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Medicaid problems swell in new system

Rollout delayed as private firm works on fixes

Indiana's nearly 2-year-old experiment with a privatized welfare system appears to be failing.

The backlog of pending Medicaid applications has ballooned in counties where welfare is handled by private contractors. From May 2008 - after the most recent wave of counties joined the new system - to December 2008, pending cases increased 86 percent. In counties working under the old system, the backlog increased only 16 percent, according to a Journal Gazette analysis of state data.

And the contractors, led by IBM Corp., missed deadlines for processing Medicaid applications at twice the rate of counties that haven't joined the new system.

In December, nearly 60 percent of applications processed under the new system were overdue.

Advocates say the backlog represents not only administrative disarray but also needy Hoosiers who are getting sicker as they await medical care.

No new counties have been brought into the system since May 2008 because of problems so critical the state's Family and Social Services Administration announced Tuesday that IBM Corp. must show how it's going to improve. If the state isn't satisfied with IBM's plan to fix he system, it could end its 10-year, $1.16 billion contract.

The problems with Medicaid mirror issues the contractors have in processing food stamp requests. Last year, Indiana ranked among the five worst states in improper denials or terminations of food stamp benefits. In April, The Journal Gazette revealed that during the final quarter of 2008, the FSSA failed to process almost a third of food stamp applications within its goal of two months, the slowest processing time since the state privatized some counties.

IBM spokesman John Buscemi declined to answer specific questions related to the problems.

"IBM is working closely with the state to implement the (corrective) action plan in an aggressive manner," Buscemi said in a written statement.

Gov. Mitch Daniels, a champion of the privatization effort, was on vacation last week and was unavailable to comment.

His spokeswoman, Jane Jankowski, said talk of scrapping the contract is premature and that the governor and his administration have been collaborating with the vendors behind the scenes for months.

"Our focus is making this project work," she said. "FSSA has been working with the contractors all along. We've been working with IBM on improvements."

FSSA Secretary Anne Murphy declined repeated requests last week for a telephone interview, and spokesman Marcus Barlow said the agency would not respond to questions about the data.

Instead, Barlow referred to a statement the FSSA made last week that said the state's increase in people seeking assistance is because of the recession.

As part of its plan to improve the system, the private vendors have hired 350 additional staff members and are revamping their training and management practices to improve client service, the statement said.

More harm

Medicaid is a federal-state program to help low-income, elderly or people with disabilities and families with children pay for health care. Depending on the case, Indiana has 45 days or 90 days to determine eligibility under federal standards. The federal government reimburses a percentage of the state's expenses.

Indiana's new system eliminates caseworkers assigned to clients. Instead, employees working for private vendors handle applications submitted through a Web site and call center based in Marion. IBM contracted with Affiliated Computer Services to oversee the call center.

Since the system began in October 2007, 59 of the state's 92 counties have been converted. Counties in the central and northwest parts of the state remain under the old system.

But almost as soon as the new program began rolling out, critics argued the changes did more harm than good.

The problems have so concerned Allen County's Adams Township trustee workers that they suspended a rule to automatically deny aid for clients whose food stamp or Medicaid applications had been denied because of alleged client error.

Since privatization, the number of "client error" terminations shot up, said Debra Freeman, director of township assistance. So Freeman's office created a complaint form for clients to fill out when they've had issues with the FSSA.

After 80 complaints, they stopped keeping track.

"There were too many," Freeman said.

In her sparse strip-mall office in New Haven, Freeman keeps a detailed computer log of clients who have given permission to share their stories: A child who had surgery and has been waiting six months for Medicaid approval. A diabetic child whose benefits were improperly ended. A man who waited seven months for Medicaid approval while suffering kidney failure.

The common themes, Freeman said, are that clients receive no explanation when their benefits are terminated, are discouraged from appealing, are asked to submit paperwork over and over and deal with uninformed call-center workers who sometimes disconnect phone calls.

By December, the state's 56,000 backlogged cases in counties under the new system slightly exceeded total cases in counties still using the old system. What isn't clear is how many of those 56,000 backlogged cases reflect an increased need during worsening economic times, and how many are duplicate applications.

Medical providers, in testifying to lawmakers, have complained many cases are listed multiple times. When clients contact the call center with questions or send in requested paperwork, document center workers simply open a new case.

Last month, The Women's Hospital in Evansville found many Medicaid cases were listed two or three times, so it appeared the hospital had 32 pending cases. There were just 14, said Beth Paul, social work coordinator at the hospital.

Counties that have rolled out privatized service account for about 43 percent of the state's population. In May 2008, when Allen County and other northeastern Indiana counties joined that group, the FSSA recorded about 57,000 total Medicaid cases in the privatized counties.

By December, the number had risen to nearly 83,000.

The counties that haven't been switched to the new system include the cities of Indianapolis, South Bend, Gary and Elkhart. Those counties make up 57 percent of the population and had 55,000 applications in December, an increase of just 11 percent from May 2008.

About a quarter of Medicaid applications in Allen County were processed beyond the federally recommended time frame when the county was brought into the new system in May 2008. By December, more than half the applications were overdue, and the county's pending applications had more than quadrupled to nearly 5,000 clients.

The other northeast Indiana counties that joined the system in May recorded similar upsurges in number of cases and tardiness.

DeKalb County's statistics are typical of Allen County's more rural neighbors. Only 15 percent of DeKalb's cases approved, denied or pending in May 2008 were overdue. By December, more than two-thirds were late.

DeKalb County's total caseload went from 293 in May to 567 in December of last year, according to the FSSA data.

‘A lot of money’

In December, IBM Corp. posted a case study to its Web site about its business relationship with the state of Indiana.

"At the end of the day, it's really all about making the lives of our citizens better by delivering the services they need, when they need them," the report quotes Zach Main, FSSA's then-director of human services, as saying. "We're doing that, better than ever."

Weeks later, newly appointed FSSA Secretary Anne Murphy halted the planned transition of counties remaining on the old system after traveling to Evansville - one of the first areas to switch to the new system - to hear complaints.

Murphy replaced Mitch Roob, a former executive at Affiliated Computer Services, the Texas company that joined IBM in the privatization contract. The governor in December appointed Roob, FSSA secretary since 2005, to secretary of the Indiana Economic Development Corp.

In pushing for privatization, state officials said caseworkers were overloaded with work.

But now it's food banks and townships that are overloaded, Adams Township trustee's investigator Katie Elsass said.

Caseworkers in the old system may have been overworked and saddled with outdated equipment, but they helped prevent fraud through face-to-face interviews and made sure clients didn't fall through the cracks, Elsass said.

Township officials who are asked for help have a much harder time getting information from the call center, she said, and now townships have no caseworkers to consult.

"We used to have a person and a direct number to call, and we worked together, hand in hand," she said. "It was good fraud prevention on both ends."

Nearly two years after the first counties switched to the new system, Elsass remains disappointed the state scrapped its former system for an untested one.

"It's just a lot of money for something that's not producing what it should," she said. "Could we have spent that money a little bit more wisely?"

Complaints common

Rep. Gail Riecken, D-Evansville, believes that idea is at the heart of the anger in her southwestern corner of the state, which has produced the most vocal and consistent criticism of the new system.

Evansville lawmakers joined forces during the regular session to call for changes to the welfare system, and their bipartisan pleas were echoed by social workers and hospital administrators who say call center workers hang up when they get frustrated and provide inaccurate information to clients and health care providers.

When Vanderburgh County was part of the first rollout in October 2007, FSSA data show 219 cases were pending beyond allowable deadlines. By the end of 2008, the total had swelled sevenfold, to more than 1,500.

The daily complaints have turned lawmakers into caseworkers and have many people questioning why a functioning system in many parts of the state had to be overhauled.

"Our area wasn't experiencing huge problems," Riecken said. "To make a drastic change like this, it was extremely upsetting to folks."

Complaints have been so common that a measure calling for an independent audit of the welfare privatization was one of only three bills filed during the special legislative session last month. Riecken backed off House Bill 1003 in deference to the special session's explicit purpose - passing the state budget. But she continues to push for hearings around the state to expose shortcomings in the system, which she says too often trips up on the first crucial step of submitting an application.

"We have to continue working on this problem until it is solved," Riecken said.