INDIANAPOLIS (AP) — Privatization critics now can say “we told you so” with the state’s decision to sue IBM Corp. over the botched outsourcing of welfare applications, but it gave them little satisfaction Friday.

One day after the state and IBM sued each other over the technology giant’s canceled $1.37 billion deal to automate intake for Medicaid, food stamps and other benefits, critics of one of the costliest contracts in state history — along with clients who struggled to keep their benefits — said Gov. Mitch Daniels ignored warnings that outsourcing such a critical government function was fraught with risks.

“So much for saving money,” said Susan Humphrey of Evansville, who blames the system that IBM put together for repeatedly losing documents needed to confirm the Medicaid eligibility for her brother, who has Down syndrome.

“I think that this was not very well thought out by the administration before they decided to make the switch into privatization, and they’re paying the price for it,” Humphrey said. “Daniels could care less. He only has two years left.”

Daniels, who signed the deal in December 2006, is barred from seeking a third term in 2012.

Democratic House Speaker Patrick Bauer and Indiana Democratic Chairman Dan Parker — who both vehemently opposed the deal four years ago — said there was plenty of blame to go around.

“There is some blame back on the governor,” Bauer said. “Everybody in Indiana said don’t do it. We said don’t do it.”

In its lawsuit, the Indiana Family and Social Services Administration is seeking to recover $437.6 million it paid IBM through Jan. 31, plus the costs of any third-party lawsuits, federal penalties and state employee overtime incurred as a result of the deal. The state is seeking triple damages, or more than $1.3 billion.

Armonk, N.Y.-based IBM countered with its own lawsuit, asking for $52.8 million in deferred payments and equipment costs that it said the state still owes. IBM said it followed the state’s instructions, but the contract designed by the Daniels administration didn’t allow for the economic downturn that created tens of thousands of new welfare applications.

Both lawsuits were filed in Marion County courts Thursday.

But the lawsuits are not the first to result from the IBM contract. Carmel attorney Scott Severns has a federal class-action lawsuit pending in Indianapolis seeking to bar the state from cutting off aid to people while they appeal the decisions to deny them benefits.

“It’s certainly refreshing to see the state stating clearly what happened. If we had had that kind of transparency three years ago we could have avoided a lot of this,” Severns said, noting that only one public hearing was held just days before Daniels signed the deal. “It was tragic for the people who were affected by it.”

The state in its lawsuit said one of the persons hurt by IBM’s performance was a dying cancer patient who was denied Medicaid benefits because she missed a recertification interview, despite telling an IBM call center that she was hospitalized. She later also lost her food stamps.

Daniels’ office declined comment Friday, as it did Thursday, but acknowledged in October when Daniels fired IBM that “those who raised concerns about service quality were correct.”

Parker, the Democratic Party chairman, said there’s many people on both sides of the legal battle who need to be held accountable.

“I think they’re both wrong,” Parker said.

Politically, Parker said the contract mess will have little tangible benefit for his party. He said it might make a difference in a House district where one of the contract’s loudest critics, Rep. Gail Riecken, D-Evansville, is being challenged by former Daniels aide Cheryl Musgrave.

Democrats control the Indiana House 52-48, while Daniels’ Republican Party has a safe edge in the state Senate.

Political experts agreed that the lawsuits will have little impact with voters in the fall.

“The governor isn’t running,” said retired Indiana University economist Morton Marcus. “Some Democrats will bring it up if they think it will resonate in their districts.”

Similar Posts:

• Ind. agency, IBM sue each other over $1.3B deal
• CVS Agrees To Pay $17.5 Mil for Inflated Prescriptions Claims
• Whistleblower suit alleges fraud by Madison Center
• Indiana offers free workshops on understanding foreclosure
• Continental CEO apologizes for ‘ugly girl’ comment