Gov. Bobby Jindal has scored another big victory in his push for privatization of state services. The state Civil Service Commission voted 3-2 to approve his administration’s plan to hire Blue Cross and Blue Shield of Louisiana to manage one of the state’s employee health insurance plans.
As you can see, it definitely wasn’t a unanimous decision. Turning government services over to private companies is a two-edged sword because savings often come at the cost of public salaries and worker benefits. In this latest move, for example, 177 positions will be eliminated. Only 121 of those are currently filled, and 62 of the 121 are eligible for retirement. That means 59 workers will definitely lose their jobs.
Those workers are employed by the Office of Group Benefits that has been handling claims processing for over 62,000 state employees, retirees and their dependents. Workers being served are members of the preferred provider organization (PPO) of OGB. Blue Cross and Blue Shield is already administering a health maintenance organization (HMO) at OGB that serves another 165,000 employees, retirees and their families.
Jindal administration officials always talk about the upside of privatization. In this case, they say state government, state workers, school boards and other public agencies will save $20 million a year. Blue Cross and Blue Shield will receive $37.8 million annually to administer both the PPO and HMO, which serve a total of more than 200,000 people.
The original plan was to sell OGB to a private company. However, members served by the office said they were afraid premiums would be increased and benefits would shrink. So the governor’s advisers decided to farm out administration of the office.
Paul Rainwater, state commissioner of administration, said Louisiana and Utah were the only two states that self-administered health insurance plans. He said doing so puts state government into competition with the private sector.
The biggest privatization move by Jindal came to fruition in 2011 when five health care companies were selected to provide policies to over 800,000 Medicaid patients. Those citizens were placed into coordinated health care networks that are paid by the state to provide health care coverage. Previously, those patients were cared for by physicians who were paid a fee for their services.
State Sen. Ronnie Johns, R-Sulphur, and former Sen. Willie Mount, D-Lake Charles, whom Johns replaced when she was term-limited, got legislation passed that would have monitored how well the new networks are operating. Jindal vetoed both measures, insisting they were a duplication of effort and unnecessary. Actually, what the governor never wants is anyone looking over his shoulder.
The Civil Service Commission earlier this month gave final approval to the privatization of two state-operated centers for the developmentally disabled. That move is supposed to save about $7 million in the first nine months under private control. It will also abolish 980 positions.
One of the facilities will be operated by a religious group and the other by an Association for Retarded Citizens. Like the OGB move, there are some unfilled slots and some workers eligible for retirement.
Jindal is also an advocate for the privatization of state-operated prisons, but his plans have run into opposition the last two years. In 2011, his proposal to sell three state prisons was voted down in committee. A committee approved sale of the Avoyelles Correctional Center this spring with a 13-11 vote, but the bill never came up for a House vote.
Two prisons were shut down this year. Legislators put $8 million in the state budget to keep one of them at Pineville open, but Jindal vetoed the appropriation.
Advocates of privatization admit jobs are lost in the process, but insist private enterprise operates more efficiently. They also believe government doesn’t exist to provide employment for citizens who are out of work. However, they say private companies will give preference to existing state workers.
Opponents disagree. Raymond LaBorde of Avoyelles Parish, a former state commissioner of administration, has argued against sale of the prison in his parish. He said there were serious employment problems before the prison was opened, and they would return if the prison were sold. Some state employees are hired by the private prison companies, but often at lower wages and with reduced or no job benefits.
Despite some drawbacks to privatization, the odds are definitely in Jindal’s favor when it comes to farming out state government operations. Most observers agree private companies are more efficient, and the general public sentiment is that governments spend too much and waste too much money.
Maybe so, but government does have a role to play when services are privatized. It has to establish the framework under which private companies deliver public services and rate the effectiveness of those efforts. Without government involvement, voters would have little recourse when the private sector fails to do its job.
Perhaps the best way to define privatization is to call it a partnership between government and private enterprise. They need one another in order to succeed.