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Illinois’s Medicaid Scandal
A tale of questionable dealings and taxpayer risk


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Bollywood performers, a Boston boat cruise with an open bar, gifts of cigars and wine — the vendor working on Illinois’s expensive new Medicaid information-technology system entertains public officials in style, according to sources in the Illinois government.

These whistleblowers tell National Review that when Client Network Services, Inc., was seeking the Medicaid contract, it wined and dined state officials, who then circumvented Illinois’s standard procurement procedures in order to outsource the multimillion-dollar contract to CNSI, which is currently under criminal investigation in Louisiana. CNSI, headquartered in Maryland, has a history of work of questionable quality, overrun project budgets, delays, and litigation in several other states.

Documents procured by OpenTheBooks.com, a national transparency organization based in Illinois but involved in all 50 states, have raised questions about the close relationship between Illinois state officials and CNSI. Several whistleblowers tipped off OpenTheBooks.com about what records to request, and National Review spoke to some of them. These sources within the Illinois government allege unethical and potentially unlawful behavior.

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It looks like pure Chicago politics, but taxpayers both in Illinois and across the United States may end up footing the bill, since the federal government will pay for 90 percent of Illinois’s system upgrade. The Centers for Medicare & Medicaid Services (CMS) has approved an upgrade costing as much as $190 million, though the state claims that because it is partnering with Michigan on the project, it will cost only $85 million.

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In late August 2012, private- and public-sector workers gathered in Boston from across the United States to attend the Medicaid Enterprise Systems Conference, an annual event focused on the IT systems that support Medicaid.

They found time for fun. According to sources within the Illinois government, CNSI rented a two-story boat to cruise Boston Harbor for a private party. The 50 or so guests included several officials from Michigan, as well as employees of the Illinois Department of Healthcare and Family Services (HFS). CNSI outsources some work to India, and that night, Indian as well as American food was served. Liquor flowed freely from an open bar, and CNSI staff clinked glasses with Illinois HFS employees with whom they hoped to work, a whistleblower says, alleging that “the only people on that boat were people who were being solicited by CNSI.”

In addition to the boat party, CNSI hosted a bigger event in the ballroom of the conference hotel, also attended by Illinois officials. That party, too, had an open bar and buffet tables, as well as Bollywood performers for the guests’ entertainment, according to a source close to the project.

Another source within the government claims that CNSI also hosted a private party in a hotel suite that night, inviting only people it wanted to do business with, including Illinois officials. HFS spokeswoman Kelly Jakubek denies that allegation.

That entertaining may have violated the Illinois State Officials and Employee Ethics Act, which forbids officials to accept refreshments or gifts worth more than $75 per person. National Review was not able to confirm which boat company provided the cruise. But Boston Harbor Cruises reports that its fee for boat rental alone for 50 people is $1,000 for three hours; a buffet costs around $80 per person, and an open bar costs an additional $42.67 per person. Other companies offering cruises would not quote a specific price, or had not returned calls. 

Illinois HFS responded to an information request by government-accountability blog Edgar County Watchdogs, confirming that at least six state employees, several of whom were positioned to make key decisions regarding the upgrade contract, were on a boat in the Boston harbor with CNSI representatives, though “HFS does not know who paid for the boat trip.” (1)

HFS’s Jakubek says CNSI did not solicit Illinois government employees on the boat. In an e-mail, she told National Review that ten HFS employees were at the conference, and “they attended various events/activities that were offered to all attendees as part of the conference and they complied with all state ethics rules.”

A whistleblower says that after OpenTheBooks.com and Edgar County Watchdogs broke the story about Illinois officials’ partying in the Boston Harbor, several of those officials removed photos of the event from their Facebook pages and office desks.

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To prevent fraud and abuse, the federal government requires states to send specific data about Medicaid payments and beneficiaries to CMS. The amount of information required was expanded under the Affordable Care Act.


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