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California's Correctional Health System Needs Real Reform

California's correctional health system is a $2 billion failure. Eight years of federal receivership has yet to bring California's correctional health system to a constitutionally acceptable level, despite such unprecedented intervention and soaring spending.

Fortunately, there are viable solutions. Unfortunately, this is California, and any of the following ideas are unlikely to catch on anytime soon. A recent Pew Charitable Trusts report details strategies states around the country have used to control the high cost of correctional health care. In doing so, Pew revived ideas presented in a 2012 report by California's own, independent Legislative Analyst's Office (LAO), which suggested that California seriously consider contracting health services to private providers.

With over 100,000 people subjected to unconstitutional health services and billions of dollars at stake, California should seriously consider tapping into the knowledge and capabilities of the private sector to prevent a further loss of life while reigning in costs.

First, how California got into this mess. In 2005, medical services in California's 33 state prisons were placed under federal receivership following a federal lawsuit (Plata v. Brown) alleging grossly inadequate health care. The lawsuit, filed in 2001, initially prompted California to promise to the federal courts that it would try to improve health care quality. Despite making such promises and the pending lawsuit, California's correctional health services failed to improve, with up to 64 preventable deaths per year being attributed to the broken system.

As conditions continued to deteriorate, Judge Thelton Henderson stepped in and ordered that the correctional health services be placed under his control, ruling that health care in the California prison system amounted to "at times outright depravity, and I intentionally call it that." Soon after, he placed the correctional health system under the federal receivership, which works to coordinate and monitor health services administered by the California Department of Corrections and Rehabilitation (CDCR). The federal receiver is charged with implementing reforms to the delivery of correctional health services with the goal of raising the standards and quality of services delivery so that they meet constitutional muster.

In the eight years since the receivership was ordered, California has repeatedly sought to terminate the receivership and assume full control over health services delivery. Time and again, these efforts have been struck down by federal courts due to persistent inadequacies and inefficiencies in correctional health services.

Ultimately, the sorry state of medical care in California prisons has in part been attributed to overcrowding. In a 2011 US Supreme Court ruling ordering California to reduce the prison population to 137.5% of design capacity, the court connected the overcrowding problem with insufficient health care delivery. California currently has until the end of January 2014 to reduce the prison population by approximately 9,000 more inmates to meet this order. Whether or not it will is another question, as Jerry Brown and corrections officials have repeatedly sought to challenge or delay the order.

In September 2012, California's latest bid to end the receivership was rejected. In rejecting the effort, Judge Henderson wrote that "evidence of progress made under the direction and control of the receiver does not constitute evidence of [the state's] own will, capacity, and leadership to maintain a constitutionally adequate system of inmate medical care."  As recently as July, investigators reported to the federal receiver that supervision and oversight of health providers at California State Prison, Corcoran was "grossly inadequate and threatens the safety of patients."

These repeated failures have come at high costs--to the health of patients and the wallets of taxpayers. Pew Charitable Trusts has found that between 2001 and 2008, per-inmate health care spending in California rose 84%, from $6,426 to $11,793 per inmate. In 2008 dollars, California taxpayers spent $981 million in 2001 on correctional health services and $1.98 billion in 2008. This year, California taxpayers will be throwing nearly $2.2 billion into the failed correctional health system.

Rising costs and consistently botched delivery of health care in a corrections setting aren't particularly surprising. Corrections departments are charged with and excel at locking people up, not providing medical services. Most states have come to realize this and are tapping the resources of the private sector in delivering a portion of medical services in state prison facilities.

The LAO identified numerous inefficiencies in how the CDCR delivers health services.

First, is the existence of the federal receivership itself, which provides administrative costs that are presently unavoidable until California resolves the overcrowding problem and demonstrates that it is capable of providing constitutionally adequate health care.

Second, California has only in the past decade invested in telemedicine, or what the Pew report refers to as "telehealth." Telemedicine is the use of telecommunication to provide medical examinations remotely; in practice, this involves two-way video and/or phone communication between a patient and a medical provider located elsewhere. This practice is widely used throughout the country and does not appear to necessarily provide poorer care. Telemedicine in a corrections setting allows for savings associated with transporting, guarding, and paying for services at an off-site hospital. The Pew report, citing the LAO, notes that California's use of telemedicine has grown from 9,000 in fiscal 2005 to 23,000 in fiscal 2011. While the use of telemedicine has been increasing, the use of it has been inconsistent and there is plenty of opportunity for expanding its use. Further expansion of telemedicine, according to the LAO, can save taxpayers a further $15 million without compromising the health of patients.

Third, the LAO cited an inconsistent application of the Utilization Management (UM) system in evaluating the appropriateness of health services compared to pre-established guidelines. In this approach, problems presented by a patient are evaluated in comparison to established guidelines designed to help determine which medical response would be most effective in addressing those problems. This process helps limit costly and unnecessary medical examinations. This system has been in place since 1996, according to the LAO, but is inconsistently applied across the 33 state prisons. According to the LAO, more consistent application can provide savings from off-site medical transports in particular.

Of course, the savings from fixing these three problems are small relative to a $2 billion budget. For larger savings one must turn to the chief recommendation by the LAO, also cited by the Pew report, and that is the contracting out of health services to external providers. Freeing correctional health services delivery from total government control provides tremendous flexibility in addressing poor service delivery. Patients in California prisons have been subjected to substandard health care for years while the government tries to deny that there is a problem at all. In the current system, CDCR cannot be "fired" from providing services.

Pew cited three strategies states have taken: contracting with a state university system, implementing capitated contracts, and public-private partnerships (PPPs). Pew discussed California's capitated contract beginning in 2011 with Health Net Federal Services to provide access to a network of medical specialists. The amount CDCR can pay external health providers is capped at an amount "ranging from 110 percent to 130 percent of Medicare rates," according to Pew. According to the report, this move has saved $24 million per year due to the contract as California no longer has to pay as much for multiple, independent contracts with specialists to pay for services.

The alternative options, contracting with university systems or private providers to provide all health services, were considered by the LAO in the context of states that have actually engaged in such contracting.  Cited as examples were Texas, which contracts with the state university system, and Kansas, which has contracted with private providers for decades. While both states experienced savings, the LAO ultimately determined that contracting with university systems yield lower savings and have less flexibility than contracting with private providers. Having a government agency contract with another government agency may lead to excessive bureauracy and stiffled innovation relative to what could be achieved in a PPP.

PPPs have been successfully utilized in controlling costs and streamlining stagnant correctional health systems across the country, including in California county jails. The most recent was Santa Cruz County in 2012, which decided to outsource jail medical services to a private health provider. A major selling point for this was estimated savings of $1.5 million per year.

In PPPs, if a private provider fails to live up to expectations set forth in the contract, the entire health system can be effectively replaced with a new one. Far from being merely an abstract possibility, Stanislaus County recently did just this, replacing the company it contracted with for 20 years with another after deciding another company could do a better job.

This knowledge is part of what prompted the LAO to recommend that California consider launching pilot programs contracting out health services with outside providers. While the LAOs ideas have so far fallen on deaf ears in Sacramento, this kind of reform is sorely needed in California's prison system. Of course, this may be a long shot considering California's inability to get anything right in addressing the state's prison crisis.


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