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Note: To help the reader navigate this report, a chart of acronyms is provided at the beginning of Chapter 2 in Exhibit 1 .

3. Recommendations

The TESD Project recommends a two-stage approach to expanding ESD in Texas and enhancing the use of the Lone Star EBT Card. These stages are presented in this Recommendations section as Lone Star Generation 1 (LSG1), to begin development in fiscal 2001 and Lone Star Generation 2 (LSG2), for which planning would begin in fiscal 2004, with a pilot beginning in fiscal 2005. As LSG2 is beginning implementation, the state should assess the state of technological development and costs, along with the needs of state agencies, to develop an updated ESD plan for the remainder of the decade.

The decision to recommend two distinct stages is not based on nor limited by technology. All of the functions and applications described in these recommendations can be accomplished with proven, readily available technology. A two-phase approach would be effective for several reasons:

  • Legislative issues: Some recommendations can be initiated more quickly, while others require legislative action and appropriation;
  • Practical issues: There is a limit on how many related initiatives can be successfully undertaken at one time. This is balanced by the need to develop a critical mass of users for the new applications, which will become particularly important when the LSG2 card is introduced;
  • Cost issues: During the planning and implementation phases of the recommended projects, agencies will need to reassess the cost effectiveness of the technology and the use of the existing EBT infrastructure to ensure that it continues to be the most cost effective approach. While the technology is now available, the cost for some applications is relatively high. The steady decline of the cost of the components of this technology will make the technology more affordable;
  • State agency resource issues: State agencies have limited staff resources, some of which are actively involved in current EBT/ESD initiatives. These same staff will be needed to participate in development of the recommendations presented in this report;
  • Coordination issues: The addition of new programs and services to the expanded ESD environment will require extensive coordination among the various participating agencies; and
  • Contractual issues: Implementation of the recommendations would have to be coordinated with a number of existing contractual obligations.

3.1 LSG1: Enhancements to the Current State ESD Environment

The recommendations for this first stage include applications that build on the new EBT2 environment, adding access to more program data and cash accounts through use of the existing Lone Star Card. The card will open or allow access to the program databases or cash accounts rather than having data embedded on the card. A card reader will be able to use the unique card number stored on the magnetic stripe, and direct the transaction to the designated program, based on the application selection made prior to the transaction. One way the selection can be made is by pushing a button on the card reader that will tell the reader which program to open. This first stage allows Texas to have a single card, and a single platform to increase the utility and versatility of the Lone Star Card.

3.1.1. Recommendation 1: Administrative and Operational Structure of LSG1

The applications recommended in LSG1 are either related to programs and agencies under the Health and Human Services Commission, or are cash payment transactions similar to the financial benefits program. Recommendations for the administrative and operational functions are described as follows.
A.   Overall administrative responsibility for LSG1 should remain with the EBT2 group within TDHS. In this role, TDHS would be responsible for coordinating activities among agencies. Implementation of the new applications would require EBT2 staff, in coordination with the Interagency Task Force on EBT, to work closely with staff from the other programs and agencies included in LSG1. TDHS should be allowed additional full-time equivalent (FTE) positions in this area that are not included in the agency FTE cap.
B.   TDHS should continue managing the contracts for host operations, card issuance, POS deployment, retailer relations, and call centers. TDHS should take the lead in negotiating contract modifications with the vendors who are providing those services needed by the new LSG1 applications. TDHS would need to coordinate this effort with TDH and OAG to ensure that appropriate and cost efficient services are available.

Deployment of card reader devices for Med ID is independent of the EBT2 application. It is anticipated that third-party processors will provide the equipment as part of the contracts with the providers. Card reader requirements and deployment strategies for this application will be discussed in recommendations related to this program.

Texas should explore the use of wireless EBT technology to provide access to services in farmer's market, in disasters, and possibly other day-to-day uses.

C.   Operation of the databases for the various programs included in LSG1 should remain with the agencies who maintain these applications.
D.   The Interagency Task Force on EBT should continue to provide guidance and coordination, and set standards for LSG1 functions.

3.1.2. Recommendation 2: WIC

In summer 2000, the WIC Program, administered by the Texas Department of Health, released a request for offers (RFO) for a card integrator as part of a pilot project to issue food prescription benefits through off-line smart card technology.

The majority opinion nationally, among those who have examined the application of EBT to the WIC Program, is that a smart card approach is the most feasible solution. However, despite TDH's efforts to involve retailers in WIC changes, some retailer concerns continue to exist. There is an interest from the retail community on both the Texas and national level to explore the use of a magnetic stripe card for WIC. One reason for this interest is the limited use and availability of smart card readers and the cost of putting them in place. Grocers do not generally use smart card readers in the United States, and the commercial market has not, to date, initiated a strong movement in that direction. In response to retailer concerns, Michigan is developing a magnetic stripe approach for their WIC program.

Another point expressed by grocery retailers related to WIC program simplification is that the WIC food prescription attempts to control client behavior, and is inconsistent with current trends in other programs to allow and encourage clients to be more responsible for their own behavior. Some describe the food prescription as an essential component of the effectiveness of WIC. It should be noted that changes to simplify WIC rules must happen at the national level. Texas, as well as all other states, does not have the authority to modify rules. Any attempt to pilot a magnetic stripe card based on simplified rules would require federal approval, and would have to be initiated by TDH.

The issues and concerns of the retailers should be considered by TDH in making decisions regarding the approach to WIC EBT. Success is contingent upon the support and cooperation of the retail community, and TDH will benefit from a strong partnership with this group.

Either a hybrid card or a magnetic stripe card may complement the long-term direction of the recommendations of this project. The WIC pilot planned for El Paso using a hybrid card would have no direct effect on the first stage of this plan. All Lone Star Card system components, such as retailer management, card issuance, settlement, and call center use, could eventually be the backbone of either WIC solution. If the pilot is successful and the program is expanded statewide, this rollout should be combined with the LSG2 recommendations described later in this section.

A. Texas should partner with retailers to explore the development of a pilot based upon the Michigan WIC approach to use magnetic stripe technology. This pilot would allow a comparison to be made between the hybrid card and the magnetic stripe approaches and possibly better use the existing EBT infrastructure.

3.1.3. Recommendation 3: Med ID

An extensive draft report on the Med ID process was made available for agency review on August 4, 2000. The recommendations listed below are taken from that report. The timeline for implementing the Med ID ESD component is incorporated into the implementation schedule for LSG1. The full final report, which incorporates comments from stakeholders on the draft review, is provided in Appendix B of this report.

The paper form currently used to verify client eligibility for medical services is mailed monthly to eligible recipients and is used by both clients and providers in the receipt and delivery of medical services. It is costly to print and mail these monthly Med ID forms. Also, the current contract arrangement with NHIC for access to NHIC's database for eligibility verifications is expensive to the state, costing 15 cents for each transaction. The proposed electronic Med ID database would not be housed at NHIC, so would avoid that 15 cents per transaction cost.
A.   Texas should replace the current paper-based Med ID system with an electronic eligibility verification system. The state should adapt the Lone Star Card, currently used to provide Food Stamp and TANF benefits, to accommodate the Med ID function. While the systems used to provide verification of Medicaid eligibility and Food Stamps/TANF EBT benefits are independent, the same card can be used for access to each system. This will provide greater convenience to clients, and allow some opportunities for cost sharing by the programs. It also is consistent with the state's interest in maintaining a single platform for ESD.
B.   Each Medicaid-eligible individual in a family should receive a separate Lone Star Card for Med ID purposes. In current program operation, only one Lone Star Card is issued for each household. In households where the family is eligible for Food Stamp and/or TANF benefits as well as Medicaid, the Med ID information for the head of the household should be accessed with the multi-program Lone Star Card. A secondary cardholder would still be permitted in this situation, meeting the current federal regulations on this requirement. Each of the other household members who are eligible for Medicaid should receive a Lone Star Card that allows Med ID access only. Cardholders should be told to keep their cards even during periods of ineligibility so the same card can be used if the recipient becomes eligible again at some future date.
C.   Coordination of card issuance should be accomplished through TDHS-established business procedures. Issuance of head-of-household cards should continue through local offices. Cards for additional Medicaid eligible family members should be distributed through a centralized system.

As part of EBT2, TDHS contracted with an issuance vendor for Lone Star Card replacements. This contract could be modified to include issuance and replacement of Lone Star/Med ID Cards, or a separate contract could be established. The option selected should be based on a determination of the most cost-effective approach at the time.

The existing Medicaid eligibility determination process will not be changed under this recommendation. Medicaid eligibility for all applicants should be activated on the database within 24 hours of the eligibility decision. The cards may not be received in the mail for several days, but eligible clients could receive services, if needed, by using the telephone backup process in the interim.

D.   At least two informational mailings per year should be planned to provide the general program information and specific information to targeted client populations. The monthly mailing that provided a vehicle for delivering client specific or general information would no longer exist under this set of recommendations. The initial notice of eligibility, which contains additional program information and rules, would still be mailed to a new recipient.
E.   TDHS should develop a single, complete database of Medicaid-eligible clients that is accessible by providers. Preliminary evaluation of the current system architecture suggests that the most likely approach is to create a separate database from the Medical Identification (MN) database.

HHSC, TDHS, and TDH should establish a policy to designate the new TDHS database as the single source file for purposes of verifying eligibility. Changes to the HMO, enrollment brokering, claims payment, and other contracts would be necessary to clarify the purpose of the database and to require daily updates to the file.

The state should also develop technical specifications that describe the protocol for accessing the system so that third-party processors can program their POS terminals to allow Medicaid providers access to the database.

F.   TDH should revise the NHIC contract to eliminate inquiries to the NHIC database for eligibility verification, as well as the charge to the state for these electronic inquiries. At the time the eligibility check feature was established, the TDHS system was unable to accommodate the application so the function was included in the services purchased from NHIC. That situation has changed, and the new TDHS Medicaid database will be able to process these transactions (see the preceding recommendation). 50 The NHIC contract includes a 15-cent per transaction cost for accessing the database. Seven and one-half cents of this transaction expense is recouped from third-party processors. It is recommended that the charge to third-party processors should continue at the same rate. It is expected that the new card system would result in an increase in the number of transactions from the third-party processes, and could result in some revenue to the state.
G.   The current Med ID task force should be directed to consult with other HHSC and related agencies affected by the database change. The task force should review and make recommendations to modify Medicaid business rules as necessary, given the electronic Med ID approach, and attempt to identify any other issues that must be considered.
H.   The HMO contracts should be revised to require the enrollment broker to send updated information on Medicaid-managed care clients daily. HMOs send files monthly, but a daily update is needed for the recommended system.
I.   The contract with NHIC should be negotiated to require NHIC to provide to the MN system data on delivery of limited services, such as eyeglasses and hearing aids, on a daily basis. A reasonable time should be allowed for this system change, but not longer than September 2003.
J.   TDHS should take the lead on developing the database since most data needed for the creation of the centralized eligibility database is located in the TDHS SAVERR and Medicaid identification (MN) systems. The existing Lone Star EBT system is also operated by that agency, and should be used as the host and processor for the new eligibility database. HHSC should provide oversight and coordination with other state systems, and TDH should assist TDHS as a partner in this development.
K.   TDHS, in coordination with TDH and HHSC, should establish or use an existing provider advisory committee consisting of representatives of major provider groups. The committee should include public and private hospitals, physicians, dentists, managed care organizations, and other health care providers as determined necessary by the agencies' commissioners. This advisory group should be used to address system design, implementation, and operational issues that may affect providers. The Interagency Task Force on EBT should oversee implementation of the electronic Med ID to ensure that task force standards are met and that cross agency coordination is achieved.
L.   It is recommended that Texas follow the Florida model to offer providers the option of contracting with approved third-party companies in order to gain access to the electronic system or to use the toll-free call center. Minimum hardware needed to support an electronic system includes one or more card readers (terminals) at each health care provider's office, a modem, and a telephone line. In addition, software programming is necessary to allow card readers access to the information. Card readers may also be connected to a PC or LAN that is connected to the modem and phone line.

TDHS would need to establish contracts with the third-party providers contracted through TDH to gain access to the eligibility database. The strategies for establishing these contracts must ensure a competitive environment through which third-party processors are selected or the state must consider other options that will ensure alternatives.

The electronic system must include a back-up system that will allow access to data in the event the electronic system is unavailable and to allow free access to the system. The system should continue to offer a hotline to respond to client or provider inquiries and requests for assistance. Like other states, Texas should use an AVR system. This system could be an extension of the current EBT call center systems.

3.1.4. Recommendation 4: Childcare Time and Attendance Tracking

Childcare providers submit paper claims once a month to childcare contractors (CCC) hired by the 28 WDBs. The claims are based on attendance data from paper records, and are used to obtain payment for childcare. CCCs reimburse the providers, and electronically submit consolidated claims directly or through the WDBs to the central TWC office. TWC electronically reimburses the WDBs who then reimburse the CCCs.

Use of an automated time and attendance tracking system in which a magnetic card is used to record a child's attendance in a childcare facility could replace the manual data entry process. A system of this type, using a card, would reduce administrative time and provide much more accurate records for claims processing than the current paper process, and could reduce overpayments. Based on these benefits, Oklahoma paid for development of an automated system, and began a pilot of the system in August 2000. Data is not available to determine the value or acceptance level of the system.

Because of the benefits of a tracking system, this appeared to be a candidate for ESD in Texas, and research completed for this report initially supported use of a system. However, after an extensive fiscal analysis, such a recommendation does not appear to be cost effective. Two options were reviewed. The first involved using a third-party processor to provide tracking services-estimates suggested a cost of approximately $4 per child per month plus the cost for development of the system. The second approach explored the possibility of Texas developing its own system using the EBT2 and LSG1 infrastructure. This approach also proved unacceptable from a cost perspective.

It is clear that an automated time and attendance tracking system has value and could be beneficial to the childcare structure; however, costs at this time and the limited availability of tracking systems make the choice unfeasible. Further exploration may be warranted following completion of the Oklahoma pilot. It may also become more practical as tracking systems become more readily available. As the technology improves, cost go down, and more systems are developed, the state may want to reconsider this option. It is also possible that Workforce Development Boards, childcare contractors, and childcare providers may be interested enough in such a system that they would be willing to pay all or part of the transaction costs that make the system prohibitive for the state at this time.

3.1.5. Recommendation 5: Child Support Payments

The OAG, administrator of the Child Support Program, currently sends an electronic file of required child support payments to the Comptroller's office, where warrants are printed. These warrants are then mailed to the custodial parents.
A.   To the extent possible, the mailing of warrants, including those for the TANF supplemental grant for the Child Support Program should be replaced with the use of direct deposit. The system that prints warrants from the electronic file should be modified to create direct deposits. Direct deposit should begin as soon as possible, but no later than September 2001, since postage costs can be reduced for this group immediately.
B.   Those child support beneficiaries that cannot, or do not wish to receive direct deposits, should be issued a Lone Star Card, and the child support funds should be available through an electronic cash account established for that purpose. Electronic files would be sent to the EBT2 operations contractor for the host system, identifying the recipients and amounts available. Payments by warrant should be eliminated by September 2003.
C.   The OAG contract for its statewide distribution unit should be modified to require that recipients be offered direct deposit as a first choice for payment distribution. The EBT2 card should be offered only if direct deposit is refused.
D.   The Lone Star Card operations contractor should issue Lone Star Cards for child support payment recipients, if that is cost effective. Contracts would have to be modified for this to occur.
E.   Recipientsof child support payments should be able to access funds using ATM accounts. To allow this capability would require modifications to the EBT2 system software and agreements with one or more electronic fund transfer networks. This recommendation would also require a change in the current EBT2 process. As designed, cash may be withdrawn from TANF accounts using the Lone Star Card only through POS devices in authorized retail grocers. It would be a burden for those retailers to provide additional banking functions for a larger array of state services. Child support recipients should, however, be able to use their Lone Star Card to pay for grocery purchases in checkout lines as currently used by TANF recipients.
F.   The child support recipient should pay the full cost for the ATM transactions. Individuals who do not have a bank account usually must pay a fee to cash warrants. This fee is as high or higher than most ATM transaction fees and is applied for each warrant cashed. Use of ATMs, even with the transaction fee, should not negatively affect the child support recipients and could, in fact, be an improvement because of the convenience of ATM locations and the potential lower cost than the check cashing fee. In addition, there is precedence set by the federal government and agencies in other states for negotiating reduced ATM transaction fees. The state should pursue a course of action with banks to secure similar reduced fees for recipients of state administered funds. Another issue to address with banking institutions is the limit on amounts of cash that can be withdrawn. The majority of child support payments are less than $400. However, for those over that amount, more than one transaction would be required to withdraw the full amount. The state should explore raising this limit for this population.

The state has credit card contracts with lending institutions, and could possibly use this as leverage in negotiating fees. GSC, in coordination with OAG and TDHS, should take the lead in negotiating with the companies that hold the contracts for travel and procurement cards seeking better access and lower fees for ATM use for all state programs.

G.   The child support supplemental grant should be added to the Lone Star Card. This pass-through payment to TANF parents, which will be shifted from the OAG's responsibility to TDHS in the future, is a cash benefit like TANF.

The addition of child support to the Lone Star Card in LSG1 is only a viable option if the state secures ATM access. This recommendation should only be implemented if ATMs become a part of the process and the recipient pays the transaction fee. This option would not be cost effective if the state pays the transaction fees.

3.1.6. Recommendation 6: TANF Access to ATMs

TANF recipients use a Lone Star Card to gain access to TANF benefits through authorized retail grocer locations. The recipient can withdraw cash of less than $50 at no cost. If the recipient withdraws more than $50, the state pays a 50-cent transaction fee to the grocer for the first and second transactions. For more than two transactions over $50, the grocer may charge the recipient up to 50 cents, but most retailers do not charge client fees. 51 However, it is anticipated that retailers will take advantage of this option, and will charge a fee when EBT2 is implemented. 52

The state should give consideration to the convenience factor of ATMs and the possibility of discrimination issues, and allow ATM access to the TANF recipients, with the recipient paying the same costs that would be charged to the child support recipients. This recommendation should only be considered if the state implements Recommendation 5 regarding child support clients using ATMs. The TANF recipients may want access to benefits through ATMs. However, since the TANF transactions are free or offered at a low cost to the recipient, the convenience factor may not be sufficient to encourage the TANF recipient to use an ATM with a transaction fee, but the recipients would have the choice.

3.1.7. Recommendation 7: Foster Care

PRS should investigate the use of the Comptroller's Website for vendor information as a resource to recipients of foster care payments that are made by direct deposit. Only about 60 percent of PRS's foster care payments are made via direct deposit. That is primarily because many of the recipients of those payments are large facilities that care for many children. They require detailed information regarding the individual children and dates for which payments are being made. A similar need for the information previously shown on a check stub was reported from a number of the state's payees when the state began making payments by direct deposit. The Comptroller has responded by creating a Website where backup documentation for direct deposit payments can be shown. Payees can get that information via the Internet.

PRS has not fully investigated the use of the CPA Website to furnish the required information to its payees. They should work with the CPA to add the necessary information, if it is not already available, and should insure their payees are adequately apprised of the availability of such information through the Website. Positive results could occur with this action. The PRS payees could become more satisfied with direct deposit as an option, and the potential for direct deposit to become the method of choice for PRS payees could be increased.

3.1.8. Recommendation 8: Campus Cards

Several universities in Texas have, or are in the process of developing, campus card applications in which a card with stored value is issued to students for use in purchasing items and services on campus and with participating local retailers. These cards are being developed independently with limited or no effort to coordinate the technology.

The state should include the university campus card initiatives in the ESD framework and ensure that common standards are developed. This could help to establish interoperability of the cards and could potentially reduce the cost for projects. A single system could be developed, and bulk purchasing could help lower costs. This would eliminate the need for each university to develop their own unique system.

3.1.9. Recommendation 9: Drivers License

Legislation passed in the 1999 session of the Texas Legislature limits the use of the drivers license to law enforcement or government purposes. 53 The limitations resulting from this legislation could prevent or limit potential compatible uses of the drivers license.

The EBT Task Force should work with representatives from the Department of Public Safety to explore the issues around the legislation to determine what ESD applications could fall within the definition of government purposes. If the limitations prohibit use of the drivers license for efficient driver-related applications, the task force should identify possible modifications to the legislation that would allow such uses while protecting the privacy of information on the card.

3.1.10. Recommendation 10: Inter/Intranet

Agencies should be encouraged to conduct internal reviews for opportunities to base agency activities on the Internet and to explore Intranet capabilities. The EBT system links to the Internet may allow activities, such as eligibility recertifications, to be done remotely.

A number of agencies are already using the Internet to provide public access to information. Some examples are TDHS' Long Term Care program, where the public can view nursing home licensure information, and can compare qualities of different facilities. Families of clients in nursing facilities where problems are experienced can discover whether other clients are experiencing similar problems, and whether the home is working on improvements. Recipients of state payments via direct deposit can access a CPA Website to get more detail about those payments. The Bureau of Vital Statistics at TDH also uses the Internet to allow customers to research records and request copies of various documents, such as birth certificates.

This technology has great potential to open agency records and services to customers who need them. Options include the posting of descriptive information, raw data, and instructions, as well as the exchange of information, and the use of the Web in lieu of current face-to-face or telephone contact. Intranet connections or secure Websites could also be used for the delivery or exchange of private information, such as service tracking or reporting.

3.1.11. Implementation Strategies for LSG1

Legislative authorization to accept and move forward with development and implementation of the recommendations included in LSG1 and LSG2 should be sought during the 2001 legislative session. Two programs are recommended for addition to the EBT2 Lone Star Card. These are the Med ID and child support programs. The planning, design, and development process should begin with Med ID by June 2001. This schedule should not impact the EBT2 software warranty period that expires September 2001. Once Med ID is in pilot, development of the child support component should begin. On the proposed schedule, Med ID should be statewide by February 2003, and child support, on the Lone Star Card, would be operational by September 2003. It is expected that direct deposit for child support will be in place by September 2001. TDHS and TDH could assist in this effort by beginning to work with provider groups, planning for contract changes, and working with its federal partners. A high level timeline for the ten-year plan is provided at the conclusion of the Recommendations section.

As part of the strategies, there are a number of factors that must be considered in planning and implementation. The more significant factors are identified below.

State/Federal Partnership

Many of the recommendations in both LSG1 and LSG2 can not proceed without support and approval by the involved federal partners. The ESD Taskforce, administrative agency, and the state agencies responsible for the identified programs and services should be responsible for informing the appropriate federal agencies and soliciting their cooperation. For some programs, this may require developing advanced planning documents (APDs) and implementation advanced planning documents (IAPDs). These activities are not specifically identified in the timeline, but are considered part of the planning, design and development activities. For other programs and services, the state would need to keep federal partners informed on planned changes and cost allocation implications. The agency responsible for each specific program should have the lead in ensuring that these activities are accomplished and should coordinate with the other involved agencies and stakeholders.

Contract Modifications

Using the Lone Star Card for the proposed new ESD applications would require negotiating changes to the existing contracts for EBT2. The addition of child support, a Tier I application, would require modification to the EBT2 host software to include the new cash account. If the TANF and child support funds remain separate, programming would be needed to direct transactions to the appropriate account. The card reader would need to point to the correct account and withdraw funds from that account when a recipient purchases groceries and chooses to use cash from the child support account. The reader would also require the capacity to print out the transaction and the amount of money remaining in the account. Alternatively, the child support funds could be added to the TANF account as long as TDHS and OAG set business policy rules on how these funds would be drawn down and recovered. Rules would also be needed on client fees and other operational considerations.

Card issuance would also be impacted by the addition of the new programs. Holders of EBT2 cards would not need a new card. These cards are issued to the head-of-household and would be able to access other services included in LSG1; however, all other members of the household who receive Medicaid services would require issuance of a card. In addition, individuals or households that receive only services of the new programs would require cards. This would include child support and Medicaid-only recipients. The contract with the card issuance vendor would need review and probable modification to provide for this increase in cards.


The child support component of LSG1 can be implemented using the POS devices that would be in place for EBT2 and at ATM locations. Should the WIC pilot with a hybrid card be successful, the addition of smart card readers would only be required for those locations in which WIC pilots are operating.

Modifications to the existing contract for POS maintenance should be made to accommodate any necessary programming changes for the equipment. Magnetic stripe readers would need to be in place with providers before implementation of the Med ID ESD process.

Licensing Fees to Add Programs

Under the current licensing arrangement regarding EBT2, the addition of new programs operated by agencies other than TDHS can cost as much as $1 million each, up to a cap of $2.5 million. After the fee cap is reached, programs can be added at no cost to the state. It is possible that TDHS could negotiate a lower cost for the additions; however, that would not be known until the negotiations are conducted. Of the programs added during LSG1, child support should be the only one that activates this licensing cost. WIC would be using the same platform and hybrid card, but would be going to a different database not associated with the EBT2 database and, as a result would not require changes to the EBT database. Child support may require programming changes to the EBT2 database because the child support funds would be added to the cash account and use the same process for accessing the account. The TANF supplemental grant should not require additional licensing costs because this program is planned for transfer from OAG to TDHS within the next fiscal year. Eligibility for Medicaid is determined by TDHS and should not require the additional licensing fee.


EBT2 in its current structure is used exclusively for TDHS programs, and costs for the system are allocated to the two programs on the card. With the addition of the new programs, allocation of costs becomes much more of a challenge. The Med ID component is a TDHS program, but multiple programs in multiple agencies use it. Child support is administered by another agency, but there is overlap in the populations. Strategies for cost allocation would need to be developed that distribute costs among the different program areas. This would include determining fiscal responsibility for contracting costs and card replacement (if cards are lost, stolen, or damaged).

Conversion Activities

A primary consideration in implementing the new applications should be to ensure that the delivery of Food Stamp and TANF benefits on the Lone Star Card is not interrupted. The applications described in the recommendations involve several different agencies. Work could proceed on modifying the back end or host application for some of these systems independently; however, ongoing coordination of efforts would be required to design the common linkage between all of these applications - the magnetic stripe card and the card reader interface software.

The agency responsible for the specific programs would need to make the modifications necessary to establish the database and the required conversion from the current process to the new system. For child support, the majority of changes would be required at the Comptroller's office - moving from the paper warrant to direct deposit or transfer of funds to the EBT2 account. TDHS should make the system modifications necessary to support the Med ID conversion. TDHS (for the Med ID program) would need to establish contracts with the third-party providers currently contracted through TDH to access the eligibility database. The strategies for establishing these contracts must ensure a competitive environment within which third-party processors are selected. TDH would need to make contractual changes with NHIC, its eligibility broker, and managed care organizations. Both TDHS and TDH would need to work closely with provider and client stakeholder groups.

Coordination activities should be the responsibility of the Interagency Task Force on EBT throughout the LSG1 implementation. Project management would be the responsibility of TDHS as the operating agency for LSG1.

Other Policy Issues

Because of the mix of services that are recommended for addition to the EBT2 card, numerous policy concerns should be expected to surface that must be addressed. The EBT Task Force, which includes representatives from TDHS, TDH, OAG, and TWC as well as other stakeholders, would be responsible for identifying and addressing these issues.