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Profiting from the Poor: Outsourcing Social Services Puts Most Vulnerable at Risk

Outsourcing aid for people can’t work. It’s designed to make a profit.

In a story most in the media missed, protestors gathered under the dome at the Mississippi state capitol earlier this year to oppose a bill that would allow the state Department of Human Services (DHS) to privatize everything from child protective services to nutrition programs for the elderly.

The bill,  HB 1009, which later passed, started out as a way to allow the Mississippi DHS to hire private contractors to collect child support payments -- something which Mississippi had flirted with in the past, with less than impressive results.

From 1995-2000, a wealthy but little known firm called  Maximus, Inc. had been hired to collect overdue child support payments in Mississippi and, according to a joint legislative committee report, on average, had higher costs but collected less in payments than the state did during the same five-year period. During the February 2013 debate on the new bill in the state Senate, the Associated Press quoted Senator Hob Bryan as  saying "I remember the disaster that Maximus was."

But memories of that failed experiment did not stop Republican lawmakers from expanding HB 1009 to include a broad provision to allow the Mississippi DHS to privatize any of its functions by contracting out to private companies.

"Outsourcing aid for people can’t work. It’s designed to make a profit," Mississippi state representative Jim Evans told CMD. Evans had joined other legislators to stop what they saw as the potential corporate takeover of a public agency providing essential services to vulnerable citizens.

Despite the now lengthy list of failed -- and often disastrous -- attempts at privatizing social services in states across the country, Mississippi Governor Phil Bryant signed the bill into law this spring.

Indiana Outsourcing Demonstrates the "Perfect Storm" of Overzealous Corporate Ambition and Corporate Politicians

Mississippi protestors had good reason to be concerned. The privatization of social services has in the past resulted in some spectacular failures.

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 home 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.

More recently, Indiana Governor Mitch Daniels' attempt to transform the state into a privatized utopia failed spectacularly in the  health and human services area. Indiana’s 2006 experiment involving a $1.16 billion contract awarded to a consortium of firms including  Affiliated Computer Services, Inc. (ACS), went so badly, that the Governor cancelled the contract  at an unknown cost to the state, and the state legislature even considered banning privatization altogether.

Before Indiana privatized these services, it had one of the lowest rates in the country for incorrectly denying or ending access to food stamps, but in 2008, under for-profit outsourcing, that error rate jumped 13 percent  according to the LA Times, resulting in kids going hungry and grandmas losing their Medicaid coverage. The human cost of these failures is all too real. WTHR News in Indiana,  reported on the story of Ronald Alexanderwho died in 2009, more than a year after being wrongly denied Medicaid benefits and despite his frequent and frustrated attempts to get the help he needed.

Many blamed ACS, the main subcontractor on the project, for the repeated problems. By 2009, the state cancelled its contract and attempted to institute a hybrid method, transferring some functions back to the state government.

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