How Kathy Hochul’s admin handed firm a $1B Medicaid contract without competitive bidding

ALBANY – The Hochul administration skirted competitive bidding by quietly amending a contract with a high-powered consulting firm to boost their deal to an eye-watering $1.1 billion deal, The Post has learned.

Gov. Kathy Hochul’s Department of Health had initially handed Deloitte Consulting a $177 million contract in 2023 to centralize a part of the Medicaid application process that was still being handled by counties into one statewide portal.

But the contract ballooned well beyond that as the administration amended the deal by $866 million in August — a move watchdogs say should have triggered a public bidding process.

Gov. Kathy Hochul, speaking at a press conference. Zuma / SplashNews.com

“For a contract expansion of this size it seems like they should be rebidding it,” Manhattan Institute Health Policy expert Bill Hammond told The Post.

Governments are required to follow competitive bidding procedures and choose the lowest responsible company, with specific exemptions for emergency deals and amendments to existing contracts.

“In this case, the amendment is more than four times the original price,” Rachael Fauss, senior policy adviser at good government group Reinvent Albany. “This certainly deserves scrutiny to ensure taxpayers are getting the best deal for the services being provided.”

Deloitte’s original $177 million contract for the “Medicaid Eligibility and Client Management (MECM) system” was amended several times before, growing to $317 million before the big August increase. Just over $200 million was actually spent, per comptroller’s office records.

That means the state paid Deloitte roughly $9 million per month for the first three years of the contract compared with $25 million a month it will spend now after the $866 million amendment signed in August.

State DOH spokesperson Cadence Aquaviva said that the Hochul administration deal with Deloitte followed the law and was necessary for “sunsetting an outdated, error-prone system.”

“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 DOH spokesperson said.

A sign in support of Medicaid funding. Middle East Images/AFP via Getty Images

The federal government — under the Centers for Medicaid and Medicare Services — is paying for 90% of design and implementation costs of Deloitte’s new portal and 75% of the operations, the spokesperson said.

Deloitte did not return a request for comment.

The firm has been involved in building pricey IT systems for the state before, such as the COVID-era vaccination “Excelsior Pass.” The program provided Empire State residents with a digital health record for vaccines and testing that was sparsely used despite costing taxpayers over $60 million.

Former State Budget Director Sandra Beattie recently admitted to violating ethics laws for schmoozing with Deloitte’s lobbyist while the firm was raking in massive contracts.

A spokesperson for the governor’s office did not return a request for comment.