Our friends at the Center for Media and Democracy have a new report on the corporate frenzy to defraud state and local governments and deny services to vulnerable communities -- all to collect huge profits:
As private corporations like ACS and Maximus rake in hundreds of millions of dollars in massive contracts, and their executives rake in colossal compensation packages, shareholder profits and warped incentives detract from the standards of care provided by these corporations.The CMD report looks at a recent bill passed in Mississippi allowing the state's Department of Health Services to privatize government functions such as child protective services and food programs for senior citizens.
Mississippi tried this before: it previously hired outside firm Maximus, Inc. to collect overdue child support payments. Maximus charged higher costs while collecting less than the state did in child support payments, according to CMD.
So maybe it's just a problem in Mississippi? Definitely not:
The Denver Post found a shocking pattern of abuse when it conducted an in-depth investigation of the privatization of Colorado’s foster care system a decade ago. The Post reported that numerous children were molested, abused, and even died in foster homes after the state started contracting with businesses that failed to ensure they were placed in safe homes. The state also paid three times as much to place a child in private foster care as it did in homes that were supervised by the counties.Affiliated Computer Services (ACS), another private firm, won a $1.16 billion contract from the state of Indiana in 2006. By 2008 there was a huge jump in the number of families and senior citizens incorrectly denied food stamps and Medicaid.
But these errors, as devastating as they are, weren't simply the result of computer glitches. Instead, they are built into the for-profit framework of corporate-run social services:
Many question whether these services -- aimed at helping the elderly, single parents, and foster children -- should ever be delivered with a profit motive. As Bob Jacobson of the Wisconsin Council on Children and Families put it, "If you’re a corporation whose very mission is to increase shareholder value, that is automatically in conflict with a social service agency whose sole purpose is to meet the needs of people in the program."
Jacobson noted that in the early days of privatizing social services in Wisconsin, contracts with Maximus and others were set up in such a way that "the profit motive was built in to deny benefits." That is, whatever money Maximus saved the government by not enrolling eligible individuals, it got to keep. "There was all sorts of money being siphoned off to build big houses for CEOs and it was perfectly legal."Despite its reputation of billing the state of Wisconsin for questionable expenses related to its privatized welfare-to-work program, Maximus won another $21 million bid in 2011 to management the state's foster care services for the next five years.
Earlier this year, the state of California's $69 million contract with ACS failed 37,000 people whose food stamp benefits disappeared.
And it isn't just state governments being swindled by private companies to prey on vulnerable families. CMD reports that Maximus just won a contract with the Department of Education to process federal student loan payments -- and it could run taxpayers as much as $848.4 million!
It's no surprise then that Maximus's CEO took home $4 million last year and his company made over a billion in revenue. ACS's parent company, Xerox, made $22.3 billion last year and has awarded top executives over $120 million since 2008.
Maybe that wouldn't be so bad if either company actually provided reliable services in exchange for the contracts they get from taxpayers. But that's the point: public services and private profits just don't mix.
So the next time tea party radicals tell you we have a spending problem, tell them to blame privatization and corporate greed.
It's not just robbing taxpayers -- it's killing the poor.
