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Saturday, October 17, 2009

Ind. Gov't. - Still more on "State will cancel its $1.34 billion contract with IBM and other vendors to automate the application process for food stamps, Medicaid and other benefits" [Updated]

The Indianapolis Star editorializes today on the contract cancellation:

Large, troubling questions remain about the fate of a public assistance system that affects one in every six Hoosiers.

How will the transition back to the state from a failed privatization effort be accomplished?

Will IBM express its ire over losing a $1.34 billion contract in the form of legal action, or a threat of legal action serious enough to prompt an expensive buyout?

How long will it take, and at what cost, to clean up a mess that has cost countless elderly, poor, sick and disabled people vital services and imperils countless more?

In sum, a long road must be traveled by Gov. Mitch Daniels and the legislature in the wake of his decision to pull the plug on the most far-reaching of his experiments with hiring out government jobs to private enterprise. But at least he has stopped trudging down the wrong road.

In a remarkable instance of admitting he was mistaken and thanking his critics, Daniels said Thursday the switch to a high-tech, phone- and Internet-based enrollment system for Medicaid, food stamps and other welfare benefits was a sincere effort that plain didn't work.

The main reason: Face time with caseworkers was lost in pursuit of modernization, necessary as the latter was and is.

Daniels, in effect, joined a chorus -- one that had grown to overwhelming proportions over the heated, sometimes heartbreaking months since he signed the 10-year contract with the IBM team in 2006.

It was not just welfare advocacy groups and Democratic politicians who complained. It was United Way agencies, nursing home operators, and some of the governor's fellow Republicans. It was the federal government, which felt compelled to sanction the program. Most of all, it was Hoosiers seeking help, packing public meetings and flooding charities and legislators' offices with tales of lost records, prolonged delays, and inability to make human contact. Charities and legislators, by default, became unofficial caseworkers, and heavily burdened ones.

It took the administration roughly two years to acknowledge that problems were pervasive, not isolated or contrived. It put IBM on notice to make a long list of fixes, fined the firm $260,000, set deadlines and then conceded at last that privatization's promise of better service at lower cost could not be fulfilled in this sensitive area.

Key elements of the project -- computerizing records and fighting fraud -- must remain for the sake of taxpayers as well as deserving recipients. But "streamlining" has to stop where the unique plight of the needy individual begins. Back in charge of a crucial function, government must show it's learned a hard lesson.

The Star's story yesterday, by Mary Beth Schneider and Bill Ruthhart, included this quote:
"This is a rare moment in which I can congratulate the governor for making the right move," said House Speaker B. Patrick Bauer, D-South Bend. "It is the right thing to do to recognize when you make a mistake to adjust, regroup, because there were too many people suffering. There were too many people's lives in danger."

And instead of thinking about legal action, Bauer said IBM "ought to be embarrassed enough to go away or pay us something." But he called the abandonment of this contract "a blow to privatization."

Daniels, though, rejected that his decision says anything about the merits of privatization.

"It has nothing to do with private or public. It had to do with a concept," he said. "If you would use the same concept IBM brought, and every worker was a state worker, you would have had the same results, or worse."

Sen. Vaneta Becker, an Evansville Republican who was among lawmakers raising concerns about the welfare changes, said no issue had generated more complaints and calls to her office in the past two years.

The saddest, she said, was a woman whose application for reauthorization of her Medicaid was denied because she missed an appointment while she was in the hospital.

"She lost her Medicaid, lost her food stamps, lost her transportation," Becker recalled.

For months, the woman tried to negotiate the maze to restore her help.

"On March 1st, she died. On March 2nd, we got her redetermination approved," Becker said. "She might have died anyway, but she never would have suffered the stress that she suffered the last six months of her life."

A side-bar to the story lists "Daniels' other privatization ideas":
Indiana Toll Road

Gov. Mitch Daniels, with a hard-won legislative approval, leased the Indiana Toll Road for $3.8 billion to an Australian-Spanish consortium, Macquarie-Cintra, for 75 years.

• Status: That money is accruing interest and funding infrastructure projects across the state.

Indiana Department of Correction

Daniels approved a four-year, $53.5 million contract, renewable for three two-year terms, for Florida-based GEO Group to run New Castle Correctional Facility, and a $112.2 million, four-year contract with Philadelphia-based Aramark for DOC food services.

• Status: The New Castle contract came under fire after inmates imported from Arizona rioted. Those prisoners are now gone, their places filled by Indiana offenders, and the contract continues.

The Hoosier Lottery

Daniels proposed in December 2006 that the state lease the lottery to raise funds for higher education.

• Status: The governor dropped the idea in October 2008 after the U.S. Department of Justice said such a deal would not comply with federal law.

Some quotes from the story by Angela Mapes Turner and Niki Kelly in the Oct. 16th Fort Wayne Journal Gazette:
Daniels said his administration tried to save thousands of Hoosiers from unnecessary face-to-face meetings to apply for benefits. But incomplete applications and confusion about documentation showed the practice just wouldn’t work.

The contract, originally for 10 years and $1.16 billion, was signed in 2006 and lauded by the Daniels’ administration as a way for the state to reduce fraud and modernize its welfare system.

More than $361 million in state and federal money has been spent on the contract, the Family and Social Services Administration told the state budget committee last month.

But the privatization was fraught with criticism from the beginning, especially because it typically traded trained state caseworkers for contracted call center workers. The state halted the rollout early this year and asked IBM to submit a plan to correct problems. * * *

Daniels thanked the critics – constituents, legislators, advocates – who raised concerns and alarms. And he commended IBM for its effort, noting it hired extra employees.

But the errors and timeliness rates did not show "clear, positive improvement," he said.

Daniels declined to comment on whether there would be a fee to cancel the contract, saying he hoped the situation could be handled amicably. * * *

Provisions in the contract give the state the right to cancel for any reason at any time, and say the state is not liable for further payment after termination.

The 60-day termination timeline gives the Family and Social Services Administration time to develop a detailed implementation plan for the hybrid system.

The state agency essentially will take over IBM’s role with its subcontractors, such as Affiliated Computer Services and Arbor, and will have to hash out agreements with them in that time. It was unclear Thursday whether the state would have to hire back some employees and whether IBM will cut jobs in the state over the cancellation.

Deanna Martin and Ken Kusmer of the AP had this lengthy story which appears in the LCJ and today's Washington Post, among others:
INDIANAPOLIS -- Indiana said it was going to get outsourcing right when it turned welfare eligibility services over to a private contractor in 2007. Now critics say the failed move is the latest warning that states should not allow for-profit companies to run social services.

The ambitious, $1.34 billion effort to automate applications for food stamps, Medicaid and other welfare benefits was being closely watched after states such as Texas had problems when they tried similar plans.

Indiana fired IBM Corp. as the lead contractor on the project Thursday over problems including lost documents, delays in benefit approvals and poor service.

"Other states should beware," said Jim Wallihan, an advocate for senior citizens in Indiana. "Indiana's been a good demonstration, along with Texas, that there's some variables involved that just don't take well to privatization."

From the beginning, officials said Indiana had learned from the experiences of other states and was confident it had a better approach. But its contract with IBM quickly led to a long list of complaints. * * *

Both Indiana and Texas - where thousands of children lost health insurance because of problems from an outsourcing experiment that ended in 2007 - learned a costly lesson, said Celia Hagert, a senior policy analyst at the Center for Public Policy Priorities in Texas.

Yet more states could still consider privatization - touted as a way to save money - as they search for budget cuts during the economic downturn, she said.

"These two huge and costly errors in Texas and Indiana should give any state pause when it thinks that privatization is going to save them money, because it's not," Hagert said. "It causes a lot of damage."

That won't stop states from turning to privatization as a way to cut costs in the future, predicted Dru Stevenson, a professor at the South Texas College of Law who opposes the practice.

"States will continue to fall for this and it will continue to backfire," he said. * * *

While Indiana has cut out IBM, it's keeping other companies, which will now work directly for the state's Family and Social Services Administration.

"The state may be taking a more direct managerial role, but I don't see very much being different despite the fanfare," said Stacy Dean, director of food stamp policy for the Center on Budget and Policy Priorities, a Washington-based think tank and advocate for low-income people.

[Updated Oct. 18th] There are a number of editorials in the Sunday papers today about the cancellation of the contract:

Mizell Stewart III writes in the Evansville C&P under the headline "FSSA intake system needs human touch". A quote:

Helping folks with the system set up to handle the application process for food stamps, Medicaid and the Temporary Assistance to Needy Families program is far from a politically popular issue. One would be hard pressed to find a better illustration of why having three branches of government provides a level of checks and balances that can limit executive power. That Evansville-area lawmakers of both parties united to press the issue with the Daniels administration is also a testament to their ability to work together on issues of common interest.

Those leading the charge included two Republicans, state Sen. Vaneta Becker and state Rep. Suzanne Crouch, and two Democrats, state Rep. Dennis Avery and state Rep. Gail Riecken.

Area lawmakers "were very brave in doing what the governor didn't want to have done," said Roland Echols, a SWIRCA board member.

The pressure from local lawmakers on the governor and FSSA was unrelenting, even after it was clear that FSSA oversight legislation proposed in both houses would fall victim to wrangling over the state budget.

From an editorial in the Fort Wayne Journal Gazette headed "Welcome move to fix privatization of welfare," some quotes (the entire article is well worth reading):
Now, as the state begins to repair the system, it’s important not to overlook the lessons the IBM deal offers:

•Listen to critics. Those who questioned the 10-year contract warned that a similar effort in Texas had failed miserably and that replacing state-employed case workers with call center employees would not work.

•Welfare services are not comparable to BMV services. Interruptions in Medicaid and Temporary Assistance to Needy Families can threaten lives; a delay in mailing a license plate will not.

•FSSA clients are not welfare cheats who should find jobs. The agency serves the elderly, people with mental and physical disabilities and tens of thousands of children. They never asked for the “convenience” of online applications; they need the help of caseworkers trained to recognize their complex needs and guide them through the system.

•Government performs some functions better than the private sector. Eliminating abuses does not justify disrupting the entire system.

While the governor took responsibility for the deal, its undoing calls into question the oversight lawmakers exercised over the largest contract in state history. Except for a handful of legislators – Republican Sen. Vaneta Becker, Republican Rep. Suzanne Crouch and Democratic Reps. Peggy Welch, Gail Riecken and Bill Crawford – there were few questions asked along the way.

Posted by Marcia Oddi on October 17, 2009 02:37 PM
Posted to Indiana Government