Value of State Contract To Process Medi-Cal Claims More Than Doubled Over Past Five Years

The value of a state contract with Texas-based Electronic Data Systems to process Medi-Cal bills in the past five years has more than doubled to $230 million annually, despite an increase of only 27% in the number of bills processed, according to an audit of the contract conducted by the Legislative Analyst's Office, the AP/Kansas City Star reports. EDS, which has held the contract with Medi-Cal for 17 years, also received a $19 million bonus created to encourage other firms to compete for the contract. The company has earned more than $100 million in contract changes, but auditors said "virtually no records exist" that show where or why that money was spent, the AP/Star reports. Gov. Arnold Schwarzenegger's (R) office has asked the Department of Health Services to submit a corrective plan within 30 days and explain its progress in adopting the audit's recommendations, Department of Finance spokesperson H.D. Palmer said. Stan Rosenstein, DHS deputy director of medical care services, said that the EDS contract is the "most carefully managed Medicaid contract in the nation," adding that the increase in the value of the contract could be attributed to increases in the number of bills processed and an increase in eligible recipients. Rosenstein also said that the EDS contract includes "more than a dozen" other state programs, the AP/Star reports. However, the audit found that non-Medi-Cal billing represented only 10% of overall billing and does not account for the price increase in the value of the contract. According to the AP/Star, EDS each year spends close to $200,000 lobbying California lawmakers and officials and about $180,000 on campaign donations in the state (Chorneau, AP/Kansas City Star, 3/13).