Obamacare Web Cost Approaches $1 Billion as Fixes Still Needed

The Government Accountability Office places blame for the site’s rising price on poor planning and supervision of contractors who built the federal health exchange in testimony for a congressional hearing Thursday in the Republican-led House.

INN Breaking News, July 31, 2014

Alex Wayne

(Bloomberg) -- The price tag for healthcare.gov, the Obamacare website, is approaching $1 billion even as key features remain incomplete, congressional auditors said.

The budget to get the site ready for the next round of enrollments, starting in November, jumped to $840 million as of March, according to the Government Accountability Office. That’s a $163 million increase since December.

Accenture Plc, the company that took over building the site that failed at its introduction this past October, is expected to be paid $175 million as of June, an $84 million increase from the estimate in January when it signed a contract. The data are part of testimony for a congressional hearing today in the Republican-led House. The GAO places blame for the site’s rising price on poor planning and supervision of contractors who built the federal health exchange.

If the management doesn’t improve “significant risks remain that upcoming open enrollment periods could encounter challenges,” William Woods, the GAO’s director of acquisition and sourcing management, is scheduled to testify according to prepared remarks released by the Energy and Commerce Committee.

After frantic repairs to healthcare.gov in October and November, about 8 million people signed up for coverage by the end of the first enrollment period in April. Enrollment for 2015 begins Nov. 15.

‘Keenly Aware’

“We are keenly aware of the challenges of Year Two in a new program of this scale, particularly one that faced significant challenges in its first year,” Andy Slavitt, the principle deputy administrator at the Centers for Medicare and Medicaid Services, said in prepared testimony. “We are still working with brand new processes and technology, we are still establishing an understanding of unique consumer behavior and needs, and we are reacting to and solving new problems.”

Slavitt was hired from UnitedHealth Group Inc. in June by the then new Health and Human Services Secretary, Sylvia Mathews Burwell, to oversee development of the site, among other jobs. His remarks at the hearing are his first as a public official.

Healthcare.gov was built primarily by CGI Group Inc. of Montreal. While top Obama administration officials publicly blamed CGI for not meeting the terms of its contract, the company wasn’t severely punished, losing only about $267,000 of their fees, Woods is scheduled to testify.

CGI’s View

Spokesmen for CGI didn’t immediately respond to an e-mail seeking comment. Cheryl Campbell, senior vice president for CGI’s U.S. government business, said in October that changing requirements from the Obama administration and a piece of healthcare.gov built by another contractor contributed to the site’s collapse.

The company “has worked diligently to develop the site,” she said, and passed eight technical reviews before it opened for business.

While Accenture has been working since January to improve the site, parts of it still don’t work, according to prepared remarks for the hearing, including features intended to allow health insurers to easily exchange financial information with the government.

The result is “hundreds of millions of taxpayer dollars wasted on an exchange that is still not ready for prime time,” Representative Fred Upton, a Michigan Republican and the Energy and Commerce Committee chairman, said in an e-mail.

‘On Budget’

A spokesman for Accenture, James McAvoy, said in an e-mail that the increase in the value of the company’s contract is the result of CMS assigning it more work. “Accenture is delivering all of our work for CMS on-time and on-budget,” he said.

CMS, which is in charge of the site, said it agreed with most of the GAO’s recommendations to improve management of the project.

“CMS takes its responsibility for contracting oversight seriously and has already implemented contracting reforms that are more extensive than the recommendations in the report, including ending its contract with CGI and moving to a new type of contract with Accenture that rewards performance,” Kevin Griffis, a spokesman for the agency, said in an e-mail.

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