If nothing else, the collapse of multi-million dollar state-based exchanges has created a PR problem for health reform, but that's only part of the issue.
In Massachusetts, there is a stew of simmering revelations about apparent mismanagement of the Health Connector, a once working exchange created in 2006 that upon an update for the Affordable Care Act ceased functioning while consuming $1 billion.
Massachusetts health officials knew the Connector was in trouble for a year before its Oct. 1, 2013, launch date, according to an investigation by the Pioneer Institute, a public policy research organization.
"Instead of raising concerns about the project," a team of University of Massachusetts Medical School contractors and MassHealth "misled the public by minimizing the shortcomings of the contractor hired to build the website, asked state workers to approve shoddy work and appear to have covered up the project's abysmal progress in a presentation to federal officials," said Josh Archambault, a senior fellow at Pioneer Institute and author of the report.
Only a few of the Mass Connector's features were ready and only those who didn't need subsidies could enroll in a health plan at the go-live date, the report found. Early tests showed a 90 percent failure rate. Top leaders at MassHealth and the contractors tried to "conceal these shortcomings by misrepresenting the progress of the health insurance exchange to a number of stakeholders including the Centers for Medicare and Medicaid Services," the report contends.
"It's like when you're a kid and you do something wrong and you are waiting to be caught," one anonymous whistleblower told the Pioneer Institute. "We were waiting for people to recognize how bad this was, because we had done everything we could to escalate. We were always told to be quiet, it doesn't matter, don't say anything." (The lead contractor, CGI, also maintains that its staff repeatedly warned senior state officials.)
A very large consequence emerged for Massachusetts. Some 325,000 residents were placed in a transitional Medicaid program, absent any eligibility determination for exchange plans. The costs for that temporary Medicaid coverage and the other disruptions have yet to be tallied.
"The sad tale of the Connector revamp after the passage of the Affordable Care Act is not just another poorly procured and managed IT project," said Jim Stergios, executive director at the Pioneer Institute. "Its implications touch on the governance of state IT projects and potentially on fraudulent actions by state officials."
Earlier this year, the FBI and U.S. Attorney for Boston issued a federal subpoena seeking Health Connector records going back to 2010. No comment as of yet from MassHealth, other than that officials are complying with the federal records request.
In other states, exchanges are also going bust or struggling, as the federal deadline for being self-sustaining looms. Sixteen states and Washington D.C. originally set up their own exchanges, with some $4.2 billion in federal grants. At least half may be at risk of shutting down.
The Hawaii Health Connector is on track to shut down by September 30, after a failed idea to get $28 million in bonds to fund several more years and after the state legislature offered only $2 million out of $5.4 million requested.
About 37,000 residents enrolled in health plans through the exchange. It was supported with $200 million in federal grants, about $130 million of which has been spent.
Other state exchanges have fallen victim to poor management. Cover Oregon was shut down late last year, after $300 million in spending from federal grants, but irreparable technology and management problems.
Vermont Health Connect is just about on life support, after $126 million in federal funding failed to produce an exchange that could sell and enroll people in plans from two insurers. The demise of the exchange likely contributed at least in part to the Governor's decision not to pursue a state single payer system.
More state exchanges are staring down funding gaps, and considering higher health plan fees or requests for state monies. Also looming on the horizon is the Supreme Court decision on the issue of whether federal subsidies can be administrered through Healthcare.gov--the federal marketplace that is now actually working feasibly and that so many states are on track to sign onto as their exchanges fail.