Even while politicians incessantly say they're looking for every dime of waste, they never finger prisons. They should.

Fear of crime was the initial reason for this untouchable status, which started as Californians imposed a variety of mandatory sentencing rules including the 1994 three-strikes-and-you're-out law. These led to building new prisons that quickly became as overcrowded as the old ones, eventually making the prison guards union, the California Correctional Peace Officers Assn., the single most powerful special interest in Sacramento.

Sacred cow status usually means that no one looks hard at what you're doing or spending.

­That's how it's been for the prison system until very recently, when a federal judge concluded the state, on its own, would never improve substandard medical care for all those convicts, whose upkeep becomes a public responsibility when the government takes control over them.

Why the Waste Exists

Emphasis has been on an $8 billion cost estimate ever since that judge appointed a receiver to bring prison medical care up to where it no longer amounts to cruel and unusual punishment (more on that estimate in an upcoming column).

But the court receiver, McGeorge School of Law Prof. J. Clark Kelso, has also discovered phenomenal waste, so far unreported elsewhere, mostly because the prisons' sacred cow status allowed an absence of oversight.

It turns out that when prisoners become ill or injured today, they're often taken to local hospitals for treatment. And the state Dept. of Corrections and Rehabilitation now pretty much pays doctors and hospitals whatever they ask for those services. Plus, the prisons have rarely verified that bills they pay are accurate.

Therefore, Kelso said in an unusually frank hour-long interview the other day, "There is a significant likelihood of fraud in the system." He estimated the combination of high payments and overbilling costs the state at least $100 million yearly. It could be much more. "The department has no monitoring system in place to be sure services billed are actually delivered," Kelso revealed.

Is He ‘Badly Mistaken’?

Most serious, the prison system lacks negotiated payment setups like those used by all health insurance companies, which generally pay a fraction of what hospitals and doctors often call "usual and customary" charges.

The California Hospital Assn. denies any fraud, with external affairs vice president Jan Emerson saying, "I'm afraid Mr. Kelso is badly mistaken on that."

Responded Kelso, "I've been around government more than 20 years. There's always fraud when there's no oversight."

Even the CHA agrees state prisons pay more for services than either insurance companies or Medicare. "They have refused to negotiate with most hospitals," Emerson said. This apparent fact is an indictment of decades worth of prison officials.

Plus, Kelso says that whenever a prison doctor recommends that a convict go to an outside hospital, he or she goes. No set stand­ards determine when Effect on Hospitals prisoners should or should not get outside treatment, with costs therefore unlimited. Conditions that one doctor might treat with aspirin can lead another to send patients outside, complete with escorting guards and high costs.

Effect on Hospitals

"There have been no effective controls on spending and billing," adds Kelso. "We think as many as 30 percent to 40 percent of referrals outside could be unnecessary." So he plans to install a system of checks on both costs and outside hospital use by the end of 2009. If it saves $100 million or more, as Kelso guesses, that money would stay in the state's general fund for use by schools, parks or wherever legislators decide.

As for what effect losing so much money might have on community hospitals, some of which are only marginally solvent, no one knows. That's in part because of the startling fact that no one now knows exactly how many prisoners get outside care.

Altogether, this picture is a stunning example of waste and lack of checks on a massive government program.

Which implies it's high time to look at some other untouchables associated with the increased prison population and its astronomical costs. The main one of these is the three-strikes law, which demands doubled sentences forEffect on Hospitals second-time felons and 25 years to life for three-time losers, even the non-violent.

Unless it's changed, that law will soon see California prisons operating the world's largest geriatric hospital system, with many thousands of convicts staying long after they're a threat to anyone — at a cost topping $100,000 per year for a typical inmate with chronic illness.

But even in the current budget morass, neither Gov. Arnold Schwarzenegger nor any state legislative leader has looked to either prison reform or sentencing changes as part of a budget solution.
Effect on Hospitals

That's what we get with sacred cows.