There is money to be made off the poor:
Til debt do us part #2
By Melvin J. Howard
In 2007, MAXIMUS agreed to pay $30.5 million to
resolve an investigation by the U.S. Department of Justice (DOJ) into False
Claims Act allegations. In a
deferred-prosecution agreement, the company admitted responsibility for causing
the District of Columbia to request Medicaid reimbursement as if the city‘s
foster care agency provided reimbursable services to every single foster child when,
as Maximus then well knew, that was not true. The DOJ described the settlement
as demonstrating strong commitment to vigorously pursuing those companies that
defraud the Medicaid program. However, both before and during the course of the
litigation, MAXIMUS was almost inextricably linked to federal and state
government agencies through contracts to provide services in Medicaid,
Medicare, and other aid programs. Thus, the available sanction of exclusion
from continued participation in federal aid programs was explicitly avoided as
part of the settlement. Within two months of the settlement regarding allegedly
fraudulent Medicaid claims, MAXIMUS won a five-year contract with the state of
New York to provide Medicaid fraud-consulting services talk about the fox
watching over the hen house. Within three months, the District of Columbia
extended the same Medicaid revenue maximization contract with MAXIMUS that
resulted in the alleged false claims. From the time of the settlement through the
end of 2008, MAXIMUS entered into or extended contracts related to Medicaid or
Medicare worth more than $240 million, including millions of dollars in
contracts directly with the Centers for Medicare and Medicaid Services (CMS) the
federal agency to which the allegedly fraudulent claims had been submitted. Then,
one year after the DOJ settled its possible claims against MAXIMUS, the company
won a contract to insert its services within the DOJ itself, to provide investigative
and analytical support, consulting, technical services, financial management,
and case-related professional support during the investigation and prosecution
of criminal cases.
In addition to tax and debt instruments for raising
revenue, intergovernmental grants are a primary tool for different levels of
government to carry out their respective roles, and thus are a key application
of fiscal federalism theory. In the United States, intergovernmental grants
typically take the form of federal grant-in-aid programs, such aid programs has
been to devolve more discretion and control to the states and local
governments. The grant programs generally fall into three categories: matching
programs such as Medicaid and Title IV-E Foster Care where state spending is
required at a certain percentage match to receive additional federal funds;
block grants like the current welfare cash assistance program (Temporary Aid to
Needy Families, or TANF), which require states to maintain a certain level of
state spending to receive the full federal block grant; and programs that are
fully funded by the federal government but administered by the states, such as
the Food Stamps Program.
Total federal spending on two of the largest
matching grant programs, Medicaid and Title IV-E Foster Care, is projected to
reach almost $320 billion in 2014. The programs are frequently targeted for
contractor operational and consulting services and have been the subject of
increased federal scrutiny into revenue maximization strategies. The programs
provide an excellent example of intended fiscal federalism structure and the
transformative effects that occur as the poverty industry‘s relationships with
both the state and federal governments continue to grow. Numerous private
companies have not only recognized the money to be made from poverty programs,
but have concentrated on that niche as the core of their business offerings.
With a mission of helping Government Serve the People, MAXIMUS provides
operational and consulting services for almost all aspects of government health
and human services programs. The poverty industry thrives on bad times. While
many companies‘stocks were diving, MAXIMUS announced increased cash dividends
to its shareholders. MAXIMUS also noted in its 2008 fourth quarter earnings
call that there are more unemployed people and they look for job opportunities,
and that plays right into the sweet spot for our welfare to work programs.
The depth and scope of the poverty industry‘s role
in federal grant-in-aid programs and funds is striking, spurred in part by
lobbying efforts, campaign contributions, and a revolving door of personnel between
private industry and government leadership. The poverty–industrial complex has
grown to the point where seemingly any task regardless of possible conflicts or
limitations regarding inherently governmental functions can be contracted out.
Pay-to-Play
A few years before former Illinois Governor Rod
Blagojevich faced impeachment for allegedly trying to sell a U.S. Senate seat,
he faced media scrutiny for his dealings with MAXIMUS. In 2005, The Chicago Sun
Times reported on possible links between the company‘s receipt of state
contracts and campaign contributions to Governor Blagojevich made by MAXIMUS
and the company‘s lobbyists. According to the paper, MAXIMUS initially contracted
with the state to develop a new plan to maximize federal aid dollars, and the
company was then ―handed a waiver from state contracting rules by Blagojevich‘s
administration so it [could] bid on the lucrative contract proposal it helped
the state develop. The company had apparently given Blagojevich‘s political
fund $25,500, and the company‘s lobbying firm—which employed the governor‘s
former congressional chief of staff—donated another $80,300 to the governor.
Such scrutiny then reached to the west coast.
According to the Los Angeles Times, when MAXIMUS faced the risk of losing a $32
million welfare-to-work contract with Los Angeles County, the company reacted
by outspending its competitor on lobbying efforts by eight to one. The county‘s
Department of Public Social Services concluded another company‘s bid was
better, and a review panel and the auditor–controller upheld the decision on
appeal. But after MAXIMUS spent $200,000 in lobbying fees and thousands more in
campaign contributions, the paper explains, Los Angeles‘s five county
supervisors voted to ignore the year-long review process and re-bid the
contract to give MAXIMUS another chance.
Revolving
Door
In addition to the influence of money and lobbying,
there is a continuous flow of leadership between the ranks of government
agencies and private contractors involved in federal grant-in-aid programs.
While Governor of Wisconsin, Tommy Thompson was on the national forefront of
the charge to privatize welfare and other poverty programs and he took his
championship of privatization to the national stage as Secretary of the U.S.
Department of Health and Human Services. When he left his federal post,
Thompson was rewarded with multiple positions in the private sector.
Simultaneously, Thompson joined Deloitte Consulting, leading the firm‘s Center
for Health Solutions; became a partner with Akin Gump Strauss Hauer & Feld
LLP, where he focused on developing solutions for clients in the health care
industry, as well as for companies doing business in the public sector; joined
former U.S. House Majority Leader Richard Gephardt as a member of the board of
directors for Centene Corporation, a company that provides Medicaid managed
care services in several states; became the board chairman of Logistics Health
Incorporated and joined the boards of directors of several private companies in
the healthcare field.
As states increasingly view federal grant-in-aid
funds as a source of general revenue rather than a means to enhance program
services. Once the bipartisan pick for Commerce Secretary in the Obama
Administration, U.S. Senator Judd Gregg has since become a critic of the
Administration‘s increased spending on federal aid programs to address the
economic downturn and budget difficulties faced by states. However, when
Senator Gregg was governor of New Hampshire and faced a growing state budget
deficit, he initiated a process of claiming additional federal Medicaid
matching funds, but with no additional net outlay of state funds. Then, rather
than using the additional funds for Medicaid-related services, Gregg created a
new general revenue line item in his state budget called ―Medicaid Enhancement
Revenue. Gregg converted additional federal Medicaid payments into general use
rather than using the federal dollars for Medicaid programs and services. The
strategy led to such an increase in federal funds that the new general revenue
line item accounted for 28% of New Hampshire‘s total general fund revenue in
1994.Gregg balanced the state‘s budget—indeed, to the point of a surplus by
converting federal funds intended to aid the poor into general state revenue.
