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September 9, 2012

FLASHPOINT: State’s welfare system now performing well

Mitch Daniels Governor of Indiana

INDIANAPOLIS — For years, our administration has sat silently through frequent criticism of our initial attempt to repair and reform Indiana’s welfare system. Much of the criticism was sincere and accurate, much was simply crude politics. But even when it crossed the line into inaccuracy, we endured it without protest; I told my coworkers in state government to make no reply until we could show with hard facts that the original problem had been addressed successfully. That time has arrived.

First, an historical review.

When our all-new crew arrived in state government in 2005, we found a lot in need of fixing. The state was bankrupt, for openers, but there were also ethics problems and dysfunction everywhere: in the highway department, the State Police, the protection of children and, as most Hoosiers remember painfully, the Bureau of Motor Vehicles, to name a few lowlights.

Nowhere was the need for change more obvious than in the delivery of welfare services. Most visibly, that department had been rocked by a series of criminal indictments, with cheats and caseworkers colluding to steal money meant for poor people.

But, as we learned after taking up our new duties, the even larger scandal was in the wasteful and often cruelly indifferent way the system operated even when no one was breaking the law. Our investigators found a mess so bad I asked them to take pictures so that people later on would believe the conditions: hallways clogged with boxes stuffed full of paper files; prehistoric “green-screen” computers with software from the 1970s; applicants waiting weeks for an answer or even an appointment; one analysis discovered that the welfare system was spending $1 million per year in postage to send mail to itself.

Not surprisingly, the system’s performance was terrible. Waiting lists, error rates, and timeliness were all among the nation’s worst. The federal government was threatening huge fines and other penalties if Indiana didn’t clean up its welfare act.

Some forgetful critics have written that we “rushed” into our first attempt to fix the system, but that is completely false. In fact, a task force spent almost a year visiting every welfare office, collecting data, interviewing experts and workers, and costing out options. By far the most expensive and lengthy option turned out to be trying to repair the existing system inside state government. The facts said plainly that we needed more than a new computer system; the entire process needed redesign, to improve service and guard against fraud.

As most folks know, our first attempt went badly. Working with IBM as the lead contractor among a team of companies, we agreed to IBM’s sweeping redesign of the process for determining who was eligible for food stamps, Medicaid or direct cash welfare.

It didn’t work. Its fundamental mistake had nothing to do with the fact that back-office computer services were “privatized” to a company expert in that area; that did and still does make total good sense. It was simply overdesigned, great on paper but too complicated to work in practice.

The new design did have some good features. By separating the intake of applications from the decision to give out benefits, it ended the previous plague of fraud in which criminals conspired with state workers to collect money illegally and divide it. But this first try failed badly to improve the worst service and error record in the country, and many measures actually got worse. Critics were right to complain, and we said so, repeatedly.

When it became clear that IBM’s design and performance were deficient, I canceled the contract. (One huge advantage of contracting for public services is that you can fire a company; you can’t easily fire an entire government bureaucracy.) We learned from the bad experience and, after extensive consultation with front-line workers and outside critics, worked with a new private partner to create a “hybrid” process, incorporating the effective features of the old and new approaches.

Gradually and carefully, beginning in January 2010, this hybrid system has been installed one by one in the ten regions of our welfare operations. Stung by the disappointment of our first reform attempt, we have said virtually nothing about our progress, moving step by step, measuring constantly and checking for any system failures.

With the entire state in the reformed system now for six months, here are the results, compared to the system as we found it in 2005:

• Timeliness of decisions across all programs has gone from 75 percent to 93 percent. For TANF, or cash welfare, timeliness has almost doubled. The backlog of pending cases has been slashed by two-thirds.

• Error rates for food stamps have been cut in half, from 6.6 percent to 3.3 percent. Indiana is now above national averages in all important performance measurements. And all this has happened while demand on the system exploded, from 695,000 to more than 1.3 million applicants.

• Meanwhile, we have saved taxpayer dollars, a lot of them. The new system costs more than $60 million per year less than the original would have,so the state’s investment in new systems and training is paying back handsomely.

• To top it off, the same federal department that was threatening to fine Indiana seven years ago recently awarded us a multi-million dollar bonus for improvement and excellence.

Early in my service as governor, I said, “As we have always promised, our mistakes will be made on the front foot; they will be errors of commission, not omission. We won’t duck problems just because they are hard, and when we try something that doesn’t work well enough, we’ll admit it, own up, and go back and fix it.” It was one of dozens of times I made exactly the same point, and our experience trying to make America’s worst welfare system better is probably the best single example of this activist philosophy in practice.

The criticisms leveled at our welfare modernization efforts have been, for the most part, sincere and fair. I am disappointed that it took two tries, but gratified at the success of the second try.

Now that the facts are so dramatically transformed, I trust that those who have been so critical will demonstrate their sincerity by modernizing their obsolete talking points.

Then we can all work together on the new challenge, making the best-performing welfare system Indiana has had much better yet.

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