Indiana Public Benefits Eligibility System


In December 2006, Indiana signed a 10-year, $1.16 billion contract with an IBM-led consortium to provide eligibility review and claim processing for public assistance programs.  Immediately following the privatization, clients and applicants reported long waits, lost files, slow approvals, and incorrectly severed eligibility for food stamps and Medicaid.  Many families lost critical safety net services.  The state paid the contractor an additional $180 million to fix the problems, to no avail. In October 2009, Indiana announced the cancellation of the 10-year contract.



Citing an inefficient and antiquated public benefits eligibility system, Gov. Mitch Daniels recommended that Indiana explore privatization as way to improve the state's eligibility determination process.  The state solicited ideas for improving the system from potential vendors in November 2005, and in February 2006 sought bids for providing eligibility and program services for public assistance programs including Medicaid, Temporary Assistance for Needy Families (TANF), Food Stamps, and child care. The RFP laid out the contractor's responsibilities, such as taking applications, making eligibility and re-determination recommendations, case work, managing client data, quality auditing, management reporting, fraud prevention, job placement, and welfare-to-work program management. 

In July 2006, Indiana chose the Hoosier Coalition for Self Sufficiency (HCSS), an IBM-led consortium, with Affiliated Computer Services (ACS) as the main subcontractor.  On December 27, 2006, the 10-year, $1.16 billion contract was finalized and awarded to HCSS. 

In early summer 2009,the new secretary of the state's Family Social Services Administration (FSSA), Anne Murphy, acknowledged that there were problems with the privatized system.  FSSA asked IBM to develop a Corrective Action Plan to fix the deficiencies in the program and improve services.  Murphy stated that contract could be cancelled if improvements were not made.  However, Indiana added $180 million to the contract to help fix the problems.  Critics pointed out that this amount represented a 15% increase from the original contract, and was worrisome since the state was only in the second year of a 10-year contract. 

A few months later, in October 2009, Indiana announced the cancellation of the contract. Governor Daniels called the fully privatized system "a failed concept."  Instead, the state plans to attempt a hybrid method, transferring some functions back to the state government such as face-to-face meetings with clients, while negotiating a new contract with the main subcontractor, ACS, to continue system modernization efforts.        


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Key Issues
Key Issues: 

The state privatized 59 out of 92 counties before stopping the rollout in early 2009 due to pressures from Indiana lawmakers and federal officials.  Clients reported a decrease in service quality, including long waits, lost files, slow approvals, and mistaken cutoffs of benefits. As eligibility determination error rates rose, many families lost access to critical safety net services like food stamps and Medicaid.  These rising error rates put Indiana in danger of federal sanctions.  Evansville resident Ronald Alexander died of heart ailments in October 2009 over a year after he was denied Medicaid benefits.  His wife testified that he was denied assistance after repeatedly mailing in information requested by the contractor.   He spent hours in frustrating conversations with workers at state call centers, to no avail.

Community groups also reported that the contractors did not fully understand federal and state welfare laws, making the process even more prone to error.  Indiana legislators reported that problems arising from the privatized public benefits eligibility system clogged their offices.  As had happened with the similar privatization of eligibility screening in Texas, many constituents reported that their benefits were improperly denied.  Legislative staff commented that it was extremely difficult to get constituents' benefits reinstated once they were mistakenly denied. 


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Concerned about the problems that had occurred in the similar Texas privatization effort two years earlier, several advocacy groups in Indiana began carefully tracking the Indiana privatization.   The Indiana Coalition for Human Services (ICHS) has been involved from the beginning, analyzing related documents and urging Hoosiers to express their concerns with lawmakers.  The Citizens Action Coalition created a campaign called Concerned Hoosiers through the website, to better understand the effects of the privatized system.