 percent of employees have gone online to perform self-service transactions, many middle managers who now must track subordinates' time have complained that the system is unwieldy and that they can't get help and weren't trained properly.

Convergys says fixes will be complete by July. Delays last fall cost it $535,000 in fees.

WHAT: State care of abused and neglected children removed from their homes

COST: Unknown

PRECEDENT: While Child Protective Services previously had outsourced most foster home recruitment and adoption placement, it plans to eliminate by 2011 the jobs of about 1,000 conservatorship caseworkers. Management of children's therapies and work with families seeking reunification will be handed off to private agencies.

WHO: There probably will be multiple contractors.

WHEN: The first contract, to oversee the San Antonio region, is expected to be issued by Sept. 30, 2007.

PROGRESS: The state sought bids on May 1.

SOURCE: Dallas Morning News research