May 21 2014

$745 Million Was Awarded to Failed Exchanges

National Review Online

Jillian Kay Melchior

Nevada’s health-care exchange is going dark, becoming the fourth state exchange so far to fail. The four terminated exchanges received $744.9 million in federal grants, much of which has already been spent.

The health-care-exchange board voted Tuesday to forgo the Silver State’s health-insurance exchange and use the federal Healthcare.gov website.

The four states that have called it quits — Nevada, Massachusetts, Oregon, and Maryland — have been awarded a total of $744.9 million in federal grants to help pay for their failed insurance exchanges, according to the latest count from the Kaiser Family Foundation.

The high cost to taxpayers may not be recovered. It remains unclear whether the federal government will be able to claw back any of that cash.

Republican senators John Barrasso (Wyo.) and Orin Hatch (Utah) have introduced a bill that would require states that junk their exchanges to repay the taxpayer money wasted. But right now, GovTrack gives it only a 1 percent chance of getting past the Senate Finance Committee, and a 0 percent chance of being enacted.

Meanwhile, Sylvia Mathews Burwell, who will likely be the next Health and Human Services secretary, said in a confirmation hearing last week: “We have to understand what went wrong. When we do understand . . . we need to go to the full extent to the law if there are contractors or others that have misled through their contracts or other things to fully recover.”

That’s a nice sentiment, but there is unlikely to be much to recover. Expect any clawback attempts to be especially complicated, given that a lot of the money has already been spent.

Nevada, which was awarded a mere $90.8 million, inked a contract worth up to $72 million with Xerox, at least $12 million of which has already been paid. (You know things are bad when Harry Reid calls his home state’s contractor a “disaster.”) The launch was plagued by glitches. Though the exchange had forecast 118,000 enrollees, it reported only 28,000 paid sign-ups as enrollment closed in March, a number that “barely outweighs the 25,000 Nevadans who had plans canceled last fall because they didn’t meet Obamacare’s new coverage mandates,” as the Las Vegas Review-Journal reported. Even those who managed to sign up faced problems ranging from dropped doctors to missing insurance cards.

The Silver State follows Massachusetts, which received more than $180 million and still failed, despite the experience of Romneycare. As Politico reported earlier this month, Massachusetts “has already spent $57 million on a system that never was able to enroll people with subsidies start to finish, and its failure has forced the state to enroll more than 160,000 residents in temporary Medicaid coverage — at an estimated $10 million-a-month cost.”

The federal government awarded $171 million to Maryland, which is now scrapping its insurance exchange and attempting to use a modified version of Connecticut’s system. Maryland has already spent about $130 million on the exchange, which crashed promptly upon launch. A Baltimore Sun reporter later wrote about how she was able to enroll only after “5 hours and 2 minutes over two days, two calls to the exchange’s call center, seven times entering my personal information, two computers, and two web browsers.”

And then there’s Oregon, which received a whopping $303 million. By March, it had blown $248 million, and the exchange was still in shambles. Federal prosecutors have since subpoenaed records, part of a grand-jury investigation into what is widely considered the most disastrous launch in the nation. 

Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity. She is also a senior fellow at the Independent Women’s Forum.

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