Brian Howey: The privatization battle over serving poor Hoosiers

FORT WAYNE, IN -  Since 1968, Indiana has outsourced or “privatized” 27 vendor functions that are now under the guise of the Family and Social Services Administration (FSSA).  The 27th - the decade long $1.6 billion contract to IBM and affiliated companies - has enmeshed Indiana and the Daniels Administration into a showdown with Democrats in Congress over outsourcing the food stamp program.

At least two Democratic Indiana gubernatorial candidates - State Sen. Richard Young and Jill Long Thompson - have said they will use the privatization issue against Gov. Mitch Daniels in the 2008 campaign. Yet Daniels is hardly the only governor to outsource at FSSA. It all started with Gov. Roger D. Branigin. But by the end of Gov. Evan Bayh’s term in 1996, the Democrat had outsourced eight functions, one more than his four predecessors. Another nine functions were outsourced under Govs. Frank O’Bannon and Joe Kernan.

Knowing that Democrats were girding for a fight in 2008 on the issue, Gov. Mitch Daniels noted the successes of Gov. Bayh’s welfare reforms. “The rolls did come down, but then while the rest of America went down 58 percent, in many states 80-plus percent, we stood still. At the end of 1995 we weren’t in bad shape. But then time stood still in Indiana and you had this unbelievable success nationally. That’s how we ended up at the bottom of the list. There is nothing new in Indiana government about contracting out; 92 percent of FSSA was already contracted out. We’re only taking this from 92 to 94 percent.”

The 2007 Farm Bill passed by the U.S. House last month would prohibit Indiana from continuing with the IBM deal. Republican critics of the House move called it a union-orchestrated payback after Gov. Daniels ended the state’s collective bargaining agreement. ASCFME contends IBM has a bad track record serving the poor.

At stake could be an IBM processing center being built at Daleville that will employ 1,000 Hoosiers as the farm bill heads to the U.S. Senate.

U.S. Rep. Steve Buyer noted that when Daniels took office, the “administration of child welfare programs was in disrepair. It had the most child deaths in the foster care system and ranked last in reducing its welfare caseloads. The Food Stamp program was a paper process and provided poor service.”

The question I had for the three Democrats – Jill Long Thompson, Jim Schellinger and Sen. Richard Young – is this … “Democratic governors have been outsourcing for almost half a century, why is it now a bad thing?”

“I would review all privatization contracts irrespective of when they were signed,” Thompson said. Her complaint is one shared by Schellinger; that out-of-state companies are getting the contracts. “IBM lost a contract in Texas because they weren’t performing,” she said. Thompson said she “appreciated the value of public/private partnerships” and noted while serving as undersecretary at the U.S. Department of Agriculture, “We centralized the services of the single family housing loan portfolio. We retained control of it. It wasn’t privatized.”   

Sen. Young noted that many of the previously outsourced functions of FSSA fall into two categories: technical and specialized functions, and those outsourced to Indiana-based non-profits.  “FSSA, under Bayh-O’Bannon-Kernan, wisely saw that established local Hoosier social service agencies were capable of providing many services to FSSA clients.  In many cases, they were already providing these services to Hoosiers,” Young said. “I find neither of these examples of outsourcing objectionable.”

Young’s concern is introducing the profit motive while serving the poor is “problematic.”     “When using local social services agencies, the face-to-face interaction with clients is maintained,” Young said. “Now, all clients must use the Internet for benefit registration.  This requires ownership of, or access to, a computer with Internet access.  An alternative offered by IBM is to encourage local agencies to ‘volunteer’ to register clients by providing computers, Internet access, and staff to answer questions about the Medicaid registration process.  IBM incurs no expense and increases profits; local agencies spend their own funds to provide this service.”

Young continued, “Gov. Daniels’ approach is to tell a for-profit business that we’re spending millions (or billions) on Medicaid.  If they will manage this system for us, with the money we are currently spending, they keep the cost savings as profit. The money saved by serving fewer Hoosiers may benefit FSSA and IBM.” He said the result could be rejected people turning to emergency rooms “where the cost of care is highest.”

Cam Savage of Daniels’ re-election campaign disputed Young’s claims. He said clients can apply over the phone and have materials mailed. They can apply at community organizations. He said the IBM contract allows Indiana to work with just one provider, “rather than 92, thereby increasing oversight.” He added that IBM is committed to adding 1,000 jobs in Indiana.

As for the profit motive, Savage said, “To the contrary, IBM will be penalized severely by the State if they deny benefits to eligible Hoosiers. The money to pay benefits doesn’t come from IBM; it comes from the State and Federal governments. All eligibility determinations will still be made by state employees.”

As you can see, this is an intense and complicated debate that will extend well into 2008.

Howey is publisher of The Howey Political Report at www.howeypolitics.com

Technorati Tags: Brian Howey Howey Political Report Howey Politics Indiana Politics Opinion Politics Politics