EBT Shutdown Illustrates Stupidity Of Outsourcing Government

10th Anniversary Fundraiser:

More costly, less effective. For more than 20 years, I've been writing about the insanity of "running government like a business." Outsourcing government has never been about cost savings or efficiency. As a Republican official gleefully explained to me, back when I was still a naive young reporter, it's only about one thing: Having big fat contracts you can parcel out to political donors. Witness the outsourced clusterf*ck that is the national Obamacare portal (the vendor list reads like a Who's Who of big-ticket campaign contributors and, as Jamie pointed out this week, the procurement process is a nightmare).

Which makes this Truthout story predictable:

Over the weekend, low-income shoppers in 17 states were unable to use their electronic food stamp debit cards. In this reporter's neighborhood in downtown New Orleans Saturday evening, rumors swirled around grocery store cash registers and street corners. Was the government shutdown to blame? Did the deadlock in Washington mean nutritional assistance was gone for good?

The public soon learned that government shutdown was not to blame. Xerox, a private company that state welfare agencies had contracted for computing services, admitted that a "routine test" caused a computer glitch that temporarily shut down the Electronic Benefit Transfer (EBT) system in Louisiana, Ohio, Michigan and 14 other states.

It turns out that the EBT incident is not the first screwup under Xerox's watch. Affiliated Computer Services (ACS), a subsidiary of Xerox since 2000 that specializes in privatizing government administrative services for the most economically vulnerable Americans, has taken heat in the past for siphoning excessive fees from welfare recipients, mismanaging Medicaid payment systems, and failing to complete multimillion dollar contracts for public agencies.

One of ACS's high-profile snafus occurred in Indiana after state politicians decided to outsource major public services as part of a failed privatization scheme, according to the Center for Media and Democracy (CMD):

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 Alexander, who 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.

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