State welfare systems hit replacement cycle

Officials pursue Web technology and integrated benefit eligibility assessments

Officials in a number of states are moving to replace aging welfare eligibility systems with updated versions designed to provide one-stop service for benefit applicants.

Those systems, some of which are decades old, are creaking under the weight of increasing caseloads and frequent policy changes. While state officials pursue modernization, they also aim to provide integrated systems that span multiple social services — Medicaid, Temporary Assistance for Needy Families and food stamps, among others.

Input estimates that states will spend $1.3 billion on Web-based integrated eligibility services from fiscal 2006 to 2009.

Chris Dixon, senior industry analyst at Input, said many states operate systems conceived in the 1970s and 1980s “prior to the advent of Internet-based technology.” Those states use client/server interfaces to access back-end systems and data, he said.

The introduction of Web technology will let social services employees access client accounts via secure Web sites rather than a green screen terminal. The technology will also allow people to apply for benefits and manage accounts online. Ideally, the integration aspect will let workers conduct one assessment to determine an applicant’s eligibility for multiple programs.

California, New York, North Carolina and Texas, among others, are in the midst of introducing such systems. Indiana is negotiating a contract with IBM. Meanwhile, Georgia, Idaho and Los Angeles County are exploring welfare system upgrades.

Market drivers

Multiple factors drive the eligibility system replacement cycle. For one, rising health care costs compel states to seek new efficiencies through modernization and integration, industry executives say.

States run multiple health care-related programs, which represent “one of the largest budget items and one of the fastest-rising areas as far as inflation goes,” said Dick Callahan, a Western region vice president in EDS’ U.S. government business unit.

“States are looking for ways to deliver these programs at a lower cost and looking for ways to improve service to citizens and replacing aging technology,” said Doug Doerr, executive director of Accenture’s human services industry practice.

The inflexibility of older technology also contributes to the states’ need to upgrade.

“They have to have the ability to make policy changes quickly and accurately, and the older systems are making that problematic,” Callahan said. “They’ve got significant technology problems to address.”

Eligibility policies change frequently, added Callahan, who said federal, state or county rule changes occur daily.

In addition, Callahan cited the need for state social services workers to have automated tools to do their jobs. The eligibility determination task involves many manual processes, which “makes it extremely difficult for government workers to consistently and accurately apply the policies,” he said. Eligibility policy manuals can fill thousands of pages.

Implementation approaches

States take different approaches to deploying modernized welfare eligibility systems.

On the one hand, states such as Texas have taken a big-bang approach to upgrading, Dixon said. In June 2005, the Texas Health and Human Services Commission awarded Accenture an $800 million-plus contract that has elements of systems development and outsourcing.

It calls for an integrated application processing system and the outsourcing of four call centers.

Accenture launched the new system in early 2006, with test programs in Travis and Hays counties. The project ran into difficulties, however, when the state found that the system had difficulty processing cases quickly enough and that call center staff could not handle some questions.

Texas has delayed the statewide deployment, according to a spokesman for the Health and Human Services Commission. “A lot of effort is going into refining this system,” he added.

Doerr said Accenture continues to run the Travis and Hays tests, which have handled more than 4 million calls and scanned more than 8 million documents. He said the company is working with the state to determine how to continue the implementation.

Dixon said the problems that arise in large-scale, one-shot deployments will persuade states to adopt more segmented approaches to integrated eligibility systems. Instead of compiling requirements in a single procurement, states might opt to break an integrated eligibility project into more manageable chunks.

He said such phased approaches minimize the risk of service disruptions, citing New York, North Carolina and Utah as examples of states taking an incremental approach. New York and North Carolina plan to introduce new phases of their integrated eligibility modernization projects, according to Input.

Indiana, which has pursued a Texas-like outsourcing deal, may reconsider its approach “as a result of what’s happened in Texas,” Dixon said.

A spokesman for the Indiana Family and Social Services Administration said the state is still going ahead with its contracting plan. Contract talks with IBM continue, he added.

Callahan said no single implementation style is likely to dominate the market because of the varied nature of state welfare programs. For example, programs determine eligibility at the state level, county level or both, he said. “No two states are alike, no two systems are alike, and no two implementations are alike,” he said.

Web-based technologies help states modernize

The market for welfare eligibility systems geared to state and local agencies appears to be ready for continued growth. Only a few states have replaced their aging eligibility determination systems thus far, said Dick Callahan, a Western region vice president in EDS’ U.S. government business unit.

Chris Dixon, senior analyst for industry analysis at Input, estimated that at least three-quarters of the states lack a Web-based platform that integrates multiple social services programs, but many have Web-enabled individual programs. At NCR Government Systems, Bill Cooper, vice president of sales and business development, counts the health care sector, including welfare systems, among the company’s top four market opportunities.

Doug Doerr, executive director of Accenture’s human services industry practice, said the market lacks a 50-state legislative mandate to upgrade welfare systems. Nevertheless, numerous agencies are trying to move from aging platforms, he said.

“States continue to [monitor] their budgets very closely, and [they] are looking for ways to save money,” Doerr said.

— John Moore


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