Lack of 'strategy' building big Obamacare site: Report

The people in charge of HealthCare.gov didn't have their act together before, but they do now—(they promise).

The federal agency that runs HealthCare.gov didn't have an "overarching" strategy for hiring the contractors that built the major Obamacare enrollment site—and then compounded that mistake with a series of other management failures as the website was created, an official report found.

It said that the Centers for Medicare and Medicaid Services "did not adequately plan for [HealthCare.gov] contracts," and subjected only 2 out of the 6 "key contracts" to an oversight review board prior to granting an award.

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CMS also did not review the past performance of two contractors before awarding them significant contracts, and for most of the key contracts "chose a contract type that placed the risk of cost increases solely on the government," according to the report by the inspector general's office of CMS' parent, the Health and Human Services Department.

The report issued Tuesday sheds further light on what happened in the years preceding the disastrous October 2013 launch of HealthCare.gov. The IG's office plans on doing further reports on the site and its development.

Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner testifies before the House Ways and Means Committee.
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Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner testifies before the House Ways and Means Committee.

Despite the expenditure of hundreds of millions of dollars to build it, HealthCare.gov was unable to enroll significant numbers of people in health insurance plans for the first several months of operation. A repair effort allowed it to sign up millions of people in the following months, but the technological debacle was a black eye for the Obama administration's signature health-care reform effort.

The IG's report, which was first reported by the Washington Examiner, came to light just days after CMS Administrator Marilyn Tavenner announced Friday that she is resigning, effective at the end of February.

While there is no indication that Tavenner's departure was linked to the imminent release of the report, her tenure will be remembered to a large degree for the troubled launch of HealthCare.gov.

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In response to the disclosure of the report, an HHS spokeswoman said: "CMS didn't wait for the IG report to make changes. It has already implemented acquisition reforms that eclipse the recommendations in the report, including ending the CGI marketplace contract and moving to a new type of contract with Accenture that rewards performance."

CGI Federal had been the lead contractor for the site, before it was booted in favor of Accenture last year.

"Our goal is to limit costs, to continue to identify areas where we can improve and to be accountable for our progress," the HHS spokeswoman said.

She also said that CMS has come a long way since the initial planning of HealthCare.gov and awarding of the contracts, and that the agency is aware that it still has work to do to improve the federal Obamacare exchange, which serves residents in the 37 states that are not operating their own insurance marketplaces.

The IG's report noted that CMS has said that 60 contracts "were awarded to support the development and operation" of HealthCare.gov. As of last August, CMS had paid out $500 million on nearly $800 million obligated for those contracts.

Despite those large dollar amounts, the IG's report reveals a lack of strategy for awarding those deals to contractors.

The report notes that the CMS official in charge of acquisition and grant management "acknowledged their was no acquisition strategy." That official also told investigators that "CMS program managers were not aware of the requirement" under HHS regulations that it have such a strategy.

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The report also points out that CMS' decisions on how to award contracts for the exchange "may have limited the number of qualified companies that competed for contracts and the number of technically acceptable proposals from which CMS could choose."

Out of the 60 HealthCare.gov contracts, just five were newly granted, while the rest "were awarded under previously established contracts," the report said.