Senator Eliot Shapleigh - El Paso, Texas

Fmr. Rep. Arlene Wohlgemuth

Texas on Tuesday ended a deal worth hundreds of millions of dollars with a private group led by Accenture LLP to manage the Children's Health Insurance Program and enroll Texans in programs such as food stamps and Medicaid.

The move, which follows reports that thousands of eligible Texans had trouble enrolling in social services, halts the nation's most ambitious effort to privatize such programs. Both champions and critics of outsourcing claimed that Tuesday's action validates their philosophy.

The mutual agreement between the state and the private group, Texas Access Alliance, severs what was originally an $899 million, five-year contract that was slashed to $543 million in December. The Health and Human Services Commission and the consulting firm Accenture never agreed on all the final terms of the deal.

"You suggest that this agency has not acted in good faith and has retreated from agreements we reached in December," Health and Human Services Executive Commissioner Albert Hawkins wrote Monday in a letter to Accenture. "This is incorrect. To the contrary, (the options Accenture offered) contradicted many of the agreements Accenture made with the state."

As the deal dissolves, Accenture spokesman Jim McAvoy said he doesn't expect either side to blame the other for what went wrong.

"The state's position on funding wouldn't permit us to successfully operate the program," McAvoy said.

State workers will run CHIP and manage Accenture subcontractors, including Maximus, until the agency decides who will handle the work. State employees will assume a greater role, although some work will still be done by private contractors, Hawkins said. The transition should be complete by Nov. 1, he said.

The state's goal, as outlined by the Legislature in 2003, was to modernize the enrollment system for social services by giving Texans the option to sign up by phone and online instead of just in person. By hiring a private group to run the call centers — Accenture's group beat out IBM — state officials expected to save $646 million over five years. But no savings have materialized.

After problems with a pilot in Travis and Hays counties, Hawkins halted a statewide rollout of the system last year.

Some of the more than 3 million Texans enrolled in programs such as Medicaid and CHIP reported receiving benefits late or talking to call center workers who couldn't answer their questions.

"Some people may say that everything is fine now that Accenture is off the job," said Patrick Rose, D-Dripping Springs, chairman of the House Human Services Committee. "That's not true. We've got to make sure we get to the bottom of what's happened over the last two years so that we don't repeat the same mistakes." As several states consider outsourcing social services, some here said Texas' experience shows that enrolling people in critical programs should not be handed to private companies.

"This should put an end to the seriously flawed idea that privatization is the way to improve services," said Will Rogers of the Texas State Employees Union. "Don't rely on these outsourcing people that are selling a product."

But Mary Katherine Stout, vice president of the Texas Public Policy Foundation, which supports limited government, said Tuesday's "action illustrates the superiority of privatization."

"If a private vendor fails to meet the agency's expectations, the state can hold that vendor accountable," Stout said. "Government employees never face such scrutiny for similar failures."

Lobbyist Arlene Wohlgemuth, who as a House member in 2003 carried the legislation launching the call centers, said the contract cancellation will amount to a loss for recipients of services.

"They'll have to go back to sitting for hours, if not days, in the eligibility offices," Wohlgemuth said.

But Sen. Judith Zaffirini, a Laredo Democrat who voted against the 2003 measure, commended the termination.

"Today's announcement sends a clear message that Texas no longer will tolerate unnecessary and unreasonable gaps that tremendously hinder access to state health services for children and low-income families," she said.

Rep. John Davis, R-Houston, said it's disappointing that Accenture hasn't performed well.

"We think the model is good, but we want to make sure we have the right contractor to implement it," he said.

But Accenture's McAvoy said that since taking over CHIP management from Maximus in June, Accenture has met performance requirements.

"Let's put it this way: After we took Maximus out of the CHIP program, the problems ended," he said.

Maximus spokeswoman Rachael Rowland declined to discuss issues with Accenture but pointed to Maximus' success running CHIP in other states.

"Where we've been the primary contractor, we have a proven track record," she said.

McAvoy said that 400 Accenture workers, including 200 in Austin, will go to work for Maximus.