Trade secrets: inmate health-care contracts kept confidential

Hundreds of millions of dollars are involved in a new state contract for prison health care, but there’s no telling now exactly much money California is spending under the agreement, which takes effect in just weeks. Even lawmakers are kept in the dark.

The contract and its fiscal details are secret because of an exemption related to health care information within the state Public Records Act, said Liz Kanter, a spokesperson for the California Prison Health Care Services, the government body that awarded the contract to Health Net Federal Services, an outside HMO and subsidiary of Health Net.

Some details will be released after a year has passed, she noted.

But questions about the contract couldn’t come at a worse time: Prison health care costs are skyrocketing.

The non-partisan Legislative Analyst’s Office found a “dramatic increase in spending on adult prison health care: from $1.2 billion in 2005-2006 to $2.5 billion in 2008-2009,” according to the March, 2010 report on adult inmate health care costs.

The increase in cost was linked to an increase in medical contracts, like the one newly obtained by Health Net.  

“The increase in correctional health care costs has been largely driven by greater usage of contract medical services,” said the LAO report.

But nobody besides CPHCS and Health Net know how much the state will be spending on inmate health care next year.  Both declined to discuss the issue.

According to the government code that protects the contract’s confidentiality, all health care service contracts and records under the Department of Corrections and Rehabilitation are exempt from the Public Records Act, a law that is intended to shed public light on government actions.

But in the case of the health care contracts, every aspect of contract negotiations, including meeting minutes and staff strategies, is confidential.

It takes a full year after a contract has been fully executed for the details to surface.

“Except for the portion of a contract that contains the rates of payment, contracts for health services entered into by the Department of Corrections and Rehabilitation … shall be open to inspection one year after they are fully executed,” says California Government Code Section 6254.14.  

And nobody outside of the negotiations has access to a non-eradicated version of the contract – not the non-partisan Legislative Analyst’s Office, not the Assembly Committee on Accountability and Administrative Review, not the rank-and-file lawmakers.   

As for portions of the contract that contain rates of payment, those details don’t become public until three years after the contract has been in place.

The code is in place to protect trade secrets, said Aaron Edwards of the Legislative Analyst’s Office. The government code explains that confidentiality is necessary to protect the highly competitive nature of health care contract negotiations.

But by the time those three years pass and the cost of the contract is public, Health Net’s contract base will have already expired and the bill already paid.

Health Net Federal Services will start providing inmate health services on behalf of CPHCS starting Jan. 1, 2011 for a base agreement of three years. After those years are up, the state has the option to extend the contract for an additional year.

Health Net Federal Services is a subsidiary of Health Net, one of the nation’s largest health care companies. They have a number of major government contracts, including those with the Department of Defense and Veterans Affairs. This is their first contract with the California prison system.  

CPHCS was established after the state was sued in 2001 for not meeting federal standards for inmate health care. As a result, the federal court took management of the inmate health system out of the hands of the California Department of Corrections and Rehabilitation and appointed a health care receiver, J. Clark Kelso, to take control. As receiver, Kelso now heads CPHCS, which administers inmate health care directly.  

Since it was established, “the federal court- appointed Receiver [has] hired thousands of additional health care staff (such as physicians, nurses, dentists and psychiatric staff),” according to the LAO’s March report.

Last year, California spent an average of $16,000 on each of its 170,000 adult inmates.

The LAO said it will have to wait until Jan. 1, 2012, before even glimpsing at the contract’s details and an additional two years will have to pass before they can crunch the numbers.

–Ed’s Note: Corrects $1.2 million to $1.2 billion in 5th graf 

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