To help the reader navigate this report, a chart of acronyms is provided below in Exhibit 1.
Acronym Name ADA Americans with Disabilities Act APD Advance Planning Document ATM
Automated Teller Machine
AVR Automated Voice Response BHO Behavioral Health Organization CAPS Child and Adult Protective System CARE Centralized and Automated Review System CBT Computer Based Training CCC Childcare Contractor (w/ local Workforce Development Boards) CHIP Children Health Insurance Program CMHMRC Community Mental Health and Mental Retardation Centers CMS LTC Claims Management System CPA Texas Comptroller of Public Accounts DD Disability Determinations DDS Disability Determination Services DIR Texas Department of Information Resources DoD U.S. Department of Defense DOL U.S. Department of Labor EBT Electronic Benefits Transfer EFT Electronic Funds Transfer EPS Electronic Payment System EPSDT Early and Periodic Screening, Diagnosis, and Treatment Program ESD Electronic Services Delivery Flexcard Tex Flex Convenience Card FMNP WIC Farmer's Market Nutrition Program FY Fiscal Year GSA U.S. General Services Administration GSC Texas General Services Commission GWS Generic Work Sheet HCFA Health Care Financing Administration HHSC Health and Human Services Commission HHSCN Health and Human Services Consolidated Network HIPAA Health Information Portability and Accountability Act HMO Health Maintenance Organization IC Integrated Circuit LSIS Lone Star Image System LTC Long-Term Care MARC Multi-Technology Automated Reader Card MIS Management Information System NACHA National Automated Clearing House Association NAFC National Association of Food Chains NHIC National Heritage Insurance Corporation OAG Texas Office of Attorney General PIN Personal Identification Number POS Point of Sale PRS Texas Department of Protective and Regulatory Services RFO Request for Offers RFP Request for Proposals SAVERR System for Application, Verification, Eligibility, Referral, and Reporting SDX State Data Exchange SDU State Disbursement Unit SPUR Supplemental Payment Under Reform SSA Social Security Administration SSI Supplemental Security Income TANF Temporary Assistance for Needy Families TDH Texas Department of Health TDHS Texas Department of Human Services TESD Texas Electronic Services Delivery TIERS Texas Integrated Eligibility Redesign System TIES Texas Integrated Enrollment and Services TCADA Texas Commission on Alcohol and Drug Abuse TRC Texas Rehabilitation Commission TWC Texas Workforce Commission TXMHMR Texas Department of Mental Health and Mental Retardation UCC Uniform Code Council USDA/FNS United States Department of Agriculture Food and Nutrition Services UI Unemployment Insurance UPC Universal Product Code UT University of Texas UTMB University of Texas Medical Branch VR Vocational Rehabilitation WDB Workforce Development Board WGA HPP Western Governors' Association Health Passport Project WIC Special Supplemental Nutrition Program for Women, Infants, and Children WtW Welfare to Work
ESD is an emerging concept that as yet has no universally-defined meaning. For the purposes of this project, it is viewed primarily as encompassing the use of electronic transaction technology to facilitate access to government services. These services can include payment of financial benefits, prescribed benefits/services, provision of non-financial information, time and attendance tracking, and a myriad of other applications. It is an electronic means of providing access, typically through the use of card technology, to the services and benefits that government agencies provide to citizens, residents, employees, and those entities with which government business is conducted.
The current, most prevalent application of ESD uses card technology for a financial application that is referred to as Electronic Benefits Transfer, or EBT. EBT is a concept that has been promoted by the federal government and implemented primarily by states. In published reports, EBT is generally described as having two tiers. The first tier is exclusively economic and includes those programs that provide cash or cash-like assistance. The Food Stamp and Temporary Assistance for Needy Families (TANF) programs are the most widely implemented examples of Tier I EBT. Tier II EBT includes those programs and services that have a financial value in the products allowed, but which are not expressed in dollars and cents. The Supplemental Nutrition Program for Women, Infants, and Children (WIC) food prescription program is an example of a Tier II application because it delivers benefits through a prescription rather than a monetary amount.
However, the benefits of ESD are not limited to, and in fact do not require, inclusion of any financial benefit or value to the recipient. The electronic exchange of data alone is an important application of the ESD concept. To underscore this point, this project describes information exchange as the third tier of ESD. It is the ability to share data in a variety of forms in an efficient and secure fashion, with easy access to those who need it, and denial of access to those who should not have it. Tier III ESD includes such aspects as authentication of identity, immunization records, and medical data.
The benefits of an ESD approach can accrue to individuals and to organizational entities. Some potential ESD applications for individuals can take a variety of forms, some of which are in use today and include:
- Access to financial benefits, such as TANF and Food Stamp payments on a magnetic stripe card;
- Provision of WIC program food prescriptions;
- Direct deposit of Social Security benefit payments to the elderly and disabled population, salary warrants for state employees, or individual income tax refunds;
- Verification of eligibility for Medicaid through a card-based electronic system;
- Use of a government-issued card by members of a job training program to pay for public transportation to a work site;
- Shared access to and updating of immunizations records and other health referral information stored on a smart card; and
- Maintenance of a variety of professional licenses granted by the state for business or professional purposes that are issued and updated electronically over the Internet.
As the examples above illustrate, ESD applications related to individuals can be seen to fall along a continuum. At one end are those applications that affect narrowly defined, specific populations, such as those for Food Stamps and TANF. These narrowly-defined applications provide an efficient delivery of services and, for the most part, are relatively uncontroversial, yet their narrowness of focus is also an inherent limitation. The sponsor of the application may support the entire cost, and the beneficiaries most likely carry separate cards for each application. As more functions and services are added to the card, the application becomes more versatile and meets a broader array of needs, possibly allowing recipients to have access to many services. There is, however, a point at which the complications of having a large number of applications on a single card can begin to outweigh the advantages.
At the other end of the continuum are universal applications, those designed to support or provide services to virtually an entire adult population. These applications are usually the result of a vision of providing one-stop shopping for virtually all government services. In the world of card-based ESD solutions, these are sometimes referred to as citizen cards. While this concept is frequently discussed and debated, in practice there are currently no true citizen card applications in the United States. When this approach has been considered by states, such as adding multiple ESD applications to a state's drivers licenses, the concept has often met with disinterest, or outright resistance from the public. Both New Jersey and Utah were unsuccessful in their efforts to develop a citizen type card using the driver's license. 1
Organizational entities that have a business relationship with the government, as well as to individuals, could use ESD applications. Texas government buys an incredible array of materials and services and is currently examining ways to turn this existing commerce into e-commerce. Other potential applications of ESD range from issuing electronic permits for projects to collecting sales tax revenues electronically.
In the last five years, there has been a virtual explosion in the use of the Internet for commercial purposes. The Internet is also being used more and more to improve access to government services, and it is part of the delivery system for some of the ESD applications proposed in this report. Some ESD applications require only the Internet and a personal computer; other applications combine card technology with the Internet. The policy implications of these alternatives, relating primarily to card technology, are discussed in a later section of this report.
The principal parties involved in an ESD application are the entity providing the benefit and the individual receiving the benefit. In some situations, a third party becomes involved when a private contractor assists in the delivery of the service. Each of these stakeholders in the application has his or her own needs and interests that may compliment or contradict each other, and must be evaluated. In assessing the feasibility of a potential ESD application, it is necessary to look at the costs and the benefits to all stakeholders.
For each application, it is necessary to start by identifying the specific population receiving a service, how that population is currently getting access to that service, and how the application of ESD would affect their access to that service. Then it is necessary to determine the relative balance of these factors. A number of different scenarios can present themselves, which affect the decision on whether to proceed.
In an ideal world, an ESD application would result in financial savings to the state, with no initial investment cost, and an improvement in access to services for the recipient. In this instance it would make perfect sense to proceed. Unfortunately, applications are rarely that well balanced. One application may require an increase in cost to the state, but result in a significant improvement in access for recipients. In this case, it is probably appropriate to proceed. Another application may prove to be much more expensive and provide relatively little increase in access for the intended recipients. In this case, there is little benefit and proceeding is not a practical choice.
A driving factor in many ESD applications is the need to increase program integrity. There may be measurable financial savings through a reduction in funds lost to fraud or overpayment, which justifies an increased outlay to implement the ESD application. Even if these reductions are not quantifiable, the application may be justified through an increase in public confidence in the integrity of a program.
The more difficult situations are those in which an ESD application presents a large initial investment or some increase in ongoing cost, but a significant improvement in access to services. It then becomes a public policy question as to whether the state wants to make the financial investment to achieve such an increase in services. Likewise, an application may provide a significant cost reduction for the state, but result in decreased access to and utilization of a service. Whether the application is feasible depends in part on whether the government wants to encourage or discourage use of that service.
In assessing the desirability of adopting an ESD approach, it is also necessary to look at non-financial factors such as tangential benefits in some current service delivery system that would be lost through conversion to ESD. An example is the use of monthly mailings of benefits as a vehicle for providing information about other programs and services. For some programs the mailings are a convenient, inexpensive form of outreach and an effective method for information distribution to clients or potential clients. ESD often provides the ability to deliver services more efficiently which may reduce personal contact with the client. Some programs, such as WIC, value seeing clients on a regular basis, so the ability to reduce this contact is not necessarily an advantage.
An ESD approach can also have advantages that are not measured in strictly financial terms. If, for example, a smart card-based system allows a linkage between services provided in a number of different health care settings, there is a significant advantage to clients even though it may or may not result in a cost reduction in services.
Finally, determining the feasibility of ESD requires a program-by-program assessment. Some applications may fit well in the existing Texas EBT Lone Star Card environment, while other applications may require, or function more efficiently in a different environment. Each potential application must be carefully evaluated to ensure enhancement of the value and utility of the card.
Once consideration is given to using a single card or cards to access multiple ESD applications, a number of variables-such as family composition, administration issues, increased complexity of security, privacy concerns, cost allocation, and conflicting statutory authorities-are introduced. A multiple application ESD system is feasible, but each of these issues must be addressed, and a logical approach to combining applications must be followed for the overall system to work effectively.
This 10-year strategic plan focuses on ESD applications for services provided to individuals, rather than to organizations. There are other initiatives underway to look at electronic service delivery directed at business and other entities. Examples of these initiatives are the Department of Information Resources
e-commerce Web portal project and the General Services Commission electronic procurement project. The recommendations in this report are cognizant of, but independent from, these other efforts.
The individuals who would be affected by the ESD applications discussed in this report involve a number of discrete populations, including recipients of financial benefits, prescribed benefits/services, recipients or users of information, and state employees. By the end of the 10-year period, the proposed ESD applications could affect the general population as well.
State employees are identified as a target population for this plan. The applications proposed for this group are not services or benefits provided by state government to an outside group of individuals. ESD applications for state employees can improve business processes and security, and allow employees to access payment and services resulting in a positive impact for both the state and for employees. In addition, the introduction of an ESD system to a large group like state employees will improve the probability for acceptance by the broader population of a new way of doing business.
Many of the agencies interviewed for this project have ESD initiatives underway that are not affected by this plan. For example the Texas Department of Health (TDH) has made significant use of the Internet to increase public access to vital records information. County clerks can now directly access the TDH vital records database and print a certified copy of a birth certificate on request. Other agencies are also increasing use of the Web as a method for distributing and receiving information. These initiatives are to be commended and encouraged and can continue independently of the recommendations in this report.
The potential applications of ESD are numerous and bounded only by the imagination. The practicality of any specific application is more complicated. In addition to the cost/benefit analysis and other operational considerations, there are a number of public policy issues that must be considered. Many of those issues are identified in this plan and, where possible, recommendations and options are offered.
Technology can enable governments to deliver services very efficiently; however, public acceptance of new technology ultimately determines whether government can or will make use of that efficiency. For example, most ESD applications require maintaining a database of information as a necessary part of the service delivery system, and a single ESD card can be used to access multiple ESD applications and databases. There are, however, concerns about privacy and confidentiality, and there are public policy implications regarding who owns, maintains, and has access to the data generated by these applications. In one scenario, the state owns and controls that data, and grants access to relevant pieces of the data to an individual or provider as needed. Another scenario would have an individual own and control access to the data. Policy decisions will be necessary to determine ownership, and these decisions will shape the direction of an ESD system.
This project considered a range of technology options available for ESD, including the use of online and off-line systems, the use of magnetic stripe cards and various types of smart cards. The use of biometrics for increased security of access was also considered and researched. Depending on the application, all of these technology tools (described in detail in the technology section of this report) may be combined in various ways to produce the most desirable ESD system.
In a perfect world, rational public policy choices determine the choice of the technology tools used and the architecture of an ESD system. In the real world, public perceptions influence public policy decisions. For example, a few years ago Utah considered creating an electronic driver license that would have allowed citizens to use a magnetic stripe on the back to access a number of other public and commercial services. The services included commercial banking functions, and the license would have carried a credit card brand. Public opposition, based primarily on privacy concerns, ultimately prompted the state to abandon this idea. 2
Another factor that affects technology choices for public sector service delivery is the existing commercial infrastructure for a particular technology. For example, there is a huge installed base of magnetic stripe readers and accompanying infrastructure in the United States. While other types of card technology, such as smart cards, are more robust, there currently is very little commercial infrastructure for these in the United States. Consequently, most of the ESD applications to date have achieved some economies by using magnetic stripe cards and "piggy-backing" onto the commercial infrastructure that supports this technology.
There are indications that the domestic commercial sector is changing. According to some experts, financial institutions and governments identify smart cards as the successor to magnetic stripe cards. 3 What is not yet clear in this country is how to pay for the infrastructure.
Several new "loyalty programs" are being developed by hotel chains, airlines and retail outlets using smart cards to track participation and assure the cardholder the best possible service in exchange for their loyalty. One example is a project being piloted by Furr's Supermarket, an Albuquerque, New Mexico-based chain with stores in Texas and New Mexico. 4 Furr's plans to issue 100,000 smart cards to customers in Summer and Fall 2000, for the purpose of allowing their customers to electronically download coupons onto the cards while shopping at their supermarkets. The cards will replace paper coupons. If the pilot is successful, the project will be rolled out to all 70 Furr's stores throughout the two states. Negotiations are also underway for a similar project with the Safeway supermarket chain, which has 1,650 stores throughout the country. 5
American Express introduced the AmEx Blue Card in 1999. The Blue Card is a standard magnetic stripe credit card that is also a smart card, and it is issued along with a card reader to consumers. The chip carries a digital certificate, and the card reader, attached to a computer, allows for identification of the cardholder when shopping on the Internet. With approximately three million cards issued, the American Express Blue Card is the first national rollout of a smart card in the U.S., and the largest domestic smart card application to date. 6
Not to be outdone, MasterCard began distribution of a combination magnetic stripe/chip card in Canada in Fall 2000. 7 Unlike the Blue Card, which can be used only as a credit card, the MasterCard can be used as a credit card, a debit card, and a loyalty card. Retailers will be issued a dual function card reader, with the cost included in their loyalty program fees. Consumers will receive a card and a basic, low-end card reader for free. Eventually, MasterCard plans to add stored value and transit application features. Finally, the card may some day be a web-access tool. Consumers will be able to download coupons from the Internet to their chip card and redeem those electronic coupons at point-of-sale terminals in retailer locations.
Conventional wisdom has been that as the commercial sector develops more infrastructures using chip cards, government ESD applications will become more feasible. Some industry experts are recognizing that government ESD applications are a promising market for chip cards and may lead the commercial sector. Many of the ESD applications that currently use smart cards-transit systems, campus cards, and time and attendance tracking-are independent of the installed base of magnetic stripe readers found in commercial locations because these applications have special use locations that have their own equipment. For the smart card to become acceptable, the infrastructures still must be developed for these applications, regardless of who takes the lead, and the cost for smart card technology must continue to decrease to a point more in line with deploying magnetic stripe cards.
A few years ago, relatively few people were aware of the Internet, and even fewer could predict the tremendous expansion of commerce conducted over the World Wide Web. Now, the Web is rapidly becoming an important tool for the delivery of electronic services, particularly to facilitate communications with a centralized database. Texas is joining this group by making the new version of the Lone Star EBT2 system Internet compatible.
Conceptually, through the use of biometric security systems and an online system (either a private network or the Internet), it would be possible to eliminate the use of card technology altogether. All ESD systems require the user to validate their identity by presenting something they have (such as a card), something they know (such as a personal identification number), or something they are (such as a fingerprint or a retina scan). In a centralized, online system, the user could obtain access to the system by presenting a finger image to be compared with an online database of all known users. This approach requires a somewhat inefficient and time consuming "one to many" comparison in the database. It also raises questions about public acceptance of the government maintaining a database of such personal identification.
A potentially more viable approach is to couple the use of biometrics with a smart card in an off-line environment. A biometric measure, such as a fingerprint image, can be stored on the smart card. When the card is used in a reader, the user must supply the matching measurement (e.g., the fingerprint) that is stored on the card, which confirms that the valid cardholder is the one using the card. This approach uses a more efficient one-to-one comparison and does not require maintenance of a central database of biometric measurements.
Because of the multiple uses of cards and the combination of technologies on the cards currently in use and being explored, the use of magnetic stripe cards, smart cards, and biometrics should not be seen as an "either/or" choice. These are natural partners in an efficient, secure, publicly acceptable system and, as technology improves, a hybrid card combining the best technology options will become the most likely approach, offering the benefits of all options.