Taxpayer Tab for 4 State Obamacare Exchanges: $474 Million and Counting

Sunday, 11 May 2014 10:31 AM

By Sandy Fitzgerald

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Four states that spent nearly a half-billion dollars in federal money to build their own state Obamacare exchanges are facing a tough decision — collect even more federal dollars to salvage their websites or transition over to the federal exchange, scrapping the sites and throwing away the money that has already been spent.

Currently, the federal system serves 36 states, more than the federal health care reform plan had expected, reports Politico. But the sites for the states of Massachusetts, Oregon, Nevada and Maryland are all considered failures, and the government must either write them checks to give them a second chance, or for less money include them with other states that use the federal website to service Obamacare plans.

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The four states alone have already used some $474 million to build their own healthcare exchanges, and the money lost could climb even higher if other states with failed exchanges, such as those in Minnesota and Hawaii, are added in.

The Kaiser Family Foundation estimates the federal government has approved $4.698 billion since 2011 for states to to create their own exchanges.

Oregon's state health care exchange has been troubled by glitches since it opened last Oct. 1, and in April, the Cover Oregon board voted to move the exchange over to the federal government, scrapping it after $303 million was spent.

The FBI last week joined other agencies in looking into the scrapped program, reports The Wall Street Journal, saying the agency has interviewed several people as part of its inquiry.

Oregon's online system was supposed to have gone live in October, but never completely opened, and is regarded as the worst of those of the more than a dozen states who chose to develop their own online health insurance marketplaces. Cover Oregon and the site's vendor that built it, Oracle Corp., have been unable to work out all the glitches, forcing Oregonians to use a hybrid paper-online process to sign up for insurance.

The paper processing efforts have cost the state another $7 million, in addition to $134 million in federal funding paid to Oracle, and Oregon was the only state receiving a month-long enrollment extension because of the problems.

In Massachusetts, whose exchange was once the pioneering model for Obamacare, officials want to build a new site from scratch while using the federal exchange as a backup.

Should this approach be approved, reports Politico, it would cost more than $120 million, added to the $170 million that has already been awarded, nearly twice as much as it would cost if the state would dump its own exchange.

Nevada expects to decide on its Nevada Health Link in the next several weeks. The state has already spent $51 million out of the $90 million in federal grants it has received, and an outside report said it would be extremely difficult to salvage the state site's flaws.

Senate Majority Leader Harry Reid, D-Nev., blames Xerox for the errors, and says the tech giant should be held responsible. But Xerox is optimistic it can fix the issues, company official David Hamilton told board members at a recent meeting.

In Maryland, officials knew well in advance that its website, The Maryland Health Connection, for which $170 million was allocated, would not be able to launch on time, reports The Washington Post.

And even though political leaders called Maryland's exchange a national model, the system hired three different property managers and key people left the project, including one of its top information technology officials.

Within minutes of its launch on Oct. 1, the state website crashed, and its exchange director resigned in December. The state is now in the process of trying to transition to technology used by Connecticut's system, a move that must meet federal approval. If the move is not approved, Maryland will have to default to the federal health care website.

Meanwhile, the state exchanges' continuing problems will likely continue to cause political headaches issues for their governors, many of whom are in the middle of reelection campaigns.

The Republican National Committee earlier this year filed public-records requests in Hawaii, Maryland, Massachusetts, Minnesota, and Oregon to seek information about compensation and vacation time for the state exchange directors, many of whom have resigned, reports The New York Times.

Meanwhile, those five states have Democratic governors whose terms end this year, and three of the state leaders, Gov. Neil Abercrombie of Hawaii, Gov. Mark Dayton of Minnesota, and Gov. John Kitzhaber of Oregon have launched re-election bids. In Nevada, the only state with a Republican leader to build its own exchange, Gov. Brian Sandoval is also seeking reelection.

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