Hawaii outsourcing hundreds of millions of dollars to the mainland

It appears that Hawaii's Departments of Education and Human Services are out-sourcing information technology and other business to the mainland, losing the state hundreds of millions of dollars.

Hawaii is the only state in the country that depends on another state to be its fiscal agent for Medicaid.  While I've been unable to find the contracts themselves, a DHHS report noted the state spent about $48 million between June 2002 and December 2004 on its contracts with Arizona, ACS and HMSA.  ACS and Arizona now operate the entire contract, which could easily cost as much if not more than it did six years ago.

Since the Medicaid information system is operated by Arizona, ACS, which has the local contract with DHS, cannot perform any on-site maintenance or repairs for the system.
The contract with Arizona necessitated a contract with another Arizona firm, Fourthought Group.  They were paid $1.8 million over 24 months in 2004-2006, to make sure the HIPAA security system worked on the computer information system operated by Arizona.

Hawaii DHS has paid about $5.25 million to D.C. law firm Covington & Burling to write, re-write and defend legally the state's Medquest contracts with UnitedHealth and Wellcare.  C&B have also represented UnitedHealth in the past.  The most recent contract is from March 2010 for an additional $500,000. 

Hawaii's Medquest contracts with UnitedHealth of Minnesota and Wellcare of Florida are shipping out over $310 million to the mainland, including over $100 million in lost insurance premium taxes.  This does not even begin to factor in the local jobs that have been lost due to cost-cutting measures the two companies have implemented that appear just to shore up their profit margins.

Hawaii's Department of Education has been paying the University of Massachusetts Medical School since 2006 to handle Medicaid reimbursements to the schools for special education health related services.  I calculated the other other day that the state seemed to be losing about $85 million in potential federal reimbursement in FY2010, in addition to whatever portion of the state's salaries could be reimbursed as administrative costs for the Medicaid program.  (As a sense of comparison, the state of Missouri was receiving over $5 million a quarter in federal funds just for administrative time.)  According to a DHS budget document, the schools are only receiving about $1.3 million this year in Medicaid reimbursements.  I have been unable to find what DOE is spending on the contract with the UMass Medical School for the past four years.

One has to wonder what our pro-Hawaii-business governor and legislators are thinking about when they make the decisions that lose our state so many millions of dollars in additional employment, services and taxes.