Out of Control Policy Blog

Costs and savings for federal prisons

Earlier last month, a South Carolina subsidiary of BlueCross BlueShield called PGBA LLC, won a $7.3 million contract with the federal Bureau of Prisons. The prisons contract outsources the processing of healthcare claims for federal inmates across America. This small measure of privatization is just one in a series of moves by the federal government to cut down on costs and improve quality in its facilities.

With a federal prison population now over 30,000, officials are also increasingly turning to fully private facilities to handle the inmate load. As Reason reports in its recent Annual Privatization Report 2008, tougher immigration laws have caused U.S. Immigration and Customs Enforcement (ICE) to turn to detention contracts to meet logistical and financial limits. According to Detention Watch Network, the ICE saves over an average of $31 per person, per day, through private firms compared to agency-run detention centers. These financial benefits are spurring ICE to contract out more of its facilities. Detention Watch also cites a report showing that, at the end of 2007, 38% of ICE detainees were held in private facilities or in prisons managed by a private firm.

Not all is positive for federal officials though. Recently, ICE contractors have been accused of inmate misconduct. The ACLU sued U.S. Customs and the private firm Corrections Corporation of America (CCA) twice in 2007. Allegations range from poor medical care to overly cramped housing to unsanitary living conditions. The outcome of cases in these matters are pending before several courts, but the ICE has already acted to increase its oversight vigilance with a "detention-inspection task force" for responding to complaints by detainees.

Not to be slowed by the accusations, CCA recently announced a contract to build and operate a new federal prison in Pahrump, Nevada. The new facility will house over 1,000 inmates from the U.S. Marshals Service, Federal Bureau of Prisons and ICE. The prison will be CCA's 42nd company-owned facility nationwide.

In Congress, the Private Prison Information Act of 2007 was referred to committees in both the House and Senate. Two subcommittee hearings have been held on the matter, the most recent in June 2008. At that hearing, Reason's Director of Government Affairs Mike Flynn testified that the Act could allow the general population to obtain proprietary or confidential information from the private prison companies. The bill, sponsored by Sen. Joe Lieberman and Rep. Tim Holden among others, would put private prisons under the requirements of the Freedom of Information Act. FOIA currently only applies to public agencies, but PPIA would greatly expand information available about private companies to the general population.

For more information about privatized corrections operations see the Public Safety section of APR 2008 and the Corrections and Prisons page on our website.

Anthony Randazzo is Director of Economic Research


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