The same global consulting firm that paid nearly $600 million in a multistate settlement for “turbocharging” sales of opioids has received millions from the Maine Department of Labor to help the agency manage a crush of unemployment claims during the pandemic.
McKinsey & Co. has received $6.3 million from a no-bid contract with the Labor Department since June 2020. A spokesperson for the agency said that McKinsey provided analytics, revamped the agency’s website to handle the explosion in unemployment claims and helped identify fraudulent claims.
The contract, which currently runs through March, is similar to other agreements between McKinsey and agencies in other states during a pandemic that has stressed both unemployment systems and public health agencies.
The results of such contracts have been mixed and expensive, raising questions about whether McKinsey’s claims to provide proprietary expertise to desperate state agencies actually helped.
Documents from the state’s procurement division show that McKinsey’s promise to provide exclusive solutions to the state’s unemployment system problems is one of the reasons the Maine Department of Labor was allowed to authorize the contract without a competitive bidding process.
At the time of the contract signing, Maine was experiencing an explosion in unemployment claims that its claimant portal, ReEmployME, was unable to handle, resulting in delayed claims processing and disbursement of benefits.
The original contract with McKinsey was worth nearly $1.8 million for a three-month period beginning in June and ending in August. The contract has been extended twice and pays McKinsey about $178,000 per week for about a half-dozen consultants.
Most of the contract was paid for using federal pandemic relief funds.
Jessica Picard, a spokeswoman for the Maine Labor Department, said McKinsey helped streamline processes to strengthen fraud protection and prevention, improve communication with people filing claims, improve the ReEmployME website to begin the claims process and create dashboards that helped the agency analyze data and deploy staff.
“This work resulted in the department being able to payout unemployment claims more quickly, to process the backlog of unemployment claims, to combat fraud and recover stolen funding, and to improve public-facing communication from the department,” Picard said in an email to Maine Public this week.
Asked to quantify the improvements resulting from the contract, Picard said about 80% of people who applied for benefits in June had received a decision about their eligibility — although not necessarily the actual unemployment check. That number jumped to 96% by July and currently stands at 99.6%.
Picard said that the department had also canceled 46,000 claims because of suspected fraud, resulting in an estimated $466 million in fraudulent payments from being distributed.
She added that the Century Foundation, a progressive think tank, ranks Maine No. 6 in the country in the speed of claims paid.
Andrew Stettner, a senior fellow at the Century Foundation, said in an interview that Maine has improved since the unprecedented surge in unemployment claims began last spring.
He noted that the state is just shy of the federal standard requiring states to pay 87% of all claims within 21 days of acceptance. As of December, Maine’s rate was 81%. In August it was just 21%.
Just nine states hit the federal benchmark in December.
As for states’ hiring of consultants like McKinsey, Stettner says it was a relatively common practice at the onset of the pandemic.
“It’s not a silver bullet, but it’s something that can help if done smartly,” Stettner said.
He said states were largely left to fend for themselves during the pandemic and he blamed states’ need to outsource on repeated cuts in federal grants to labor departments.
“The grants leading into the pandemic were really small, so the states really cut back and the increases in claims were so rapid,” he said.
McKinsey is one of two consulting firms that states have turned to during the pandemic. A Wall Street Journal analysis published in November found that McKinsey and Deloitte Consulting LLP have secured contracts from state agencies worth a combined $182 million and counting. The two firms have offered a range of services that include overhauling unemployment systems, population tracking and a decision dashboard in Washington State that was meant to advise Democratic Gov. Jay Inslee on reopening that state’s economy.
The efficacy of public-private partnerships during the pandemic has been heavily scrutinized. A report published in July by ProPublica questioned what states were getting in return for lucrative contracts.
In many cases, including Maine, McKinsey is first to approach states by offering its expertise. The firm touts its work with states on its website, saying it’s assisting state and federal governments with data analysis, building organizational capabilities and helping to assess the economic impacts of the pandemic. The Maine Department of Labor is cited as a client.
Maine’s contract with McKinsey isn’t the first. Procurement documents show that the Maine Department of Health and Human Services paid McKinsey $2.1 million during the state’s early expansion of Medicaid eligibility.
The hiring of McKinsey brings with it the firm’s controversies. Last week, the Maine Attorney General announced it was receiving $3.1 million from McKinsey as part of the multistate settlement for the firm’s role marketing opioids for manufacturers and fueling the opioid crisis. The original complaint detailed how McKinsey advised drug manufacturers on ways to maximize profits by targeting high-volume opioid prescribers, enticing physicians to prescribe more OxyContin to patients and navigating pharmacy restrictions to deliver high-dose prescriptions.
“McKinsey played a critical role in advising manufacturers like Purdue in how to market their product, so this settlement is appropriate,” Maine Attorney General Aaron Frey said in a statement announcing the settlement.
The firm was also the subject of an investigation by the New York Times and ProPublica that detailed how McKinsey helped the Trump administration carry out its immigration policies with methods described as overly punitive.
McKinsey responded by saying the investigation misrepresented its work for the Trump administration.
Picard, with the Maine Department of Labor, said the firm was part of the agency’s multifaceted approach to preventing fraud and delivering benefits.
“In addition to engaging McKinsey, this work has included our system vendor, a call center contractor, hiring additional staff and improving data analysis, among other measures,” she said.
