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  • Douglas J. Shumway

Business lawyers in Texas warily watch government suit against private contract company


The Texas Attorney General’s office most recent announcement regarding the state’s decision to file a lawsuit against the company contracted to provide Medicaid services for its population hasn’t made waves or generated much media controversy according to this overview of the case published in the Texas Tribune. But some business lawyers in Texas think that the lawsuit should have. Elected officials and the general public of Texas both take pride in the traditionally and quintessentially Texan idea of individual (and corporate) freedom from government over-regulation and intrusion. This most recent lawsuit smacks of a twisted ideology from the capitol that isn’t quite sure what to prioritize.

At first glance it’s money. It’s almost always money, and the state of Texas would have you believe it’s about your money, or at least, that of their taxpayers. But business lawyers in Texas with a critical eye aren’t so sure about that.

The state has filed a lawsuit and is asking for a jury trial to adjudicate the claim around the $1.1 billion that the Department of Health and Human Services alleges their Medicaid contract provider, a subsidiary of Xerox Corp., approved and spent on “services not performed and orthodontic benefits not authorized by Medicaid policy.” One of the attorneys assisting the state in their case is estimating the damages and penalties could tally $2 billion when all is said and done.

But there are other factors at work here, and one that business lawyers in Texas representing Xerox’s subsidiaries would be keen to point out in court. First, it apparently took two years after an investigation revealing the alleged overspending on Medicaid orthodontics was made known to the Texas HHS for the state to consider canceling their contract. Furthermore, the contract enabled the company to have “only one dentist to review thousands of monthly claims,” leaving the process with the choice of being either backlogged and denying care to patients or “rubber-stamping” dental claims.

Politicians and elected officials are outraged at Xerox’s costly errors, and have adamantly voiced opinions that the state is right to “hold this contractor accountable and recover these taxpayer dollars.” With emotional language, state Sen. Jane Nelson, R-Flower Mound, laments that they trusted the contractor, “that trust has been broken, and we want our money back.”

But Texas Medicaid services haven’t exactly been a priority for the state before. In fact, as some business lawyers in Texas might note, the program as a whole has been slashed, cut back, and known nationally as one of the worst providers of medical care to the people of the second most populous state in the union. It’s understandable that when an alleged $1 billion is involved, it could fast become a priority, but it would seem the state has a pretty big blind spot when it comes to how it understands government implementation of state-wide programs, the responsibility of the state in its administration of its contractual obligations to the public and its accountability to its taxpayers in its own stewardship role of their earned income and the health of its most vulnerable people.


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