BC Pays a ‘Huge Premium’ for Contracting Out Health Admin: Analyst

When looking at how payments to a private contractor to administer the Medical Service Plan and Pharmacare programs have ballooned, the real comparison should be to what it would cost the B.C. government to do the work itself, says a former government policy analyst.

“It’s a huge, huge premium we’re paying for this, compared to what it would cost if we were doing it in house,” said Don Scott, a retired civil servant who worked for MSP from 1998 to 2004.

The Tyee reported in December on a health ministry report that found the cost of the contract with Maximus B.C. Health Inc., signed as part of a post-2001 wave of outsourcing, had grown by 50 per cent over its 10-year term.

When the government and the company entered the deal starting in 2005, it was to have a fixed value of $324 million. “The total value of payments to Maximus over the same term is $489 million, an increase of approximately 50 per cent over the original 10-year cost,” the ministry’s report found.

A ministry spokesperson said the cost had increased due to policy and program changes, the implementation of major projects, and the increased risks associated with them.

Changes also included implementing new programs, such as the smoking cessation program announced in 2011 to fulfill a promise Premier Christy Clark made during her BC Liberal leadership campaign.

Scott said that while it’s damning that the contract has cost so much more than expected, comparing the expense to what the government used to spend to do the work makes the picture appear even worse.

According to the Medical Service Commission’s financial statements for the year that ended March 31, 2001, administration cost the government less than $25 million.

“They privatized it and it went to almost $40 million overnight,” Scott said.

The Tyee reported in 2009 that the annual cost had escalated to $42.1 million by 2008 and $51.2 million by 2009.

At the time a health ministry spokesperson said the government was satisfied with Maximus’ performance and the cost had grown as the parties negotiated improvements to service, including increased requirements to protect personal health information.

The government has since renewed the contract with Maximus for another five years and the cost has continued to grow. According to the public accounts for 2015-2016, the B.C. government paid Maximus B.C. Health Inc. nearly $68 million that year.