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Texas State Auditor Questions Necessity of Prison Health Care Oversight Board

by Matthew T. Clarke

The Texas State Auditor's Office has released a report which scathingly criticized the Correctional Managed Health Care Committee (Committee) for failing to perform its contractual duties and having several conflicts of interest with the health care providers, concluding that the committee may no longer be necessary.

In 1994, the Texas Legislature implemented a managed health care plan for Texas prisons, essentially creating a HMO for the prison system, believing it would reduce the cost of providing prisoners medical treatment. The method of health care provision was direct, fixed-rate contracts with the University of Texas Medical Branch at Galveston (UTMB) and Texas Tech University Health Sciences Center. This was later replaced with a two-tiered system of contracting whereby the prison system contracts with the committee for provision of health care services and the committee contracts with the health care providers. The cost of health care services for the approximately 150,000 Texas state prisoners in 2004-2005 was $300 million per year.

The structure of the committee virtually ensures conflicts of interest. It consists of two representatives from each university, two employees from the prison system and three public members. The committee also employed five full-time staff members and accounted for $636,000 in expenditures in 2003, 92% of which was spent on salaries. The fact that half the committee members are employees of the health care providers and all of the committee's staff members are paid by UTMB's payroll system makes independent fiscal oversight of the health care providers difficult. Furthermore, the committee maintains its funds in two accounts at UTMB, holds the quarterly funds used to pay for prisoners health care in UTMB bank accounts, and relies on UTMB's accounting department to maintain its accounting records.

The current contracts by the committee fail to provide for even the most basic of provisions for the evaluation of contractor performance, remedies for nonperformance, and reporting of financial transactions. The contracts also often fail to specify allowed and unallowed costs. Thus, UTMB has, for instance, spent funds intended for the medical treatment of prisoners on non-prisoner-health-care items such as a banquet and conference, moving expenses for newly-hired employees, gifts for employees attending training, the costs of a UTMB employee to take a new UTMB doctor to dinner (including tip), and flowers for employees.

The questionably-spent funds were great, totaling 17.5% of the $2,266,072 spent in the 228 expenditures sampled from 2002 and 2003, and 11.5% of the $8,660,342 spent in the 42 expenditures sampled from 2004. Taken as a percentage of the $300 million per year expenditures, this means that $121.5 million of the monies intended for prisoner health care were questionably spent in those three years. Thus, millions of dollars of the expenditures were either unreasonable or unallowable under state law.
Even greater problems arise in the proper tracking of payroll costs, which account for 54% of the overall expenditures. The Committee's contracts with university providers do not require university providers to keep detailed payroll records that would allow them to accurately allocate payroll costs to their contracts with the Committee." The problem is that the health care providers contract for health services with jails, counties, federal prisons and private prisons. Thus, if the amount of time an employee spends on state prisoners' medical care is not tracked, the state prison system may end up paying for the other contractors' expenses so far as employee salary is concerned. Due to the lack of detailed records, it cannot be determined if this is actually occurring. A fixed payroll allocation percentage is assigned to each employee, but it does not necessarily reflect the actual percentage of work done for the prison system and cannot accurately account for ever-changing allocation of employee time among the various customers.

The Committee does not provide sufficient fiscal oversight of the funds appropriated for inmate health care. Without monitoring how these funds are spent, the Committee cannot ensure that the funds are spent appropriately, nor can it support its requests for funding.

The Committee relies on the Department [of Criminal Justice] to monitor inmates' access to health care and on the university providers to monitor quality of care....The structure of the Committee and the potential for conflicting loyalties" may compromise the quality of the health care given prisoners and allow for improper expenditures. The Committee should monitor both prisoners' access to health care and the quality of care independent of the prison system and universities.

The Committee failed to report the available fund balances at the end of each fiscal quarter to the governor and Legislative Budget Board as required by state statute. These available fund balances totaled $3.9 million, $2.7 million and $1.98 million in the first three quarters of FY 2004, respectively. An available fund balance as high as $31.8 million has existed at the end of each quarter since 1996. However, the Committee has either reported only a portion of the balance or reported that it had no reserves. The Committee has no authority to carry forth such balances.
Overall, the Committee did not agree with the audit report. It complained that the audit report held them to standards applicable to state agencies.
The Correctional Managed Health Care Committee is not a state agency," said former Committee Chair Dr. Ben Raimer of UTMB.

Of course, this is merely an attempt to divert attention from the misspent millions. Agency or not, state organs are accountable for how they spent the taxpayers' money. No wonder the State Auditor questioned whether this committee--that is nothing but an interested middleman in the contracting of prisoners' health care--is still necessary.

Ironically, the audit report was released only a few months after an article praising health care in Texas prisons appeared in The Journal of the American Medical Association. Who was that article written by? UTMB doctors. Adding irony to the pile, most of the statistics used in the article to prove" how much the health care of Texas prisoners had improved pre-dated the creation of the managed health care plan. Thus, they dated from an era when the federal court in the Ruiz litigation referred to Texas health care as barely constitutional overall and miserably unconstitutional in some specific prisons.

In dismissing the Ruiz suit in 2001, the federal judge stated that while the court remains deeply disturbed by the current sub-par level of medical treatment being provided by the TDCJ-ID to its inmates, a system-wide deliberate indifference to health needs has not been shown to exist." Ruiz v. Johnson, 154 F.Supp.2d 975, 988 (S.D.Tex. 2001). Thus, seven years after its implementation, the managed health care plan was providing Texas prisoners at best sub-par medical care at great expense to the Texas taxpayer, a situation that continues to this day. The audit is available on PLN's website.

Sources: Austin-American Statesman; An Audit Report on Management of Correctional Managed Health Care Contracts, November 2004, Report No. 05-012,

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