Gambling In The Casino

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One of the enduring idiosyncracies of Texas politics is that behavior that would easily raise concerns over corruption in many states is legal, normal, and even encouraged, as when legislators argue that their concurrent business interests give them expertise rather than conflicts of interests. 

That’s worth keeping in mind when considering the roiling drama over at the Health and Human Services Commission. Last week Jack Stick, HHSC’s chief counsel, resigned after its head, Kyle Janek, canceled a $110m contract that Stick had awarded to 21CT, an Austin-based data analytics firm whose lobbyists include one of his former coworkers, without considering any competing bids. As the Houston Chronicle’s Brian Rosenthal explains, Stick got around the competitive bidding requirement by using the Cooperative Contract program, which is meant to minimize red tape for state agencies making minor purchases: 

State officials said Stick chose the process because he became so smitten with 21CT’s ability to identify patterns within combined data sets that he thought formal bidding would waste time.

That explanation appears far-fetched, however, according to experts who said most anti-fraud software is not radically different.

“Everybody has their own slightly special way of doing it, but it’s all basically the same bucket of chicken,” said Alan White, inspector general at the Wisconsin Department of Health Services and a spokesman for the National Association for Medicaid Program Integrity. “There are only so many pieces in the bucket, and how you get them is how you get them.”

21CT’s contract, which was for fighting Medicaid fraud, is apparently legal, although its size–$110 million dollars—is irregular. The Chronicle crunched the numbers, and found that over the past five years contracts awarded under the Cooperative Contracting program have had an average value of $3,493. Also legal but irregular was a 21CT contract, with the Department of Family Protective Services, which was worth $452,000. That one was also awarded without competitive bidding, after Stick recommended the company to DFPS officials. And it was cancelled on Wednesday, after the Texas Tribune started asking about it.  

It’s not hard to see why these contracts would be controversial, except that such contracts rarely are, in Texas. After a video camera company called WatchGuard was awarded a $10m contract with the Department of Public Safety in 2006, several of its competitors cried foul, arguing that the bid had been carefully written to exclude all companies other than WatchGuard, which happened to tout two incumbent legislators among its initial investors. That case elicited some criticism, but comparatively little backlash and no notable consequences; one of the legislators in question, Ken Paxton, is about to be sworn in as attorney general. In a different vein, awards from the Texas Enterprise Funds might be considered pseudo-contracts, insofar as the companies that receive them are meant to yield measurable economic returns, and there’s no direct competition for those awards, only an intermittently enforced application process

The Austin American-Statesman’s J. David McSwane’s account, though, points to a possible explanation. The owner of one of 21CT’s rivals says that when his company analyzed three years’ worth of data on Texas’s Medicaid spending, they found suggestions of rampant fraud, perhaps amounting to as much as a quarter of the roughly $28 billion the state spends on Medicaid each year. 21CT, not having had to compete for the contract, never produced that kind of analysis. And it has yet to produce any notable results: In October, an audit found that investigators in HHSC’s office of the inspector general were recovering so little money that had been fraudulently paid that they weren’t necessarily paying for themselves, to say nothing of any data analytics firms. Thus far, in other words, the controversy points to a Texas-specific understanding of corruption. Cronyism is probably fine. Inefficiency is intolerable. 

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