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The state appeared to have a pretty good idea when it launched a new community mental health services plan a few years ago: Use private contractors to provide one-on-one services to patients, providing them with assistance in daily living chores. It was part of a broader program intended to provide better services to patients in their own communities rather than in central hospitals.
But evidently no one was paying attention to the possibility that private contractors would see a potential gold mine in the program. Within a short time, they contracted with the state at rates of about $61 per hour to provide patients with help with everyday chores. That's enough to hire highly skilled people to provide an array of services. But contractors often hired high school graduates at relatively low wages to take clients shopping or accompany kids to school.
A six-month investigation by The News & Observer of Raleigh concluded that the program had wasted at least $400 million due to poor planning and inadequate management. Most of the money spent went to those who needed help the least; meanwhile, the sickest patients got far less help than they needed.
Now the General Assembly's Program Evaluation Division has checked in with its own study of the system and concluded the damage was even worse. The program wasted more than $635 million, two-thirds of it in federal Medicaid funds and more than $226 million in state money. Lanier Cansler, secretary of the Department of Health and Human Services, said the agency was unprepared to detect program problems because of inadequate technology. It is looking into installing a system to provide quicker information. Cansler, who was not head of the department when the program was launched, told the newspaper that DHHS failed to foresee the “cottage industry that sprang up around the holes that were left in the plan” when it first was put into place. The agency will have to consider every potential angle in future program design and implementation, he noted.
Indeed it will. At a time when there's a huge hole in the annual state budget and continuing demand for key state services such as mental health, there's no room for squandering any money on poor planning and lack of attention. But as state legislators prepare the 2009-10 budget, they must be careful not to cut out badly needed services simply because unscrupulous private contractors took advantage of taxpayers. This episode may give a bad name to privatization, not to the provision of badly needed services.
Privatizing this program without adequate oversight clearly was the wrong thing to do. But the services – including badly needed emergency services and programs for the mentally ill who might otherwise wind up in hospitals or jails are as much in demand as ever. Legislators struggling with how to balance a badly out-of-whack budget should keep in mind that cutting these services will wind up costing far more than it saves.
