Cutting Costs Without Cutting Benefits

The stress on public budgets is real. When public officials say there's nothing left to cut, they really mean it. Truth is, there aren't a...
by | May 1, 2010
 

The stress on public budgets is real. When public officials say there's nothing left to cut, they really mean it. Truth is, there aren't a lot of frivolous programs waiting to be eliminated. But what about cutting the waste and inefficiencies from existing programs? Thinking about program "cuts" this way would produce dozens of opportunities in every jurisdiction in America.

According to a 2009 report from the Office of Management and Budget, benefit programs are rife with erroneous payments. The OMB found that the Medicaid error rate was 10.5 percent, totaling $18 billion in flawed payments. The Temporary Assistance for Needy Families welfare program error rate was 9.3 percent, and the State Children's Health Insurance Program was 14.7 percent. Without question, the opportunity exists to improve practices and squeeze out inefficiencies so that scarce resources benefit those in need.

Every day, federal and state authorities oversee programs that contain billions of dollars of waste, fraud and client inconvenience. Yet even during these dire fiscal times, far too few public leaders take on reforming these systems, wasting precious resources intended to help those truly in need.

Taking on embedded inefficiencies can produce big results. Consider just one improvement: converting to electronic distribution of benefits. Government has been expanding its use of plastic stored-value cards in recent years, but big opportunities still exist.

Oklahoma took on the challenge in 2003 when the state's Department of Human Services faced several child-care challenges.

The situation was difficult all around. Dollars were short, and the demand for child-care support exceeded the available resources, frustrating mothers who wanted to work but couldn't without some child-care help. In addition, child-care providers were frustrated by the slow and cumbersome paper-based reimbursement systems, prompting some providers to simply refuse to accept children in the program. Most critically, there was significant waste and a lack of financial accountability throughout the system, building in a tolerance for incorrect payments. Too many providers simply "rounded off" their bill, charging for 30 days even if the child attended for just 25.

Facing fiscal constraints, Oklahoma couldn't afford an expensive overhaul. What it needed was a simple, cheap solution. They found it in a system utilizing an Electronic Benefit Transfer program, a proven method of benefit disbursement that had already worked well with food stamps.

The EBT program employed time and attendance tracking to solve the problems the state's child-care system was facing. The department could now document and pay at the point of service while simultaneously verifying eligibility in real time -- allowing them to pay providers for actual services provided and to eliminate retroactive paperwork and undocumented claims for payment.

Not only did the system provide a solution to exiting problems, it also dramatically enhanced the usability of Oklahoma's child-care service. Parents could now use a convenient card to check their child in and out of day care. Parents and providers would now be notified of coverage and co-pays through instant eligibility verification, and automatic payment calculations would be based on actual attendance -- eliminating the need for invoicing paperwork. The plastic benefit cards were fast, accurate and paper-free.

State officials estimated that waste and fraud dropped by 10 percent, not a surprising number in light of the findings from OMB. Just imagine if 10 percent more poor moms nationwide could receive child-care assistance, with no increase in costs?

This all seems so obvious and yet is so overlooked. So what keeps government from racing to implement such reforms, whether in child care or school lunch or a host of other benefit programs? The sad fact is that many government officials are caught up in thinking that a "cut" means a program cut, and where the word innovation often entails unacceptable personal risk.

First of all, anything new puts a bull's eye on the backs of public officials. Routines, even flawed paper-based routines, entail no risk. Clever innovations involve change, and these innovations can be unrewarding for managers. After all, any departure from standard practices entails taking on vested interests and in many cases, fellow employees. A streamlining effort can be risky, especially if the transition is less than perfect.

Taking on fraud can sometimes go against an agency's "helping" culture, too. Bureaucrats often sincerely care about those they serve, and can't bear to inflict discomfort on anyone seeking help -- fearing that these increased accountability systems will produce discomfort or stigma for applicants. Increasing the accountability through a card swipe system isn't mean however, since it can redirect limited resources to those most in need.

Rooting out inefficiency is tough work. It means implementing new technologies and constantly searching for ways to do things better, faster, cheaper. It's easier to throw up your hands and say, "We can't cut anymore," than to root out inefficiency and waste program by program.

The lesson here is simple: Instead of looking to explain what you can't do without, look hard at how you can make the most of what you've got. Doing so will create a culture that encourages innovation and protects those who advocate for innovations that increase accountability while improving results.

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