Who gets welfare?
Firms eye potential $3 billion market processing applications for public assistance programs
- By William Welsh
- May 08, 2003
A major new business opportunity will open up for systems integrators this year if federal officials and state lawmakers decide to let private companies process applications for welfare eligibility.
Integrators are optimistic that this lucrative opportunity will unfold this year because the Bush administration and Florida and Texas are taking a second look at long-standing government policies prohibiting private companies from determining eligibility for public assistance programs such as food stamps and Medicaid.
The size of the market opportunity from outsourcing of eligibility determinations could range from $1 billion to $3 billion, according to industry officials.
"This is an emerging market that could be worth several billion dollars once legislation is enacted and states decide to outsource welfare eligibility," said Jeffrey Rich, chief executive officer of Affiliated Computer Services Inc., Dallas.
ACS is currently conducting eligibility determinations for several assistance programs as part of a pilot project in Florida.
Outsourcing of eligibility determinations "is one of the areas that a lot of states are looking at right now," said Claudia Langguth, managing director of global public sector health and human services programs at Unisys Corp., Blue Bell, Pa.
Systems integrators currently provide states with various services and solutions related to eligibility determinations, including business analysis, performance management, systems design and development and business process outsourcing, where allowed by law.
These systems and solutions support public assistance programs that typically are handled by local work force boards or county governments. They are often designed to help government break down stovepipes and allow different human services functions to work in tandem rather than isolation.
Except for Temporary Assistance for Needy Families programs, however, state laws currently prohibit private companies from making eligibility determinations on public assistance programs, said Rick Wheeler, global managing partner for the human services industry, Government Operating Group, Accenture Ltd., Hamilton, Bermuda.
Government has been reluctant to outsource eligibility determinations in the past, partly because of sensitive legal issues related to deciding who is eligible for aid.
Because private organizations cannot currently provide eligibility determinations for food stamps, Medicaid and other programs, states aren't able to gain certain efficiencies from integrating the services, and recipients often have to visit several offices to obtain different services.
A number of changes must occur for states to outsource eligibility determinations. States must pass laws making outsourcing of this service possible, industry officials said. The U.S. departments of Agriculture and Health and Human Services also must issue a waiver, they said.
Both Florida and Texas are leaning toward allowing private companies to process welfare eligibility, said Jerry Miller, managing director of ACS' welfare and work force services. If these two states move to allow it on a statewide basis, "you will start to see many other states follow the leaders," Wheeler said.
A string of technological advances in eligibility determination, such as business modeling, enterprise architecture, object-oriented development, customer relationship management and commercial software, have made outsourcing a more realistic endeavor, said Holli Ploog, vice president and general manager of Unisys' Global Public Sector programs.
But Tom Davies, senior vice president with the market research firm Current Analysis Inc., Sterling, Va., said he expects only a few states to move forward in the beginning to outsource eligibility determinations, while the majority will wait until it is proven and risk free.
Rich said during a third quarter earnings call in April that outsourcing of eligibility determinations was one of four key growth opportunities for ACS in 2003. The company derives more than two-thirds of its $3.2 billion annual revenue from business process outsourcing. ACS currently provides work force services, which are closely tied to eligibility determinations, in 19 states.
A pilot project in which ACS is conducting eligibility determinations could pave the way for more work -- both for ACS and other companies.
Under the pilot, which is part of a three-year contract with the work-force development board in Palm Beach County, Fla., ACS determines eligibility for food stamps, Medicaid and TANF. The work was added to a larger work force contract with the board that provides case management, job preparation, job placement and retention services to the unemployed.
Both Accenture and Unisys are looking to grow their human resources business through processing of eligibility determinations if state lawmakers and federal oversight agencies should approve full-scale outsourcing.
Accenture is prime contractor on a 13-year, $453 million contract awarded two years ago for an integrated human services system that supports one of four consortiums in California that provide public assistance under federal welfare reform mandates.
The system, known as C-4, supports eligibility determinations for assistance programs in San Bernadino, Riverside, Stanislaus and Merced counties.
Unisys currently has contracts in California and New York for welfare eligibility systems development and support. The company has a 10-year contract with Los Angeles County for a project known as LA Leader, to operate a system the company built, which supports federally mandated public assistance programs. In the course of project implementation, the company consolidated five county legacy welfare systems into one uniform system.
To date, governments have been generally reluctant to outsource eligibility determinations for public assistance programs, Wheeler said. Turning eligibility determinations into a private sector function is not something that government officials have been enthusiastic about, he said.
"But with the right structure and right oversight in place [government] can manage private companies to be better than the group of state employees that have been delivering this in the traditional fashion," he said. *
Staff writer William Welsh can be contacted at email@example.com.
William Welsh is a freelance writer covering IT and defense technology.