Hochul Administration Approved $1.1 Billion Medicaid Contract Without Competitive Bidding

The administration of New York Gov. Kathy Hochul significantly expanded a contract with Deloitte Consulting to over $1.1 billion without a competitive bidding process, a move drawing scrutiny from government watchdogs.

The initial contract, awarded in 2023 by the Hochul administration's Department of Health, was for $177 million. Its stated purpose was to centralize Medicaid application processes currently handled by individual counties into a single statewide portal.

However, in August, the contract was amended, increasing its value by $866 million and bringing the total to $1.1 billion. This substantial increase, more than four times the original amount, has raised concerns about adherence to public bidding requirements. "For a contract expansion of this size it seems like they should be rebidding it," Bill Hammond, a health policy expert at the Manhattan Institute, told The Post.

Government regulations typically mandate competitive bidding for contracts, with specific exemptions for emergencies or amendments to existing agreements. "This certainly deserves scrutiny to ensure taxpayers are getting the best deal for the services being provided," said Rachael Fauss, senior policy adviser at Reinvent Albany, a good government group.

Records indicate that the Deloitte contract for the "Medicaid Eligibility and Client Management (MECM) system" had already seen several amendments, increasing its value to $317 million before the major August revision. Approximately $200 million of that initial amount was expended, according to comptroller's office data. This translates to an average monthly spending of about $9 million for the first three years of the contract, which will now rise to an estimated $25 million per month following the recent amendment.

A spokesperson for the Department of Health, Cadence Aquaviva, stated that the administration followed legal procedures. "Once it is complete, this platform will save state taxpayers hundreds of millions of dollars while allowing us to strengthen the program and reduce the potential for waste, fraud and abuse," the spokesperson said. The federal government, through the Centers for Medicaid and CMS, is funding 90% of the design and implementation costs and 75% of the operational expenses for the new portal.

Deloitte has previously been involved in large state IT projects, including the "Excelsior Pass," a digital health record system for COVID-19 vaccines and tests. That program reportedly cost taxpayers over $60 million and saw low usage.

Separately, former State Budget Director Sandra Beattie admitted to violating ethics laws for interacting with Deloitte's lobbyist while the firm was securing state contracts. Deloitte did not respond to requests for comment, and a spokesperson for the governor's office also did not provide comment.