AUTOMATING ELIGIBILITY IN THE HEARTLAND
A little white donkey is chewing on a fencepost where we turn toward the Stipes house on a narrow utility road paralleling the train tracks in Tipton, Indiana. Michael “Dan” Skinner, 65-year-old ex-newspaper man and my guide to central Indiana, heaves his mom’s 19-year-old sedan across the tracks and into the Stipes family’s driveway a mile or so later. Their big white house is marooned in a sea of cornfields, but on this sunny day in March 2015, the stalks are cut back low and softened by snow melting to mud. Kim and Kevin Stipes joke that they’ve had to grow tall children: come July, the smaller ones disappear into the corn. I’m here to talk to Kim and Kevin about their daughter Sophie, who lost her Medicaid benefits during Indiana’s experiment with welfare eligibility automation.
In 2012, I delivered a lecture at Indiana University Bloomington about how new data-based technologies were impacting public services. When I was finished, a well-dressed man raised his hand and asked the question that would launch this book. “You know,” he asked, “what’s going on here in Indiana, right?” I looked at him blankly and shook my head. He gave me a quick synopsis: a $1.3 billion contract to privatize and automate the state’s welfare eligibility processes, thousands losing benefits, a high-profile breach-of-contract case for the Indiana Supreme Court. He handed me his card. In gold letters it identified him as Matt Pierce, Democratic member of the Indiana House of Representatives.
Two and a half years later, the welfare automation story brought me to the home of Sophie Stipes, a lively, sunny, stubborn girl with dark brown hair, wide chocolate eyes, and the deep brow characteristic of people with cerebral palsy. Shortly after she was born in 2002, she was diagnosed with failure to thrive, global developmental delays, and periventricular leukomalacia, a white-matter brain injury that affects newborns and fetuses. She was also diagnosed with 1p36 deletion syndrome, which is believed to affect between 1 in 5,000 and 1 in 10,000 newborns. She has significant hearing loss in both ears. Kim and Kevin were told that she might never sit up, walk, or speak. For her first two years, all she did was lie on her back. She barely moved.
Her parents contacted representatives of First Steps, a program of the Indiana Division of Disability and Rehabilitative Services that helps young children with developmental delays. Through the program, Sophie received therapy and nutrition services, and her family received counseling and support. Most important: she had a gastronomy tube implanted to deliver nutrition directly to her stomach; for the first two years of her life, she had not been eating very much at all. Shortly after they started feeding her directly through the G-tube, Sophie began to sit up.
At the time of my 2015 visit, Sophie is 13. She gets around on her own and goes to school. She knows all the letters of the alphabet. Though doctors originally told Kim that it wouldn’t do any good to sign to her, Sophie understands 300 or 400 words in the family’s pidgin sign language and communicates with her parents and friends. Sophie has been at school all day, so she is relaxing in her room watching Elmo’s World, wearing orange-and-pink-striped pajamas. Kim Stipes introduces us, and we wave hello at each other.
I ask Kim to tell Sophie that I like her pink TV, and she laughs, signing the message. “Kudos to Sophie,” says her mom, a blond with faded blue eyes, a gold thumb ring, and the slide-on Crocs worn by folks who spend a lot of time on their feet. “If other kids worked half as hard, they’d all be geniuses making millions. That’s how hard Sophie has worked.”
The Stipeses aren’t strangers to hard work. In a greenhouse made of metal tubes and plastic sheeting, Kevin cultivates heirloom tomatoes, broccoli, lettuce, peppers, green beans, squash, and even peaches. They can and freeze produce to use throughout the winter. But 2008 was a rough year. Kevin lost his job, and with it, the family’s health insurance. He and Kim were trying to support seven kids on what they could make selling auto parts on the internet. Their son Max had recently been diagnosed with type I diabetes. And Sophie had been very sick, throwing up all the time.
Without Medicaid Sophie’s care would have been financially overwhelming. Her formula was incredibly expensive. She needed specialized diapers for older children with developmental delays. It cost $1,700 every time Sophie had a G-tube implanted. The cost of her care exceeded $6,000 a month.
Trouble really started in late 2007, when Kim applied for the Healthy Indiana Plan, which provides catastrophic health insurance for low-income adults. Though five of their children were covered by Medicaid, she and Kevin had no health insurance. Immediately after Kim started the application process, four members of the household became ill. Kim knew that she would not be able to fill out all the required paperwork while caring for them.
So she went to her local Family and Social Services Administration (FSSA) office in Tipton, spoke to a caseworker, and asked to have the application put on hold. The Tipton caseworker told her that, because of recent changes at FSSA, application decisions were no longer made at the local level. She would have to speak with a call center operator in Marion, 40 miles away. Kim called the Marion office and was told that her application “would be taken care of.” Neither the Tipton caseworker nor the Marion call center operator told Kim that she had to sign paperwork declaring that she was stopping the application process. Nor did they tell her that her failed attempt to get health insurance for herself and her husband might impact her children’s coverage.
Then, the family received a letter from the FSSA. It was addressed to six-year-old Sophie, and it informed her that she would be kicked off Medicaid in less than a month because she had “failed to cooperate” in establishing her eligibility for the program. The notice somehow managed to be both terrifyingly brief and densely bureaucratic. It read:
Mailing Date: 3/26/08
Dear SOPHIE STIPES,
MA D 01 (MI)
Your MEDICAID benefits will be discontinued effective APRIL 30, 2008 due to the following reason(s):
-FAILURE TO COOPERATE IN ESTABLISHING ELIGIBILITY
-FAILURE TO COOPERATE IN VERIFYING INCOME
SUPPORTING LAW(S) OR REGULATION(S): 470IAC2.1-1-2
Important: If you believe you may be eligible for Medicaid benefits under another category and have more information about your case, please contact us at the number listed at the top of this notice within ten days (13 days if this notice is received by mail) of the date of this notice.
The notice arrived on April 5, 2008. It had been ten days since it was mailed. The family had three days left to contact FSSA and correct the mistake.
Kim sprang into action, composing a lengthy letter that explained her situation and faxing it to the Marion office on Sunday, April 6. In it, she stressed that Medicaid kept Sophie alive, that she had no other insurance, and that her medical supplies alone cost thousands of dollars a month. Sophie’s medicines were due to run out in five days. Kim phoned the call center in Marion and was told that Sophie was being cut off because Kim had failed to sign the paperwork declaring that she was stopping her earlier applications for the Healthy Indiana Plan. Kim protested that no one had ever told her about the paperwork.
But it was too late.
According to the state of Indiana, the Stipes family had failed to cooperate with the eligibility determination process and, under state law, the punishment was total denial of medical benefits. The sanction would impact both Kim and Kevin, who were trying to get health insurance for themselves, and Sophie would be denied the Medicaid she was already receiving. When Kim asked why their other children were not being cut off, she was informed that they were. She should expect four more letters.
The Stipes family contacted Dan Skinner, who was spending his retirement as a volunteer with United Senior Action, working on behalf of elderly Hoosiers. In early 2007, United Senior Action started getting calls from individuals and organizations all over central Indiana: the shelves at food pantries were empty and the United Way was overrun by requests for emergency medical help. Skinner began an independent investigation in Howard County, visiting the mayor’s office, the area agency on aging, Catholic social services, the senior center, and Mental Health America. He found that people were losing their benefits for “failure to cooperate” in alarming numbers.
Sophie’s case stood out to him as particularly appalling. “She was six years old, and she was recovering. She learned how to sign. She was starting to walk!” Skinner said. “She was starting to be able to eat a little bit, and they said when she could take 3,000 calories, they would take the feeding tube out. She was right at that stage, and her Medicaid was cut off for failure to cooperate.” By the time the Stipes family reached him, Skinner remembered, they were in a desperate situation and needed immediate action.
Dan called John Cardwell, founder and director of The Generations Project, an organization dedicated to addressing long-term health-care issues in the state of Indiana. The two gathered their colleagues from the AARP and the Alliance for Retired Americans, lobbied their contacts, worked the media, and called an emergency press conference. Dan took Sophie and her parents to the Indianapolis State House in a van. “She had a little dress on,” Kim Stipes remembers. “She was not a happy camper then. Her little life was rough.” They walked into the governor’s office with Sophie in her wheelchair and “TV cameras in tow,” said Skinner. “They didn’t expect that.”
At one point, Governor Mitch Daniels walked right by the group. “He did have an opportunity, quite frankly, to walk right over to us,” Skinner recalled. “He just walked by. Mitch Roob [Secretary of the FSSA] was with him. They just stared at us and kept on going.” Kevin Stipes yelled across the room to Daniels, inviting him to come talk with his family. But the governor and FSSA secretary failed to acknowledge them. “They get to that position they don’t want to deal with that stuff. They want layers,” Kevin theorized later, “They want people in between.” The group asked for Lawren Mills, Governor Daniels’ policy director for human services, who agreed to meet with them. The next day at four o’clock in the afternoon, Sophie had her Medicaid back.
* * *
Sophie’s family was not alone. In 2006, Republican governor Mitch Daniels instituted a welfare reform program that relied on multinational corporations to streamline benefits applications, privatize casework, and identify fraud. Daniels had long been a foe of public assistance. In 1987, while serving as President Ronald Reagan’s assistant for Political and Intergovernmental Affairs, he had been a high-profile supporter of a failed attempt to eliminate AFDC. Nearly 20 years later, he tried to eliminate TANF in Indiana. But this time he did it through high-tech tools, not policy-making.
Governor Daniels famously applied a Yellow Pages test to government services. If a product or service is listed in the Yellow Pages, he insisted, the government shouldn’t provide it. So it was not surprising when, shortly after his election in 2004, Daniels began an aggressive campaign to privatize many of the state’s public services, including the Indiana Toll Road, the Bureau of Motor Vehicles, and the state’s public assistance programs.
Daniels appointed Mitch Roob as FSSA secretary. In The Indianapolis Star, Daniels praised Roob, then a vice president at Affiliated Computer Services (ACS), as being “deeply committed to the interests of the least fortunate among us and equally committed to getting the most service from every tax dollar.” As their first order of business, Roob and his boss commissioned an audit of what Daniels called in a 2007 South Bend Tribune editorial “the monstrous bureaucracy known as the Family and Social Service Administration.” As the agency’s audit report was released in June 2005, two FSSA employees were arrested and charged with theft, welfare fraud, and a panoply of other offenses. One of the employees was accused of collaborating with church leaders of the Greater Faith Missionary Baptist Church in Indianapolis to collect $62,497 in food stamps and other welfare benefits by creating dummy accounts for herself and fellow church parishioners. Between them, the two caseworkers had 45 years of experience at the FSSA.
Daniels seized the political moment. In public speeches, press releases, and reports, the governor repeatedly characterized Indiana’s welfare system as “irretrievably broken,” wasteful, fraudulent, and “America’s worst welfare system.” Citing the system’s high error rate and poor customer service, Mitch Roob crisscrossed the state arguing that the system was broken beyond the ability of state employees to fix. In early 2006, the Daniels administration released a request for proposal (RFP) to outsource and automate eligibility processes for TANF, food stamps, and Medicaid. In the request, the state set very clear goals: reduce fraud, curtail spending, and move clients off the welfare rolls.
“The State is aware that poor policy and operations have contributed to a culture of welfare dependency among some of its clients,” the RFP read. “Respondent will help address this issue by agreeing to use welfare eligibility and other programs to help clients reduce dependency on welfare assistance and transition into a paid work setting.” While the state provided no incentives or support for matching applicants to available jobs, the RFP suggested that the FSSA would be willing to provide extra financial incentives for finding and denying ineligible cases. The state offered to “pay the Respondent for superior performance,” for example, if the company can “reduce ineligible cases” by identifying “client misrepresentations.”
At the time, the Indiana FSSA was helping about a million people access health care, social services, mental health counseling, and other forms of support. The 2006 agency was sizable: it had a budget of $6.55 billion and a staff of approximately 6,500. But it was much smaller than it had been 15 years earlier. In 1991, the Indiana General Assembly consolidated the departments of Mental Health, Public Welfare, and Human Services, and outsourced many of its functions. By the time of the automation, the FSSA had halved its public workforce and was spending 92 percent of its budget buying services from outside vendors.
Everyone—advocates, applicants, administrators, and legislators alike—agreed that the existing system faced serious challenges. FSSA offices were using an extremely out-of-date system called the Indiana Client Eligibility System (ICES) for daily administrative functions such as calculating eligibility and verifying income. Customer service was uneven at best. A 2005 survey found that applicants faced a slow intake process, a telephone system that rarely worked, and caseworkers who were difficult to reach. A U.S. Department of Agriculture (USDA) study found that food stamp applicants made up to four visits to county offices before receiving program benefits. Overstretched staff couldn’t handle demand or keep up with towering piles of paper case files.1
The Daniels administration insisted that moving away from face-to-face casework and toward electronic communication would make offices more organized and more efficient. Even better, they argued, moving paper shuffling and data collection to a private contractor would free remaining state caseworkers to work more closely with clients. Daniels and Roob built a compelling case. And people listened.
However, many of Daniels’s other assertions about the failures of FSSA have been contested. His claim that Indiana’s welfare system was the worst in the country, for example, was based only on the state’s record for moving Hoosiers off welfare. It is true that Indiana reduced the number of people on public assistance more slowly than other states in the decade after the 1996 welfare reforms. But Indiana had seen a significant drop in the welfare rolls years earlier. In the three years between the installation of ICES and the implementation of federal welfare reform, Indiana’s caseload fell 23 percent. As Daniels began his term, only a tiny proportion of poor Hoosiers—38 percent—were receiving benefits from TANF, and only 74 percent of qualified individuals were receiving food stamps. Despite the administration’s insistence that eligibility errors were spiraling out of control, the FSSA reported food stamp error rates consistent with national averages. The positive error rate—which measures those who receive benefits for which they are not actually eligible—was 4.4 percent. The negative error rate—which describes those who apply for benefits and are incorrectly denied them—was 1.5 percent.
Only two bids were submitted for the contract, one from Accenture LLC and the other from a coalition of companies called the Hoosier Coalition for Self-Sufficiency. The coalition was led by IBM and ACS, Roob’s former employer. Accenture dropped out of the bidding process. On December 27, 2006, after holding a single public hearing on the topic, the governor signed a ten-year, $1.16 billion contract with the IBM/ACS coalition.
In a press release celebrating the plan, Daniels announced, “Today, we act to clean up welfare waste, and to provide Indiana’s neediest people a better chance to escape welfare for the world of work and dignity. We will make America’s worst welfare system better for the people it serves, a much fairer deal for taxpayers, and for its own employees.”2 According to the Daniels administration, the modernization project would improve access to services for needy, elderly, and disabled people while saving taxpayers’ money. It would do this by automating welfare eligibility processes: substituting online applications for face-to-face interactions, building centralized call centers throughout the state, and “transitioning” 1,500 state employees to private telephone call centers run by ACS.
Daniels lauded his privatization plan and the automated system in the 2007 South Bend Tribune editorial. “Today’s welfare system … is totally indefensible,” he wrote. “For Hoosier taxpayers, reform means enormous savings: a half billion dollars over the next 10 years, and that’s only on the administrative side. When today’s high rates of errors and fraud are brought down, savings will probably exceed $1 billion.”3 By March, 70 percent of the FSSA workforce had moved to positions with private contractors. In October the Indiana automation project rolled out to 12 pilot counties in north central Indiana.
* * *
In the first nine weeks of the pilot, 143,899 people called the toll-free number and 2,858 applied online. System failures were immediate. “The telephone appointment system was a disaster,” remembered Jamie Andree of Indiana Legal Services, an organization providing legal assistance to low-income Hoosiers. “An interview would be scheduled from 10 to 12 in the morning. People would have to find a phone, sit by it, and wait to be called. Then the call wouldn’t come, or they’d call at 11:45 saying [the interview] is being rescheduled for tomorrow.”
Applicants who had taken time off work were often unable to wait by the phone the next day for a new appointment. Others received notices that required them to participate in phone interviews scheduled for dates that had already passed. According to a 2010 USDA report, a food stamp (called the Supplemental Nutrition Assistance Program, or SNAP, after 2008) recipient added the call center number to her cell phone plan’s “friends and family” list because she spent so much time on the phone with them. Applicants who failed to successfully complete their phone interview were terminated for failing to cooperate in eligibility determination. Says Andree, “It was a terrible, terrible, terrible system.”
Private call center workers were not adequately trained to deal with the severity of challenges faced by callers, nor were they provided with sufficient information about applicable regulations. Advocates report call center operators bursting into tears on the phone. “The first person I called under modernization, I remember it vividly,” reported Terry West, a patient advocate with 15 years’ experience in central Indiana. “She was young, and … did not have any experience whatsoever.… There was a problem, a denial of a case. I talked to this young lady for about an hour. I kept citing [the appropriate regulations]. After about a half an hour, she just started crying. She said, ‘I don’t know what I’m doing.’ That’s exactly what she told me. I said, ‘Look, it’s okay. I was a caseworker. I’m reading right out of your policy manual what has to be done.’ She just cried.”
Millions of copies of drivers’ licenses, social security cards, and other supporting documents were faxed to a centralized document processing center in Grant County; so many of them disappeared that advocates started calling it “the black hole in Marion.” Each month the number of verification documents that vanished—were not attached properly to digital case files in a process called “indexing”—rose exponentially. According to court documents, in December 2007 just over 11,000 documents were unindexed. By February 2009, nearly 283,000 documents had disappeared, an increase of 2,473 percent. The rise in technical errors far outpaced increased system use. The consequences are staggering if you consider that any single missing document could cause an applicant to be denied benefits.
Performance metrics designed to speed eligibility determinations created perverse incentives for call center workers to close cases prematurely. Timeliness could be improved by denying applications and then advising applicants to reapply, which required that they wait an additional 30 or 60 days for a new determination. Some administrative snafus were simple mistakes, integration problems, and technical glitches. But many errors were the result of inflexible rules that interpreted any deviation from the newly rigid application process, no matter how inconsequential or inadvertent, as an active refusal to cooperate.
The automation’s impacts were devastating for poor and working-class Hoosiers. Between 2006 and 2008, the state of Indiana denied more than a million applications for food stamps, Medicaid, and cash benefits, a 54 percent increase compared to the three years prior to automation.
* * *
Michelle “Shelli” Birden, a soft-spoken and serious young woman from Kokomo, lost her benefits during the automation experiment. Shelli was diagnosed with epilepsy at six months of age; by the time she reached adulthood, she was suffering as many as five grand mal seizures a day. Despite having surgery to implant a vagus nerve stimulator—something like a pacemaker for the brain—she was still, in her own words, “violently ill” when the modernization hit. In late April 2008 she received a recertification notice from the FSSA. She faxed her response, a pile of forms, and other documentation eight days later. On June 25, Shelli received a letter dated June 12 informing her that her Medicaid benefits would be discontinued in five days for “failure to cooperate in establishing eligibility.”
The failure to cooperate notice had originally been sent to an outdated address, which delayed its delivery. Now Shelli, in a panic, phoned the call center. An ACS worker told her to try to correct her application online. When that failed, she and her boyfriend Jeff Stewart phoned the call center several more times, trying to identify the problem. “I started reading her letters to figure out what to do, and where to go, and who to call,” Jeff remembered, “but you couldn’t get anywhere on the phone. It was like you were talking to a computer instead of a person.”
On July 11, call center operators connected Shelli with one of the few remaining state caseworkers in Marion, who told her that she had neglected to sign a required form but did not tell her which one. By this point, she was starting to run out of her anticonvulsant medications. She would have to find a free source for her drugs, which cost close to $800 a month, or risk violent seizures, panic attacks, dizziness, insomnia, blurred vision, and an increased risk of death from going off them cold turkey.
Shelli contacted the United Way, which provided her with a few days of emergency medication. The staff also advised her to immediately file an appeal of the “failure to cooperate” determination. She reached out to the Marion office again, on July 14, and asked to lodge an appeal. But she was informed that the 30-day deadline to contest the June 12 decision had passed. It was too late to appeal the FSSA’s decision. She’d have to reapply.
A new determination would take 45 days. She had three days of medication left.
* * *
The governor and the FSSA promised that an automated eligibility system would offer increased client control, a fairer application process, and more timely decisions. The problem with the existing caseworker-centered system, as they saw it, was twofold. First, caseworkers spent more time manually processing papers and collecting data than “using their social work expertise to help clients.” Second, the outdated data system allowed caseworkers to collude with outside co-conspirators to illegally obtain benefits and defraud taxpayers. The old system involved caseworkers developing one-on-one relationships with individuals and families and following cases through to completion. The new system was “self-serve,” technology-focused, and presented call center workers with a list of tasks to complete rather than a docket of families to serve. No one worker had oversight of a case from beginning to end; when clients called the 1-800 number, they always spoke to a new worker. Because the Daniels administration saw relationships between caseworkers and clients as invitations to fraud, the system was designed to sever those links.
The FSSA packed up all its existing records and moved them to a central storage facility in Indianapolis. These paper records were set aside in case the state needed them for appeal hearings, but were not scanned into the modernized system. All current recipients of TANF, food stamps/SNAP, and Medicaid were required to turn in all their supporting documentation again, no matter how long they had been receiving benefits. “All of the documents that identified the members of the household—birth certificates and that sort of thing—were in the local office until the modernization. And then they were gone,” remembered Jamie Andree. “It was as if they had never existed. So one of the things that happened with modernization is that people [were] asked to turn in [obscure] stuff, like the title to a vehicle that they hadn’t owned since 1988. They were being asked to turn in things that the agency already had.”
When clients did manage to find decades-old documents, delays between the document center receiving paperwork and the contractors processing it were consistently interpreted as the fault of the applicant. Chris Holly, a Medicaid attorney in Bloomington, estimated that 95 percent of the Medicaid applications he handled during the automation resulted in eligibility determination errors. According to Holly, all the errors were generated by the state and its contractors, not his clients. “We knew we had submitted everything by the deadline,” he said in December of 2014, “and we were still getting denials for failure to cooperate.” It would take three or four days for documentation to get processed, but “they never waited. They would deny it on the [deadline], or even before. And if people get denied, they assume the system knows what it’s doing. They’ll accept that they’re just ineligible and give up.”
Still, many applicants fought to retain their health insurance or food assistance against these formidable odds. Like Shelli, they became tenacious detectives, trying to ferret out a single error in complex applications running dozens of pages. Failure to cooperate notices offered little guidance. They simply stated that something was not right with an application, not what specifically was wrong. Was a document missing, lost, unsigned, or illegible? Was it the fault of the client, the FSSA, or the contractor? “Failure to cooperate was the operative phrase,” noted Glenn Cardwell, a retired caseworker and administrator now living in Vigo County, “because then it was the client’s problem and not the city, not the contractor.”
Under the previous system, mistakes or omissions in an application were troublesome and time-consuming, requiring caseworkers and clients to collaborate to secure documents like birth certificates, medical reports, proof of income, social security cards, and rental receipts. “Before modernization, they had someone to call up and say, ‘Listen, I received this notice. What do I need to do?’” recalled ACLU attorney Gavin Rose. “And the answer was ‘Run it down to me, fax it over right now. I’ll make sure it gets in your file and we’ll take care of this.’” Before the automation, “failure to cooperate” had been a last-ditch punishment caseworkers used against a few clients who actively refused to participate in the eligibility process. After the automation, the phrase became a chain saw that clearcut the welfare rolls, no matter the collateral damage.
* * *
Shelli Birden was wary of talking about what she remembers as one of the most confusing and terrifying times of her life. Ultimately she discovered the lone signature she had missed. “I had to go back through my papers,” she said. “I always copied my papers. I missed one question, and boom, they shut me off.” When we spoke in 2015, she remembered feeling completely alone in a life-threatening situation. “They didn’t give us enough information,” she said. “They didn’t send us in with our social workers anymore. They made us do it on our own.”
But Shelli, as smart and tenacious as she is, didn’t do it entirely on her own. She received help from advocate Dan Skinner, whose contacts with FSSA staff fast-tracked solutions. Her boyfriend took on navigating the debacle like it was a second job. She received help from the United Way, which provided advice and support. Birden was reinstated to Medicaid on July 17. She received her medication in time to save her life. Seven years later, with her health stabilized, Shelli was holding a job at Wal-Mart. “I’m doing really good,” she said. “I’m actually able to get back to work, and I feel like my life matters.”
But many others were not so lucky. “As attorneys, we had access to people that could fix things,” noted Chris Holly. “But average well-meaning people that needed help? They were the ones that suffered the most.” Jane Porter Gresham, a retired caseworker with nearly 30 years’ experience at FSSA, agreed. “The most vulnerable of our population—the parents of children who didn’t have food to eat, who needed medical treatment, and the disabled who were not able to speak for themselves—were the ones who took it on the chin, took it in the gut, and in the heart.”
* * *
Lindsay Kidwell of Windfall also lost public benefits during the modernization experiment. Six months after giving birth to her first child, Maddox, in December 2008, Lindsay was informed that she was due to recertify for food stamps/SNAP and Hoosier Healthwise, Indiana’s Medicaid program for low-income parents, pregnant women, and children. She participated in a phone interview on December 10 with a call center worker in Marion, who told her what documentation she needed to provide. Among the documents requested were pay stubs for her partner, Jack Williams, who made about $400 a week before taxes at the Buckhorn Restaurant and Lounge. Lindsay faxed everything except the pay stubs to the document center on December 19, because Jack got paid by bank check and didn’t have any stubs. His boss at the Buckhorn called the document center to find out how to supply proof of his wages. Following their directions, she wrote out a list of paychecks and amounts and faxed them to the document center on December 23.
On January 2, Lindsay received a medical bill informing her that her Medicaid had been denied, and that she would be responsible for paying $246 out of pocket for her recent postnatal check-up. When she went out to do some grocery shopping on January 4, her EBT card—the debit-like card holding her food stamp/SNAP benefits—was denied. On January 15, she received a letter from FSSA.
Mailing Date: 1/13/09
Dear LINDSAY K KIDWELL,
FS01 (XD)
Your application for FOOD STAMPS dated DECEMBER 10, 2008 has been denied.
You are not eligible because:
—FAILURE TO COOPERATE IN VERIFYING INCOME
SUPPORTING LAW(S) OR REGULATION(S): 7CFR273.2(d)
…
MA C 01 (MI)
Your HOOSIER HEALTHWISE benefits will be discontinued effective JANUARY 31, 2009 due to the following reason(s):
—FAILURE TO COOPERATE IN VERIFYING INCOME
SUPPORTING LAW(S) OR REGULATION(S): 470IAC2. 1-1-2
A week later, well within the 13-day window to submit the “missing” documents, Lindsay went to her local Tipton County FSSA office, submitting a more complete listing of wages and photocopies of Jack’s last three paychecks.
Lindsay had the wage report and canceled paychecks stamped “Received” and asked for a copy. She watched the employee scan her paperwork into the system and took a copy of the “Scan Successful” notice confirming it was received by the document center. She also filed an appeal of the earlier “failure to cooperate” determinations. If she began a fair hearing process, her food stamps/SNAP and Medicaid would be reinstated until an administrative law judge ruled whether or not the decision to terminate her benefits was correct.
The Tipton County worker told Lindsay that she should file a new application for benefits rather than an appeal. It would be faster and easier, she insisted. Lindsay refused. She didn’t want to reapply; she wanted to appeal what she saw as an incorrect FSSA decision.
Three weeks later she received a phone call from a young man who informed her that she would receive a notice in the mail soon—a hearing on her Medicaid case had been scheduled. Then he advised her to drop her appeal. He was looking in the computer, he said, and because Lindsay had never submitted payroll information for Jack, she would lose her case. But Lindsay had copies of his payroll information stamped “Received.” She had the canceled checks and the scan confirmation. It must be some kind of mistake, she insisted. It didn’t matter. Lindsay recalls that the man on the phone simply said, “I found no documentation of recent payroll information in the computer. The judge will simply look in the computer, see this, and deny you.”
* * *
One of the great victories of the welfare rights movement of the 1960s and ’70s was the redefinition of welfare benefits as the personal property of the recipient, rather than as charity that can be bestowed or denied on a whim. Activists successfully challenged inequitable access to public assistance by appealing decisions and demanding access to administrative law procedures known as fair hearings.
In 1968, eight individuals denied due process in New York launched a class action lawsuit that led to a Supreme Court decision in Goldberg v. Kelly. This landmark case found that all welfare recipients have a right to an evidentiary hearing—a process that includes timely and adequate notice, disclosure of opposing evidence, an impartial decision-maker, cross-examination of witnesses, and the right to retain legal representation—before their benefits can be terminated.
By successfully reframing public benefits as property rather than charity, the welfare rights movement established that public assistance recipients must be provided due process under the Fourteenth Amendment of the Constitution. The case hinged on the understanding, expressed by Justice William Brennan, that abrupt termination of aid deprives poor people of both their means of survival and their ability to mount an adequate challenge to government decisions. “From its founding, the Nation’s basic commitment has been to foster the dignity and well-being of all persons within its borders,” Brennan wrote. “Public assistance, then, is not mere charity, but a means to ‘promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.’”4
The far-reaching and fundamental changes introduced by Indiana’s automated system put it on an inevitable collision course with the poor’s right to due process guaranteed by Goldberg. A class action lawsuit, Perdue v. Murphy, was filed by Gavin Rose and Jacquelyn Bowie Suess, staff attorneys from the ACLU of Indiana, on behalf of more than a dozen individuals in north central Indiana who had lost their Medicaid, food stamps/SNAP, or TANF assistance for failure to cooperate. The case explicitly challenged the loss of due process under the automated system.
The ACLU alleged that notices were incomplete, “failure to cooperate” was being used too broadly, and the new caseworkerless system denied the disabled equal access to public programs. They also claimed that the last resort of wrongly denied applicants—a fair hearing—was made increasingly difficult to access. Call center workers defaulted to the decisions of the automated system over the administrative law process, discouraging appeals in favor of reapplication, and failed to notify applicants of their rights. Applicants felt that they had nowhere to turn for redress.
After successes for the ACLU in lower courts, Perdue v. Murphy eventually went to the Indiana Supreme Court, which found that the state’s “failure to cooperate” notices were unconstitutional and did not provide adequate due process protections. But, reversing a lower court’s decision, Indiana’s highest court held that the state does have a right to deny applicants for “failure to cooperate” because at some point “failing” and “refusing” to cooperate converge. The case forced the FSSA to create more complete and specific notices, but did little to return the individualized attention of caseworkers to the Indiana eligibility process, or to stop the use of “failure to cooperate” to clearcut the rolls.
* * *
“The judge will simply look in the computer … and deny you,” the call center operator said to Lindsay Kidwell in February 2009. The words were a nightmare. Despite the fact that she had stamped proof that she submitted all the appropriate payroll information, Lindsay wavered. Should she cancel her appeal? If she lost, she’d be responsible for repaying all the benefits she received while waiting for a decision—months of medical and food bills.
Even though Lindsay knew she was in the right, there was no guarantee she would win the case. A loss would mean more debt for her young family. She asked the man on the phone if she could talk to an advisor before deciding whether or not to continue her appeal. He said, “No. I need an answer now. Are you going or not?” Gathering her courage, she re-affirmed that she wanted a fair hearing.
He hung up on her.
Lindsay remembered that the appeal hearing was pretty straightforward. “I went to my appeal,” she said in 2017. “They said basically that they messed up. I didn’t owe them money.” Her family met all of the eligibility requirements of the program; their Hoosier Healthwise and food stamp benefits were officially reinstated.
But her experience with the FSSA still haunts her today. Her family was self-supporting for nearly a decade after the eligibility automation. Then she went through a divorce. When I spoke with her in 2017, she knew she was probably eligible for help from FSSA. “I’m going through a tough time,” she said. “I’m a single mom. I work full time, but it doesn’t always cut it.” Her experience during the automation makes Lindsay hesitant to apply for benefits again. “They make it so difficult. If I applied now I could probably get it, but that experience with being denied … I mean, I cried. I did everything that they asked me to do. I don’t even know if it’s worth the stress.”
* * *
Applicants for TANF, food stamps/SNAP, and Medicaid were not the only Hoosiers impacted by the shift to automated decision-making. That’s why I traveled to Fort Wayne in March 2015 to talk to caseworkers about their experience with the Indiana experiment.
Fort Wayne, the second-largest city in Indiana, is in the northeast, 18 miles west of Ohio and 50 miles south of Michigan. General Electric and International Harvester had factories there that closed or scaled their workforces back significantly during the 1970s and 1980s. Driving to my first appointment of the afternoon, I pass the local headquarters of the National Association of Letter Carriers; George’s International Market with its incredible selection of house-made salsas and bottled hot sauces; and Uncle Lou’s Steel Mill Tavern, which sports a sign in the window that reads “Honk if you like beer.” I cross the railroad tracks and the St. Marys River, swollen from recent flooding, into a neighborhood of modest two-story houses.
Jane Porter Gresham welcomes me into her tidy white home, where we sit on a blue velveteen couch in her front parlor. Gresham’s wooden cross contrasts sharply with her matching blue t-shirt and cardigan set. Gresham worked for the FSSA for 26 years, from 1985 to 2011, when she retired in the wake of the automation. Even four years later, rage and frustration flicker across her round face as we speak. “People who are [at FSSA] for the first time, you can see it in their eyes—fear. Fear of what I’m going to do. People say to me, ‘I never thought I’d have to be here.’ They’re not trying to cheat the system; they don’t know where else to turn. Our responsibility as public employees is to make certain that people who are eligible get the benefits they’re entitled to.”
With decades of experience and seniority, Gresham managed to hold on to her state job when the automation rolled out to Allen County. But under the new system, she no longer carried a caseload. Rather, she responded to tasks that were assigned by the new Workflow Management System (WFMS). Tasks bounced between 1,500 new ACS employees and 682 remaining state employees, now known as “state eligibility consultants.”
The governor promised that no state workers would lose their jobs due to the automation and that salaries would stay the same or rise. But the reality of the new ACS positions created a wave of retirements and resignations. After reapplying for jobs they already held, sometimes for decades, and submitting to criminal background checks and drug tests, workers found their positions moved from their home county office to a regional call center. They were offered moving bonuses if their new job was more than 50 miles from their current work site, but many declined to uproot their lives for the insecure new positions.
Under the eligibility automation, no single employee “owned” or oversaw a case; staff were responsible for responding to tasks that dropped into their queue in the WFMS. Cases were not handled in the county where applicants lived. Now, any employee could take any call from any county using the new system, even if they knew nothing about the caller’s local context. “We got calls from all over the state,” says Gresham. “I had never heard of Floyds Knobs [in southeastern Indiana] until we started that process! I had no idea of services that were available in that area.”
Reducing casework to a task-based system is dehumanizing, she suggests, for both worker and client. “If I wanted to work in a factory, I would have worked in a factory.… You were expected to produce, and you couldn’t do that if you listened to the client’s story.” The majority of clients Gresham saw during her long career were traumatized—by flood or fire, illness or accident, domestic violence or extended unemployment. “People who have gone through a trauma want some hope that it’s going to get better. That somebody’s paying attention, that they’re not in this alone,” she says. “That’s what I think we did [before the automation]. We listened to what they had to say and acted on it so that things could get better.”
“We became slaves to the task system,” said Fred Gilbert, a 30-year FSSA employee specializing in refugee assistance. “Like any other private call center, it’s ‘just the facts.’ But the welfare system is very complicated. That’s the job of caseworkers, to help people wade through the mess.”
The governor and the IBM/ACS coalition promised more timely decisions, more efficient use of resources, and better customer service. But caseworkers experienced cascading technical failures, an explosion of errors that slowed or terminated applications, and poorly trained private workers who passed the problems they created on to the remaining public employees. Mistakes made by ACS workers were referred to state workers for correction, piling an outsized workload on the handful of long-term employees that remained.
By summer 2009, there was a backlog of nearly 32,000 cases and 6,500 people were waiting for appeal hearings. According to their monthly management reports, the FSSA was reporting incredibly high food stamp eligibility error rates to the USDA. Between 2006 and 2008, the combined error rate more than tripled, from 5.9 percent to 19.4 percent. Most of that growth was in the negative error rate: 12.2 percent of those applying for food stamps were being incorrectly denied. The state’s long wait times for food stamps decisions attracted notice and threats of financial penalties from the USDA.
The pressure to keep timeliness numbers high to fulfill the basic requirements of the contract, combined with an ever-growing backlog of cases, led to mass application denials and the now-habitual advice from call center workers to “just reapply.” Fred Gilbert reflected, “The rules became brittle. If [applicants] didn’t send something in, one of thirty documents, you simply closed the case for failure to comply.… You couldn’t go out of your way to help somebody.”
Back in her living room, Jane Porter Gresham turns reflective. “It didn’t take long for word to get out on the street: If you want your benefits on time, go to the office [in person] because they have to give you a face-to-face appointment,” she says. “We were inundated with people who knew that. It was bogging everybody down.… We didn’t save space and rent. We didn’t save workers.… We were inundated at the end.”
Gresham saw great workers burn out, and her own health began to deteriorate. “Morale was at an all-time low. There couldn’t be reassurance, there couldn’t be any camaraderie. It was just you out there,” she says wistfully. “Towards the end, I realized this was affecting my health, my relationships. I was one of the last holdouts.”
* * *
When failed by FSSA, Indiana’s poor and working-class families relied on local governments, volunteers, and each other. Faced with lines of desperate people waiting for help, recalcitrant state agencies, and dismissive private call center workers, Hoosiers fought back. One of the centers of their resistance was Muncie, Indiana, the largest city in the automation experiment’s first pilot area.
Following State Route 32 through “Middletown, USA” provides a drive-by tour of the city’s recent industrial past. The abandoned million-square-foot BorgWarner plant haunts the town as you arrive from the west. In the 1950s, it employed 5,000 people assembling transmissions for Ford trucks, but it closed in 2009. Two miles later on your right, you roll by an enormous asphalt field, site of the old General Motors plant. Workers made the famous Muncie M-22 “Rock Crusher” four-speed transmission for the muscle cars of the 1960s there, but the plant closed in 2006. When I visited Muncie in 2015, the job board in the Center Township of Delaware County Trustee’s office offered only a handful of employment opportunities: gardener, custodian, food service, Pepsi delivery.
The state of Indiana is broken up into 1,008 six-square-mile townships, each with a local government office funded by property taxes and run by a township board and an elected trustee. Though each township office works a little differently, one of their primary responsibilities is to manage local poverty relief. Almost immediately after its rollout in October 2007, the failures of the automated system overwhelmed the Delaware County Trustee’s office. “People were devastated,” Lead Case Coordinator Kim Murphy said. “I mean they were just lost. Lost, lost, lost.” Already suffering through the rash of plant closures, Muncie families were now getting kicked off food stamps, cash assistance, and Medicaid. “They were confused, and they didn’t know where to turn,” said Marilyn “Kay” Walker, Center Township trustee. “There was no case management, no personal connection, no communication among agencies. It was just the biggest mess.”
According to the Muncie Star Press, by February 2008, the number of households receiving food stamps in Delaware County dropped 7.47 percent, though the number of households receiving food assistance had climbed 4 percent in Indiana overall. Calls to the LifeStream 211 telephone hotline requesting information about food pantries doubled. The Second Harvest Food Bank of East Central Indiana faced severe shortages. The municipal graveyard complained it had not been paid for thousands of dollars worth of funerals for poor and indigent people.
The public was encouraged to apply for services through the new online system; but low-income families in Muncie, as elsewhere, did not have regular access to the internet. The majority of applicants had to rely on a community partner such as a local library, food pantry, or health clinic to access the online application. The FSSA aggressively recruited community organizations to support the new system by becoming part of a Voluntary Community Assistance Network (V-CAN).
Asked to use her office’s existing computers and staff to help Muncie citizens submit applications for public assistance, Walker resisted. “When it came out that this is what they were going to do, I was like, ‘Excuse me, but, hell! You are not!’ They were trying to get all these other organizations involved to do their work,” she remembered. “We’re already overloaded.” Walker made her office available to people who needed to fax documents and participate in phone appointments, and her staff went out of their way to help applicants, but she drew the line at becoming a V-CAN partner. “I didn’t think it was our responsibility to start doing FSSA’s work.”
Public libraries were particularly hard-hit by the automation project. “We had lines of desperate people waiting for help,” said Muncie Public Library director Ginny Nilles, now retired. V-CAN partners received little to no compensation, training, or oversight to do what amounted to volunteer casework. Librarians trained community volunteers to help patrons submit welfare applications, but the library was quickly overwhelmed. The situation worsened when budget cuts required reducing hours and laying off staff.
Library staff and volunteers did a great job, said Nilles, but there were serious issues. “Confidentiality is very important to librarians. The forms ask very personal questions. If they couldn’t use the computer, it was incumbent on us to read the questions out loud and get the answers: social security numbers, mental and physical health. Volunteers are great, but if you pay someone to do a job, it’s their responsibility. It’s about accountability.”
“Local agencies were victimized,” said John Cardwell from the Generations Project, who worked closely with local nonprofits throughout the automation. “They were being dumped on, serving thousands of people they shouldn’t have been serving, scrambling to help people get their benefits restored. They knew these people. They weren’t going to leave them without medical care or food.”
Faced with system failures, increasing need, and little help from the state, public assistance recipients, community organizations, and trustee’s offices began to organize. A group called Concerned Hoosiers set up a website where FSSA and ACS workers could share their experiences with the modernized system. The Indiana Home Care Task Force held press conferences on the automation experiment’s impacts and drafted model legislation to reverse damage. A subcommittee of service providers, advocates, and welfare recipients calling themselves the Committee on Welfare Privatization Issues provided emergency interventions for recipients facing benefits termination, organized press tours highlighting impacts on Hoosier families, and launched campaigns to increase pressure on policy-makers to stop the automation rollout and terminate the IBM/ACS contract. With typical Hoosier humor, their acronym, COWPI, made it clear what they thought about the new system.
Town Hall meetings on the welfare modernization spread across the state. Anderson was first in April 2008, then Muncie, Bloomington, Terre Haute, Kokomo. One of the most successful was the Muncie People’s Town Hall meeting, held on May 13, 2008. Walker and Murphy proved to be shrewd organizers. They printed flyers for the meeting and delivered them to social service agencies, convenience stores, and libraries. They convinced the Dollar Tree to put a flyer in every customer’s bag. They scheduled the meeting to coincide with a free food distribution by the Second Harvest Food Bank. They invited local lawmakers, including State Senator Sue Errington, State Senator Tim Lanane, and State Representative Dennis Tyler, who listened to hours of testimony from impacted constituents. They invited Mitch Roob, who at first demurred. As the town hall date approached, he changed his mind and asked Walker to make space for a small army of caseworkers, eight computers, and a photocopier, to help attendees solve their eligibility problems on-site.
More than 500 people attended. A room-spanning line of public assistance recipients testified about unanswered phones, lost documents, and benefits denied capriciously. Melinda Jones of Muncie, the mother of a ten-month-old with cancer, was fighting to keep her Medicaid and food stamps. “I have to beg and borrow from my family to give my daughter her food,” she said, “and I think it’s utterly ridiculous that we do our children like this.”
Christina King, a diabetic and working mother of three, lost her Medicaid during the modernization. She was unable to afford insulin for seven months and her blood sugar was out of control, putting her at risk of stroke or coma. “What good does it do when my seven-year-old walks in and I physically cannot get out of bed?” she asked. “I spent two days in the ICU because I have no medicine. My kidneys are now at risk. My eyes are at risk. But I get up every day and I go to work, because I think it’s important for me to show my kids, ‘Don’t be dependent on the system.’ I need a hand up, not a handout. I’m raising three kids by myself. I am trying to show my kids, ‘Don’t be like me—do better.’”
Deaf, blind, disabled, and mentally ill clients were particularly hard-hit. “I’m deaf. How can I do a telephone interview?” asked Dionna McGairk through a sign-language interpreter. “I tell [call-center operators] to use my relay service. They don’t understand what relay service is.” When operators told her she needed to get help to apply for public services, she responded: “No—I can answer my questions myself. You are discriminating against the deaf.”
The day after the Muncie Town Hall meeting, State Representative Dennis Tyler sent a letter to his colleagues in the Indiana House of Representatives requesting a summer General Assembly meeting to address ongoing problems with the automated system. “The state of Indiana isn’t doing its job,” he said to Joe Cermak of NewsLink Indiana. “You don’t want to think this system is put in place to fail these people, but what can you think when it’s failing this bad?” A few days later, on May 19, the IBM/ACS coalition, receiving a “go ahead” order from the FSSA, rolled out the automated system to 20 more counties in northeastern and southwestern Indiana.
The modernized system had now reached 59 of 92 Indiana counties, and was serving 430,000 social services clients, a bit less than half of the state’s caseload. On May 30, a severe weather system—including tornadoes, torrential rain, and high winds—battered the state, causing widespread flooding. The IBM/ACS coalition pulled employees away from regular operations to pitch in for the flood effort, easing the way to emergency benefits for thousands but worsening the already significant backlog for regular public assistance applicants.
At a Bloomington Town Hall meeting a few weeks later, State Senator Vi Simpson and State Representatives Peggy Welch and Matt Pierce listened to client testimony and grilled Zach Main, director of the Division of Family Resources at FSSA and Mitch Roob’s right-hand man. Participants in the forum raised similar concerns to those in Muncie: telephone lines were always busy, Help Center offices had multi-day waits, failure to cooperate notices were arbitrary and unclear, V-CAN partners were not trained or supported. Main, visibly frustrated, responded to criticism of the new system. “I’m not here today to argue, to defend,” he said. “I’m certainly not here to tell you that everything is perfect with the system. What I will tell you is that we’re working very hard.… When Governor Daniels came into office, Indiana was first in the nation in child deaths and last in the nation in welfare-to-work. We had a system that was undeniably broken, and the results speak for themselves on that.”
He faced a skeptical, even incredulous, room. If the results spoke for themselves, what were they saying, exactly? Simpson and Welch, who had been responding to constituent complaints for three months, weren’t buying it. They pressed him with questions about the ambiguity of failure to cooperate notices, inadequate caseworker support, lack of FSSA accountability to its own processes, and failure to levy penalties against IBM and ACS for poor performance.
Peggy Welch shot back, “I’m sorry Zach, but what we’ve heard over and over again is about this telephone interview time, that they tell you, ‘We’re going to call between 2 and 4 and you better be there,’ and the call doesn’t come through. They call at 8 o’clock the next morning and then say ‘failure to cooperate.’ That’s a real problem.” Simpson added, “People don’t know what it means when they get ‘failure to cooperate’ on a denial notice. In the old days, they used to be able to call their caseworker and find out what piece of paper they were missing, or what signature line they forgot to sign, or whatever the problem was. Now they don’t have anyone to call.”
The press was printing poignant human interest stories emerging from the modernization: a nun denied Medicaid, desperately ill patients spending their final months fighting to get their health care back, food banks picked clean. Ollice Holden, regional administrator of the Food and Nutrition Service, which administers food stamps for the USDA, wrote a letter to Secretary Roob requesting that the FSSA delay further implementation. The federal government was concerned over long determination wait times.
The governor faced increasingly vocal challenges from state legislators. “I asked for a point of personal privilege on the House floor,” said Matt Pierce, a Democrat. “I said, ‘This is a train wreck and everybody ought to know. This thing is hurting people. We’ve really got to fix it.’” The governor attacked complaints as partisan sniping. “Let me tell you what,” Daniels fired back in an interview with the Evansville Courier & Press, “[Legislators] are hearing complaints from people who made money off the past system. That’s where the complaints are principally coming from.”5
* * *
But Daniels’ contention that the only people harmed by the automation experiment were welfare chiselers proved unsustainable when members of his own party began to attack the project. In October 2008, State Representative Suzanne Crouch and State Senator Vaneta Becker, both Republicans, drafted legislation that would halt the expansion of the new eligibility system until the Select Joint Commission on Medicaid Oversight could perform a thorough review. At the close of the year, Daniels announced that he was moving his friend and colleague, Mitch Roob, out of the FSSA and making him the state’s secretary of commerce and CEO of the Indiana Economic Development Corporation. He appointed Anne Waltermann Murphy, Roob’s chief of staff, to lead the troubled agency.
Within three months of taking control, Murphy demanded that IBM submit a corrective action plan to improve 36 different service deficiencies, including excessive wait times, lost documents, inaccurate data, interview scheduling problems, slow application processing, and incorrect instructions to clients.
IBM argued that nothing in their contract required that they respond to a corrective action plan, but agreed to evaluate existing operations and suggest areas for system improvement. According to Ken Kusmer of the News and Tribune, IBM released a 362-page plan to fix problems, including “inaccurate and incomplete data gathering” and “incorrect communications to clients” in late July.6 Secretary Murphy encouraged two longtime welfare officials, Richard Adams and Roger Zimmerman, to come up with a “Plan B” in case IBM was unable or unwilling to make these changes. According to Adams’ testimony in Perdue v. Murphy, the two sketched out a “hybrid system” that would bring back some aspects of the pre-automated FSSA process on a napkin over lunch.
Daniels continued to defend the automation experiment, insisting that Indiana would not back down from high-tech welfare reform and that “over time this issue will resolve itself.” But the political winds had changed. Daniels was now the subject of speculation about a presidential run, and the failed automation was embarrassing to the state and to his administration. In October 2009, with his eye on a national audience, the governor did something unexpected. He admitted that the experiment had failed and canceled the contract with IBM, calling the project a “flawed concept that simply did not work out in practice.”
* * *
In May 2010, Indiana sued IBM for $437 million, claiming breach of contract. The state claimed that the automation experiment led to faulty benefit denials that harmed needy Hoosiers, and demanded that the company pay back the nearly half-billion dollars they had received for running the modernization plus damages for lawsuits, federal penalties, and state employee overtime. IBM countersued for about $100 million for the server, hardware, automated processes, and software that the state was still using to determine benefit eligibility. IBM won the suit, and was awarded more than $52 million.
“Neither party deserves to win this case,” wrote Marion Superior Court Judge David Dreyer in his judgment in favor of IBM. “This story represents a ‘perfect storm’ of misguided government policy and overzealous corporate ambition. Overall, both parties are to blame and Indiana’s taxpayers are left as apparent losers.… There is nothing in this case, or the Court’s power,… [to] remedy the lost taxpayer money or personal suffering of needy Hoosiers.”
In its suit against IBM, the state charged that the company had misrepresented its ability to modernize complicated social service programs and failed to meet the performance standards contained in the contract. Automated counties lagged behind “as-is” counties in almost every area of performance: timeliness, backlogs, data integrity, determination errors, and number of appeals requested.
The state even accused IBM of jury-rigging its processes to make its performance look better. “A major cause of the dramatic rise in appeals in the Modernized counties,” the private attorneys hired to represent the state argued, “was that the IBM Coalition workers were so far behind in processing applications that they would often recommend denial of an application to make their timeliness numbers look better, but then would tell the applicant to appeal the decision. While the appeal was pending, the Coalition workers would actually process the application and benefits would be granted before the hearing date.” According to the suit, “for the three-year period, IBM was achieving higher-than-projected profit margins at the same time that its modernized system was floundering.”
IBM argued on the contrary: the state had consistently praised their efforts. In May 2008, Secretary Roob reported to the General Assembly that, “We are serving more people statewide and in a timelier manner than we ever have before.”7 In December 2008 Governor Daniels stated that the new system “was far better than what preceded it.” IBM admitted that there were problems with managing overload in the new system. But the company claimed the problems that arose were due to factors beyond its control. The Great Recession, the new Healthy Indiana Program, and the 2008 floods had pushed application levels beyond what either party had imagined.
Judge Dreyer saw incompetence and negligence on both sides. He noted that the state invited IBM to keep working on the project even as they rolled out the hybrid system, which was based on IBM’s tools, software, and skills. But since the Senate had stripped the FSSA budget “bare” in early 2009, there was no money to pay for change orders or modifications to the contract. Secretary Murphy wrote in an email to her colleagues that IBM would “not commit to moving forward at no cost.… [T]hey want more money! We don’t have money now and we won’t have money for the remainder of [State Fiscal Year] ’10. What a mess.”8 When IBM refused to do more work without more pay, the state simply cut out the middle man, terminating their contract while keeping their equipment, processes, and subcontractors in place.
The state and IBM both blamed forces out of their control for the plan’s collapse. But in reality the coalition delivered exactly what Indiana officials had asked for: smaller welfare rolls, whatever the cost.
* * *
In the lawsuit, both the state and IBM avoided talking much about the impact of the failed automation experiment on the people of Indiana. The state knew from the beginning that what it was doing posed enormous risks for public assistance recipients and their families. The state identified “several areas of potentially significant risk” with the automated system, but “concluded that ‘the status quo is not acceptable’” and moved forward with the plan anyway.9
The goals of the project were consistent throughout the automation experiment: maximize efficiency and eliminate fraud by shifting to a task-based system and severing caseworker-to-client bonds. They were clearly reflected in contract metrics: response time in the call centers was a key performance indicator; determination accuracy was not. Efficiency and savings were built into the contract; transparency and due process were not.
Judge Dreyer found that the problem with the automation experiment was not contractor negligence. There was no material breach of the Indiana/IBM contract. “The heart of the contract remained intact throughout the project,” he concluded in his findings, “although sometimes beating irregularly.” The state achieved its goal of containing the cost of social service programs. The contractor, accountable only to its employer and its shareholders, had no obligation to measure the automation experiment’s impact on poor and working-class Hoosiers. The problem with the automation experiment was not that the IBM/ACS coalition failed to deliver, it was that the state and its private partners refused to anticipate or address the system’s human costs.
After an expensive series of appeals of Judge Dreyer’s decision, in March 2016 the Indiana Supreme Court ruled that IBM did in fact materially breach its contract with the state. But the legal case only seeks to apportion blame and levy penalties. Indiana v. IBM, as Judge Dreyer pointed out, was about material breach of contract, not the public trust or public injury. The real cost of the privatization experiment—the loss of life-saving benefits for struggling families, the cost of the contract and legal disputes to taxpayers, and the weakening of the public service system and democratic process—has yet to be calculated. It is perhaps incalculable.
“There’s a cost to people,” said Jamie Andree of Indiana Legal Services. “The cost of just waiting around without Medicaid benefits is enormous; it’s really hard to make somebody whole. Most people will stop getting medical care while eligibility is being determined. There’s no way to compensate them for that.”
* * *
The state now uses the hybrid eligibility system, which combines face-to-face interactions with public employees with the electronic data processing and privatized administration of the automated system. Its design allows applicants to contact a team of regional caseworkers assigned to their case by phone, by internet, by mail, or in person, providing increased contact with state workers. But the hybrid system still relies on privatized, automated processes for many core functions and retains the task-based case management that caused so many problems during the modernization. In the hybrid system, re-staffed local offices function as problem resolution centers, while regional and statewide “change centers”—run by Xerox, which bought ACS in 2009 for $6.4 billion—review applications, collect and digitize documents, schedule appointments, screen applications for fraud, process fair hearing requests, provide a first point of contact for clients, and perform most updates to cases.
The move to the hybrid system in 2009 certainly quieted the automated system’s most vocal detractors. But it is unclear if it works better to secure benefits for those who deserve them. “They got marginally better when they ditched IBM and did the hybrid thing,” said Chris Holly in December 2014. “They got better for people like me. People who help poor people have access to the local office directly to solve problems. So they took care of us. I don’t think they took care of the normal person. I won’t say they bought us off, but they responded to us. We were the ones that were complaining the loudest.”
Representative Gail Riecken of Evansville agreed with Holly in an op-ed she wrote in the Fort Wayne Journal Gazette in May 2010. “[FSSA Secretary Anne] Murphy reported that fewer people are filing appeals for mistakes and wrong decisions [under the hybrid system]. But it is not clear why the appeals have decreased. Is it because the system is better, or have people simply given up fighting the system?”10
For some caseworkers, the hybrid system is just the automated system with a different name. “I don’t see any change,” said Jane Porter Gresham. “We’re still working mandatory overtime. We still have the same number of people clamoring to be heard in face-to-face interviews. The workload has not diminished.… The people that were the most vocal had their needs met.” When I asked her why we weren’t hearing more about the problems of the hybrid system, she replied, “Experienced workers who knew how it was supposed to be aren’t there any more.” Glenn Cardwell, retired FSSA worker and advocate, agreed. “Yeah,” he said, “We’re not satisfied [with the hybrid system], but that’s partly a matter of energy. We won a big battle, but we weren’t ever sure we won the war.”
“They set that system up to just slide stuff under the rug and hide it,” argued Kevin Stipes, Sophie’s dad. “People [on public assistance] don’t have a voice. That’s one of the reasons we went down [to the state house].” Kim chimed in, “To put a face on it!” Kevin nodded at his wife. “We didn’t mind standing up,” he said. But there were a lot of people who didn’t know what to do, or felt too vulnerable to rally to their own defense. “My wife is persistent, intelligent—I mean, it should have been a breeze for her to get the paperwork turned in correctly. I just can’t imagine people with lesser skills … I know they couldn’t, they didn’t do it.”
“The system doesn’t seem to be set up to help people. It seems to be set up to play gotcha,” said Chris Holly. “In our legal system it is better that ten guilty men go free than one innocent man go to jail. The modernization flipped that on its head.” Automated eligibility was based on the assumption that it is better for ten eligible applicants to be denied public benefits than for one ineligible person to receive them. “They had an opportunity to make a system that was responsive and effective, and ensure people who qualified for benefits received those benefits,” Holly said. “My gut feeling is that they did not respect the people who needed their help.”
* * *
In the fall of 2008, Omega Young of Evansville missed an appointment to recertify for Medicaid because she was in the hospital suffering from terminal cancer. The cancer that began in her ovaries had spread to her kidneys, breast, and liver. Her chemotherapy left her weak and emaciated. Young, a round-faced, umber-skinned mother of two grown sons, struggled to meet the new system’s requirements. She called the Vanderburgh County Help Center to let them know that she was hospitalized. Her medical benefits and food stamps were still cut off for failure to cooperate.
“The 50-year-old Young, who lived alone in a tiny apartment, was frantic,” reported Will Higgins in the Indianapolis Star.11 She called Cecilia Brennan, a staffer with Evansville-based Southwestern Indiana Regional Council on Aging who had been helping with her case, crying, asking, “‘What am I going to do?’” Her sister, Christal Bell, refrained from telling the press that the Medicaid denial hastened Young’s death, but she did blame the automated system for making her last days full of extra worry and trouble. Her brother-in-law, Tom Willis, told Higgins that he routinely hid Young’s medical bills from her so she would not obsess about the $10,000 she owed.
Because she lost her benefits, Young was unable to afford her medications. She lost her food stamps. She struggled to pay her rent. She lost access to free transportation to medical appointments. Omega Young died March 1, 2009. The next day, on March 2, she won her FSSA appeal for wrongful termination and her benefits were restored.
The public welfare system has never been simple, particularly for Black women. The most restrictive eligibility rules were historically aimed at them. “Suitable home” and “employable mother” rules were selectively interpreted to block African American women from claiming their benefits until the rise of the welfare rights movement in the 1970s. “Man in house” and “substitute father” rules legitimized intrusion into their privacy, judgment of their sexuality, and invasions of their homes. Ronald Reagan’s 1976 stump speech about the lavish lifestyle of “welfare queen” Linda Taylor was intended to make the face of welfare both Black and female. “There’s a woman in Chicago,” he said during the New Hampshire Republican presidential primary contest. “She has 80 names, 30 addresses, 12 Social Security cards and is collecting veterans’ benefits on four non-existing deceased husbands. She’s got Medicaid, getting food stamps and she is collecting welfare under each of her names. Her tax-free cash income alone is over $150,000.”12 Ms. Taylor was eventually charged with using 4 aliases, not 80, and collecting $8,000, not $150,000, but Reagan’s overblown claims found fertile ground, and the image of the welfare queen has remained central to our country’s understanding of public assistance.
Even today, audit studies find that nonwhite applicants in welfare offices face more unprofessional behavior from caseworkers than whites: withholding crucial information, refusing to provide applications, and other forms of outright rudeness.13 States with higher African American populations have tougher rules, more stringent work requirements, and higher sanction rates.14 Casework is a complex, human endeavor that relies on relationships, requires a difficult mix of canniness and compassion, and is vulnerable to all the biases about race, class, and gender that are woven through our society. Concerns about discretionary excesses are valid. Caseworkers do turn down individuals based on bigotry or unconscious bias.
The majority of public assistance recipients in Indiana are white, but race still played a major role in the automation experiment. Governor Mitch Daniels played on rural-urban tensions and white racial anxiety when he persistently framed problems in terms of dependency, cheating, criminality, and collusion despite evidence that only a small proportion of those eligible for public assistance benefits actually claimed them and that fraud was not a particularly severe problem at FSSA. The fraud case he held up as indicative of the worst problems in the system—the Greater Faith Missionary Baptist scam—involved Black defendants. It’s hard not to suspect that Daniels, like his anti-AFDC mentor Ronald Reagan, cagily stoked Hoosiers’ stereotypes about race, class, and public assistance to drum up support for the move to an automated, privatized welfare system.
The Indiana counties with the smallest African American populations were transitioned to the automated system first, and the experiment was halted before it reached Indianapolis and Gary, the two cities a large share of Black Hoosiers call home. But despite being tested primarily on poor whites, the automation experiment had profound impacts on African Americans. According to census data, in 2000, African Americans made up 46.5 percent of the state’s TANF rolls, and whites held a very slim majority in the program, at 47.2 percent. At the end of the automation experiment in 2010, the gap between white and African American TANF and food stamp/SNAP recipients had widened precipitously. Despite the fact that the African American population of Indiana had grown over the decade, the TANF rolls were now 54.2 percent white and only 32.1 percent African American. Though eligibility modernization was tested on primarily white communities, Black families still felt its worst effects.
Removing human discretion from public assistance eligibility may seem like a compelling solution to the continuing discrimination African Americans face in the welfare system. After all, a computer applies the rules to each case consistently and without prejudice. But historically, the removal of human discretion and the creation of inflexible rules in public services only compound racially disparate harms.
For example, in the 1980s and 1990s Congress and many state legislatures enacted a series of “Tough on Crime” laws that established mandatory minimum sentences for many categories of crime and removed a great deal of discretion from judges. Ironically, the changes were a result of organizing both by conservative law-and-order types and by some progressive civil rights activists who saw the bias in judicial discretion as creating racially disparate outcomes in sentencing.
The evidence of the past 30 years is clear: racial disparity in the criminal justice system is a great deal worse. As the Leadership Conference on Civil and Human Rights wrote in a 2000 report called “Justice on Trial,” “Minorities fare much worse under mandatory sentencing laws and guidelines than they did under a system favoring judicial discretion. By depriving judges of the ultimate authority to impose just sentences, mandatory sentencing laws and guidelines put sentencing on auto-pilot.”15
Automated decision-making can change government for the better, and tracking program data may, in fact, help identify patterns of biased decision-making. But justice sometimes requires an ability to bend the rules. By removing human discretion from frontline social servants and moving it instead to engineers and private contractors, the Indiana experiment supercharged discrimination.
The “social specs” for the automation were based on time-worn, race- and class-motivated assumptions about welfare recipients that were encoded into performance metrics and programmed into business processes: they are lazy and must be “prodded” into contributing to their own support, they are sneaky and prone to fraudulent claims, and their burdensome use of public resources must be repeatedly discouraged. Each of these assumptions relies on, and is bolstered by, race- and class-based stereotypes. Poor Black women like Omega Young paid the price.
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New high-tech tools allow for more precise measuring and tracking, better sharing of information, and increased visibility of targeted populations. In a system dedicated to supporting poor and working-class people’s self-determination, such diligence would guarantee that they attain all the benefits they are entitled to by law. In that context, integrated data and modernized administration would not necessarily result in bad outcomes for poor communities. But automated decision-making in our current welfare system acts a lot like older, atavistic forms of punishment and containment. It filters and diverts. It is a gatekeeper, not a facilitator.
The Indiana automated eligibility system enhanced the state’s already well-developed diversion apparatus, turbo-charging what must be seen as a remarkably efficient machine for denying applications. By narrowing the gate for public benefits and raising the penalties for noncompliance, it achieved stunning welfare roll reductions. Even under the hybrid system and during the greatest economic downturn since the Great Depression, drops in the state’s TANF caseload continued to outpace national averages. As poverty in Indiana increased, caseloads dropped. When the governor signed the contract with IBM in 2006, 38 percent of poor families with children were receiving cash benefits from TANF. By 2014, the number had dropped to 8 percent.
Struggling people like Omega Young, Lindsay Kidwell, and Shelli Birden were the first victims of the automation, and they bore the system’s most terrifying impacts. Though the Stipes family managed against incredible odds to reestablish their daughter’s Medicaid, the experience took a dreadful toll. “During that time, my mind was muddled because it was so stressful,” said Kim Stipes. “All my focus was getting Sophie back on that Medicaid. Then crying afterwards because everybody was calling us white trash, moochers. It was like being sucked into this vacuum of nothingness.”
In the seven years between the Stipes’ battle with the automation experiment and my visit, Sophie’s life improved: She gained weight, learned sign language, went to school and made friends. But eight days after I interviewed the family in their Tipton home, Dan Skinner sent me an email. “Sad news,” it read. “Kim Stipes called and told me that little Sophie died. She had been sick and throwing up on Friday and when they found her dead on Saturday she was curled up in a fetal position looking peaceful. The doctor said her heart simply stopped.”
In the end, the Indiana automation experiment was a form of digital diversion for poor and working Americans. It denied them benefits, due process, dignity, and life itself. “We were not investing in our fellow human beings the way we should be,” said John Cardwell of The Generations Project. “We were basically saying to a large percentage of people in Indiana, ‘You’re not worth a shit.’ What a horrible waste of humanity.”