Privatization Boondoggles Threaten Client Services and 1,800 State Positions

Senate Bill 7, which passed the 2013 Texas Legislature, mandates sweeping changes to the way Medicaid services are delivered, and who coordinates those services. Senate Bill 8, which also passed, privatizes the Medical Transportation Program, while increasing the authority of HHSC to investigate fraud, waste, and abuse of Medicaid services. These two measures would undermine the quality of state services for Texans who depend on these programs and eliminate around 1,800 state positions. Privatization of these programs will undermine services by turning the work over to for-profit companies whose top priority is profits, not the people these programs are meant to help.

Medical Transportation Program

Senate Bill 8 converts the Medical Transportation Program under HHSC to a Managed Transportation Model by 9/1/2014, with some rural counties allowed to transition later. HHSC operates 4 MTP call centers in Austin, San Antonio, McAllen, and Grand Prairie that receive, process, and manage requests for services through the program. The Managed Transportation model has been in place since 2012 in Houston/Beaumont (Medical Transportation Management) and Dallas/Ft. Worth (Logisticare) areas.  These Managed Transportation Organizations (MTOs) either provide the transportation themselves with their own fleet or they can subcontract out to other medical transportation companies. This privatization would result in the loss of 293 positions in HHSC, since the private MTOs would be responsible for running their own call centers.

Despite claims that fraud in the MTP program would be eliminated by the private MTOs, on Friday July 26th 2013, federal administrators of Medicaid and Medicare Services announced a moratorium on new providers enrolling in the MTP program in the Houston area. This means that fraud was so prevalent that in order to get a handle on the situation, no new providers will be allowed to enter the program for 6 months. In Dallas/Ft. Worth, over 6000 complaints were filed against Logisticare in the 6 months of their contract. Fraud, waste and abuse have grown, while the quality of services provided has diminished in privatized areas.

Medicaid Managed Care Expansion

Senate Bill 7 would give responsibility for coordinating services for nearly all Medicaid clients to private Managed Care Organizations (MCOs). Specifically, the changes mean an expansion of STAR+PLUS to all areas of the state and mandates that nearly all Medicaid recipients, including those who live in nursing homes, Intermediate Care Facilities (ICFs), and who have Intellectual and Developmental Disabilities (IDDs), have all aspects of their care managed by a private MCO through STAR+PLUS. Residents of State Supported Living Centers would not be subject to the change.

The changes would contract out functional eligibility determination and service plan development for Medicaid waiver programs currently performed by state employees in DADS. When implemented, clients in these programs would no longer have a DADS case manager to coordinate their services, but would instead rely on the private MCO. The statewide expansion of STAR+ PLUS will result in the loss of 131 DADS staff positions, and up to 1500 more could follow when case management for more of our clients becomes the responsibility of private MCOs.

Another significant change that accompanies the Medicaid Managed Care expansion is the use of capitated rate payment method. An MCO receives a flat rate per month per client to provide services, based on the services needed by the client instead of the Fee For Service (FFS) plan that pays providers based on each unit of service used by a client. Capitated payments are designed to prevent providers from performing unnecessary procedures, but they also can result in a lower quality of care to clients, since MCOs would be incentivized to increase their profit by providing fewer services to clients.

As a result of these changes, the crisis of providers refusing to accept Medicaid would be accelerated. Medicaid recipients already have trouble finding specialists. To expand Managed Care to Medicaid clients who most need specialized care would create higher costs for MCOs. The quality of care would decrease by encouraging MCO’s to provide fewer services in order to increase profits. MCOs also have an interest in providing minimal oversight of providers in their networks, since every dollar spent on monitoring subcontracted providers is a dollar less in profit. Close oversight of subcontracted providers might also result in MCOs having to replace substandard providers with another provider that would charge the MCO more per client.

Programs Effected by Managed Care Expansion

Coordination of the following services would be privatized:

  • LTSS in all areas currently not implementing STAR+ PLUS, beginning as soon as 9/1/2014
  • Long Term Services and Support & Acute Care to clients with IDDs – Pilot 9/1/2016- conclude 9/1/2018
  • Basic Attendant and Habilitation Services for clients with IDDs
  • All Medicaid clients- study of feasibility of all clients to Man¬aged Care Organization by 12/1/2014
  • Medically Dependent Children Program (MDCP) to STAR Kids, beginning as soon as 9/1/2014
  • Nursing Facility benefits to STAR+ PLUS, beginning as soon as 9/1/2014
  • Texas Home Living (TxHmL), to STAR + PLUS complete by 9/1/2017
  • Community Living Assistance & Support Services (CLASS), Deaf-Blind Multiple Disabilities (DBMD), Home and Community Based Services (HCS). Community Based Services (CBA), and clients receiving services in ICFs to STAR + PLUS complete by 9/1/2020



Join the union! Only an organized voice can stop privatization that threatens the quality of care for our clients.

Call your legislator and ask them to request a complete analysis on the potential impact these moves would have on our clients.

whorepresentsme Locate your legislators and their contact information!