OIG Report Finds CMS Unprepared for Exchange Launch

Published January 22, 2015

Consumer Power Report #450

President Barack Obama’s State of the Union address Tuesday barely made mention of his signature domestic policy achievement. But that doesn’t mean everyone else is keeping quiet about it. The Wall Street Journal reports:

The federal government skipped key contracting requirements when awarding hundreds of millions of dollars to build the troubled HealthCare.gov site, according to an inspector general’s report.

The investigation published Tuesday by the Office of Inspector General for the Department of Health & Human Services found the federal government failed to probe fully the past performance of CGI Federal Inc., a subsidiary of a Canadian information technology firm, before awarding it a contract to construct basic parts of the insurance enrollment site.

Federal officials also drafted agreements that left the government on the hook for whatever it cost contractors to complete their work, investigators said. Several big contracts including CGI’s ballooned to twice or three times the estimated cost …

The report of work carried out by the Centers for Medicare and Medicaid Services, the HHS unit tasked with building the site, paints a picture of rushed and sloppy activity with poor oversight that didn’t meet the agency’s standards. The site launched in 2013 with many problems that initially crippled enrollments by consumers.

Officials from HHS and CMS told the inspector general they concurred with the recommendations in the report. A CGI spokeswoman didn’t comment.

The full OIG report is here. There are more details here on the failure of CMS to match the requirements involved. These mistakes have had consequences, and continue to impact the federal exchange to this day. Consider this report from the Associated Press:

The government’s health insurance website is quietly sending consumers’ personal data to private companies that specialize in advertising and analyzing Internet data for performance and marketing, the Associated Press has learned.

The scope of what is disclosed or how it might be used was not immediately clear, but it can include age, income, ZIP code, whether a person smokes, and if a person is pregnant. It can include a computer’s Internet address, which can identify a person’s name or address when combined with other information collected by sophisticated online marketing or advertising firms.

The Obama administration says HealthCare.gov’s connections to data firms were intended to help improve the consumer experience. Officials said outside firms are barred from using the data to further their own business interests.

I’m sure they would never do that, of course. It’s important that these problems are solved not just from the administration’s perspective, but because more than one of the replacement plans offered by Republicans rely on a “fixed” federal exchange or the equivalent, absent the mandates and requirements involved. People at this point are right to be skeptical of the federal exchange, and those who favor free-market alternatives will need to understand why before moving forward with anything that even sounds similar.

— Benjamin Domenech



Oklahoma state Rep. Mike Ritze is a foot soldier – one of hundreds – in a passionate war over the Affordable Care Act that is reigniting as state legislatures convene across the country.

The Republican lawmaker, a family doctor, has stood behind three anti-Obamacare bills supported by conservative groups in Oklahoma and other states. None have made it into law, but Ritze plans to pick up the fight in the 2015 legislative session that convenes in the Sooner State next month.

“We need to do everything we can to try and reverse this,” said Ritze, who practices in Broken Arrow.

In Washington, DC, there’s been little consensus on modifying the health care law. But in state capitals around the country, from Albany and Columbia to Austin and Sacramento, lawmakers have been mulling over hundreds of proposals that reflect many starkly different views on Obamacare as settled law.

A Center for Public Integrity review found that more than 700 Obamacare-related bills were filed in the states during 2014 or carried over from 2013 in states where legislatures allow that. …

Some states saw 50 or more health bills each, according to data from the National Conference of State Legislatures (NCSL). It’s not yet clear how many will be reconsidered in 2015 – many states are just kicking off their legislative sessions – but few expect any substantial retreat from the battlefront.



Millions of Americans who received subsidized health insurance under ObamaCare will find a new wave of frustration this tax season.

After losing their health insurance because it was not ObamaCare compliant … after slogging through the healthcare.gov website to get enrolled in a new policy … after losing their doctors … after learning that they must pay thousands of dollars in deductibles before they can get medical care … now they must face the IRS.

By the end of the month, they should receive a form 1095-A that shows they had health insurance through federal or state exchanges. They will use the form to fill out an astonishingly complex Form 8962 to reconcile the subsidies they received with the income they earned in 2014.

If they received too much, they will have to pay back some or all of the subsidy. That could mean they receive a smaller – or no – tax refund. And for the privilege of this new interaction with the IRS, many will have to pay hundreds of dollars to hire a tax preparer to help them wade through these new ObamaCare tax forms.

H&R Block estimates that up to half of Americans who received subsidies for health insurance under the ACA last year will owe the IRS money.

An estimated 87% of those who signed up for health insurance on the new exchanges got subsidies to reduce their health insurance premiums and sometimes their cost-sharing expenses. An assistant professor of health policy at Vanderbilt University, John Graves, calculates the average subsidy was $208 too high.

But these taxpayers face yet another cost. Many of them are accustomed to filing the simple 1040EZ tax form. No more. Most will have to retain tax preparers to help them fill out the new Form 8962. That could cost them several hundred dollars.

SOURCE: Grace-Marie Turner, Forbes


While Republicans cannot expect a full repeal of the health law while President Barack Obama remains in office, the GOP intends to “strike away at it, piece by piece,” Senate Finance Committee Chairman Orrin Hatch, R-Utah, said Tuesday.

But in a speech at the U.S. Chamber of Commerce, Hatch also said he expected that Republican and Democratic lawmakers would work together on several other key pieces of health legislation.

Hatch said there may be more bipartisanship in some “must pass items,” including continued funding for the Children’s Health Insurance Program and overhauling the way Medicare pays physicians, known as the “sustainable growth rate.” On CHIP, Hatch said the Finance Committee has “heard from a number of governors from red states and blue stakes alike that they want to see this program extended. It has been a marvelous program. It has worked very, very well. I’m optimistic that we can work on a bipartisan, bicameral basis to extend CHIP in a responsible way.”

Hatch also said he wants the Finance panel “to address the SGR challenge once and for all.” Last year he co-sponsored legislation that would move physicians from the traditional system in which they are paid for volume and instead use financial incentives to encourage them to move to alternative payment models emphasizing quality care. Finance must also act “sooner rather than later” to strengthen Medicare, Medicaid and Social Security, he said, noting that in the last Congress he supported several significant changes to Medicare, including raising the eligibility age and simplifying cost-sharing in the program.

SOURCE: Mary Carey, Kaiser Health News


Under the [Affordable Care Act’s (ACA)] original terms, expanding Medicaid was mandatory: states would lose all federal funding for the program if they failed to extend coverage to those earning less than 138 percent of the federal poverty level, or about $16,100 a year. The implications of that were not merely budgetary. What had always been a program designed to cover the disabled, the indigent elderly, and low-income pregnant women and infants would extend coverage to a new population – able-bodied, working-age adults, including those without children. If not for the Supreme Court’s 2012 ruling that the mandatory expansion provision was tantamount to coercion, the ACA would have transformed Medicaid from a narrowly tailored health insurance program to a broad-based entitlement.

Let’s set that aside, however, and focus on the data, which is more relevant from the Lege’s perspective – and more complicated than supporters are suggesting. The Chronicle’s fiscal argument echoes a much-cited 2013 study in which Billy Hamilton, a former deputy state comptroller, argued that Medicaid expansion in Texas would save money, create jobs and drive economic growth across Texas. The reasoning is that Texans are, in some sense, already paying for the uninsured and underinsured through local charity care programs funded by state and local taxes. By taking the expansion, in other words, Texas would be able to cover those costs with federal money instead. (This is the official line of the Texas Hospital Association, which claims Texas hospitals spend about $5 billion a year on “uncompensated care” for the uninsured and that federal Medicaid expansion funds would offset those costs.) Meanwhile, by replacing state and local funds with federal funds, the theory goes, Texas communities would benefit in the form of lower property taxes while an influx of federal funds would create healthcare jobs and stimulate the economy. The economic activity generated by expansion, in Hamilton’s analysis, would create more than 230,000 jobs by 2016 and boost economic output by $67.9 billion, adding $2.5 billion to local revenues between fiscal 2014 and 2017.

But hospital finances, alas, are not quite that simple – and neither are the economic effects of expanding publicly-financed healthcare. What THA and similar groups summarize as “uncompensated care” is actually a combination of bad debt, charity care, and “under-reimbursement” for Medicaid. Of these, bad debt, accruing when hospital patients don’t pay their medical bills, is by far the largest share of most nonprofit hospitals’ uncompensated care costs. Since most bad debt comes from insured patients, Medicaid expansion wouldn’t mitigate this portion of uncompensated care. Charity care, typically the smallest portion of uncompensated care, is the cost of programs that provide care for low-income uninsured patients, which all nonprofit hospitals in Texas must offer. Although programs differ, they tend to have income limits well above Medicaid eligibility levels, and would not disappear with Medicaid expansion. The third category, under-reimbursement for Medicaid, is what hospitals claim they are shorted by the state when caring for Medicaid patients; the state pays significantly less than what private insurers typically would. Ironically, this segment of uncompensated care would doubtless increase under Medicaid expansion, as more patients would be enrolled in the underpaying program.

As for the economic effects of expanding public coverage, far from being an economic driver, there’s some evidence that Medicaid expansion could swamp state budgets. California has gone about implementing federal healthcare reform with gusto, and the costs have now shown up in the state budget, which Governor Jerry Brown released January 9. Enrollment in the state’s Medicaid program, Medi-Cal, has exploded since the ACA took effect, climbing from less than 8 million in 2012-13 to an estimated 12.2 million this year. More than one in three Californians are now on Medi-Cal, and the costs are daunting.

SOURCE: John Davidson, Texas Monthly


About 70,000 low-income Montanans would be covered under an expansion of Medicaid as long as the federal government covers at least 90 percent of the cost, the governor said Monday in his proposal on the issue.

Democratic Gov. Steve Bullock unveiled the legislation called the Healthy Montana Plan with sponsor Rep. Pat Noonan of Ramsay in a room of about 100 supporters at the Capitol.

Under House Bill 249, adults making up to $16,105 a year and a family of four earning up to $32,913 would qualify under the guidelines.

“These are Montanans who struggle to make ends meet,” Bullock said, referencing cooks, ranch hands and day care providers. “Studies show that the vast majority of those without access wake up every single morning and go to work.”

Bullock’s proposal is based on the Healthy Montana Kids program, which provides coverage of children in low-income families. It would expand Medicaid in the same manner to adults through competitive state contracts with private insurance companies for care at negotiated rates.

SOURCE: Lisa Baumann, Associated Press