After the well-publicised last-minute save of the Healthcare.gov federal health insurance exchange in 2013, there was a general sighing of relief from the Affordable Care Act's supporters. The months of suspense and error codes had been very painful, but finally the federal exchange was working more or less, and millions were able to enroll in time for the deadline (even if they couldn't then find a doctor who would accept their plan).
It seems that such confidence may have been misplaced; the federal site was fixed but a number of states decided to implement their own exchanges and it hasn't turned out too well for many of them, and people with badges are looking at Oregon's exchange quite hard:
The various state exchanges were funded by the U.S. Center for Medicare and Medicaid Services. As of March 28, it had awarded $4.7 billion in grants nationally. Oregon has been awarded $303 million in five increments.Oregon has a population of about 4 million people. Since ACA sign-up is about 2.5% of the US population, let's be generous and say 3% for Oregon; that's $303 million for 120K people, or about $2500 per sign-up - just for the website. They've now dropped the idea entirely and fallen back to use the federal site which at least kind of works.
Typically in federally funded projects, states must show evidence they've met certain milestones before they get additional grants. In Oregon's case, the Oregon Health Authority at first, and later Cover Oregon, had several "gate reviews" where federal officials reviewed progress on the project.
Documents show Oregon may have presented a misleading picture to the federal government.
Most of the money went to Covered Oregon's contractor Oracle, who probably won't be promoting this as a triumph because the website has not managed to enroll a single private customer:
After discovering a series of technical problems before the Oct. 1 launch -- including inaccurate calculations of the tax subsidies for which consumers would be eligible -- Cover Oregon decided to scratch its plans to go live along with the rest of the country and never managed to get online enrollment started.This hasn't come from out of the blue: back in November Oracle were being grilled about missed deadlines. Their VP Tom Budnar reported that they were bringing in an Oracle "SWAT team" but it would appear their efforts were in vain. Oracle's stock price has steadily risen from $39.5 to $42 in the past month, so at least Mr. Budnar doesn't have to worry about loss of public confidence in the company. Mind you, a search of Oracle's website doesn't show any results with his surname, so maybe they're already planning to cut him loose - if they've not done so already. He's going to have a difficult round of interviews if that's the case; I'd advise him to take a year of sabbatical and hope most people have forgotten about Oregon...
Oregon is egregiously bad, but unfortunately not too far out of line with other states' exchanges. As NPR reports this week, costs per enrollee of the exchanges have made the federal effort look like a model project:
Even Covered California, the most efficient of the state-run exchanges at $758 per enrollee, still spent more than the average for the federal exchange. And California was the only state-run exchange with a per-person average under $1,000.Okay, so why did this cost so much? We can look at a comparable solution in the private sector in the USA: TurboTax (web edition) which is delivered by the firm Intuit. Filing federal and state taxes in the USA is a substantial undertaking; most people either go to a tax preparer (H+R Block is a popular one for lower-income taxpayers) or use some tax prep software. Filling in Form 1099 and its many supplemental forms by hand is a great way to lose money, get audited, develop a drinking habit and hate of humanity, or all three. TurboTax is a popular web system for filing taxes; it does automatic imports of data from a number of sources (major employees and brokerages), has a user-friendly interface, lets you submit forms electronically, and generally makes tax preparation a breeze. My expat colleagues who have used TurboTax sing its praises as being slightly easier to use than the short-form UK tax form, performing substantially more complex calculations and optimizations.
US tax season is not dissimilar to healthcare signups - a short period (1-2 months) after you get the tax information from your employer and brokerages and before the April 15th deadline, usage spiking in evenings and on weekends. So lots (millions, I'd estimate) of users crowd onto the TurboTax site in a short time, with downtime or even slowness being commercially unacceptable - there are several alternatives to TurboTax. Turbotax covers its costs and generates income by serving basic users for free, simple uses for $30 per user and complex uses for $50 per user (state filing is an additional $20 or so). You can even cover your costs if you use Amazon heavily.
It's not an exaggeration to say that if the states and federal goverment had contracted TurboTax's Intuit to build and operate the site for $70 per user - one tenth of the current cost in reality - then they could probably have made it work. They already have the storage and serving systems capable of handling that level of traffic, the marginal cost is probably less than developing from scratch. So why didn't the states and feds do this? Why did Oregon contract Oracle? Because Oracle and other consulting firms are very good at bidding for federal and state contracts. They're pretty awful at making them work, but this doesn't matter - strange to relate, contracts are not issued and paid based on whether the delivered solution actually works. The incentives in government contracting have generated an ecosystem where actual ability to build working systems is one of the less important characteristics for which the environment selects.
The defence of the federal contracting system (instead of assigning the contract to a company who might actually be able to make the contract work) starts with "we have to protect the taxpayer from being exploited in no-bid contracts." Except that it seems that the taxpayer is already being exploited. If Intuit charged $400 per user, made out like a bandit, gave bonuses through the company right down to the mailroom boy's cat and sent the execs off on 1 year fact-finding trip to the Bahamas, the taxpayer would still come out ahead, and would have the bonus of a website that actually worked well and was user-friendly.