Reforming Medicaid through Contracting: The Nexus of Implementation and Organizational Culture

Abstract

This article investigates the administrative experience resulting from the intersection of two popular public management trends: social service reform and contracting out. In this case, the reform involved the state of Kansas contracting with nonprofit agencies to provide Medicaid case management services. Implementation of the reforms entailed substantial changes in the roles and scope of administrative activities for the agencies involved and significant challenges to the administrative cultures of each. As a result, the nonprofit agencies now play a more central role in state policy deliberations and encounter higher levels of interagency political conflict than they did prior to their contracting role. While some of the rationales for the policy reform have been realized, others have been more elusive, including cost savings and the single-point-of-entry organizing principle of the reform. Implementation challenges due to turf issues, tensions over external monitoring, and differences in administrative cultures have contributed to a lack of policy subgroup cohesiveness, which could facilitate intragovernmental and intergovernmental relationships. This article examines the interaction of implementation dynamics and organizational culture in the context of a popular American public policy trend: privatization and contracting. Privatization and contracting have soared in popularity in the last decade and are now finding acceptance in heretofore unimagined arenas, such as prisons and welfare reform.' In the social welfare policy arena, privatization and contracting frequently are manifested in agreements with nonprofits. (Nathan [1997] refers to this phenomenon as nonprofitization.) Research on the subject indicates that contracting presents nonprofits with substantial challenges as they implement new 107/Journal of Public Administration Research and Theory An earlier version of this article was presented at the fourth national Public Management Conference, University of Georgia, Athens, October 1997. The authors are grateful to Denise Casamento and Kara Lindaman for research assistance and to the many state and nonprofit officials who agreed to be interviewed for this study. 'It is important to note that there are inherent differences between privatization and contracting. Privatization implies a more complete transfer of ownership and service delivery from the public to the private sector. Contracting involves government administrative responsibility, with service delivery and/or management provided under a formal agreement with nongovernmental agencies. In our case, the word privatization is used by Kansas elected officials to describe the reform that serves as the focus of our study. In reality, however, the reform entails a new contractual arrangement for service