Plan pays contractors $1.16 billion to IBM to upgrade state's welfare process

INDIANAPOLIS -- Indiana would pay an IBM-led team $1.16 billion over 10 years for help upgrading programs for food stamps, Medicaid and welfare but would retain state control over eligibility decisions under a reform plan made public by Gov. Mitch Daniels on Wednesday.\nIBM also would create 1,000 new jobs in Indiana over four years -- including 850 in the first two years -- and provide more than $8 million in computer equipment and services to the state.\nThe Family and Social Services Administration also would spend $500 million internally on the plan.\nThe Daniels plan envisions improving the delivery of the public safety-net benefits system received by one in six Hoosiers by making it easier to apply through the Internet and telephone call centers. It also aims to use computers to drive the process with self-surveys instead of time-consuming interviews to ease case workers' paperwork and reduce error and fraud.\nIBM also would provide hardware, software and three researchers to upgrade a supercomputer on the IU-Bloomington campus. Purdue would share ownership of the upgraded supercomputer, which would also serve Indiana's life sciences industry. IBM also would establish a $2 million technology center on the Bloomington campus that could foster Indiana economic development and would provide up to 400 hours of free consulting services to the Indiana Economic Development Corp.\nThe proposal still needs approval from federal officials who oversee the benefits distributed to about 1 million children and needy, elderly and disabled Indiana residents. However, administration officials were confident they would gain that approval and begin the changes by late spring in a phased rollout expected to cover the entire state by late 2008.\nThe plan addresses the administration's desire to reform an increasingly expensive and error-riddled benefits system while trying to avoid pitfalls encountered by other states and guaranteeing jobs to FSSA workers whose duties are being outsourced.\n"There isn't going to be a perfect system, but this can only be dramatically better than what's going on," Daniels said in an interview with The Associated Press, which was given a copy of the plan before Wednesday's announcement.\nThe IBM contract would be one of the most expensive in state history.\nBut state officials said outsourcing improvements to the public benefits system would save Indiana $490.8 million compared with the estimated $2.1 billion cost of the upgrades. It would also save $341.6 million from what FSSA would spend by 2017 if it retained its current system, they said.\n"Saving taxpayers a half-billion dollars and cleaning up America's worst welfare system have to be number one," Daniels said when asked to assess the plan's benefits. "Bringing a thousand new jobs to the state of Indiana is a great event anytime it happens."\nFSSA's plan to outsource processing of benefits to private companies, first made public a year ago, has sparked concerns that Indiana might encounter some of the privatization problems as other states, including Texas, where some applicants' benefits have been delayed.\nResponding to those concerns, Daniels six months ago appointed a team of aides from outside FSSA to review the agency's plans. The team, led by Daniels' chief of staff, Earl Goode, examined problems in Texas and Florida, made significant changes to the FSSA plan and helped negotiate the contract with the consortium led by IBM.\nThat group also includes Dallas-based Affiliated Computer Services Inc., which employed FSSA Secretary Mitch Roob as a vice president before he took over the state's largest agency nearly two years ago.\n"This will be, I can assure, the best-maintained, the best-complied-with contract in state history," Goode said.\nUnder the plan, state employees would retain decision-making over eligibility for not only food stamps and Medicaid, but also welfare benefits, subsidized child care and non-Medicaid-related Hoosier Healthwise insurance benefits for needy families.\nAlso, out of about 2,200 current FSSA employees now performing the benefits work, the revised plan doubled the number that would be retained by the agency to about 700. The remaining 1,500 FSSA employees were essentially guaranteed jobs with the consortium for two years at no less than equal pay and benefits.\nEach of Indiana's 92 counties would retain an office where people could apply in person for benefits under the plan. The Internet, e-mail and telephone call centers would create greater access for benefit applicants and recipients.\nThe phased rollout would begin by late spring with 10 percent of the state's caseload centered on Grant County in north central Indiana, then in southern Indiana (25 percent), northwest Indiana (25 percent) and finally central Indiana (40 percent). No new phase would begin before the previous one was complete.\nThe 1,000 new jobs would be created by IBM at an Indiana customer service center whose location has not been determined yet.