Actually, Obamacare State Exchanges Have Wasted $1.2 Billion
Phil Kerpen
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Kyle Cheney of Politico is a solid, straight news reporter.  So I was a little surprised this morning to see his analysis of state Obamacare exchange spending features numbers much smaller than the ones I have been using, most notably a figure of $248 million for Oregon and just $57 million for Massachusetts.  Total federal grant funding to Oregon’s failed exchange, according to CMS, is $305 million.  Massachusetts, according to CMS, is at $179 million.  These are huge disparities.

Kyle explained to me on Twitter than they chose to report the amount these states admit to having already spent, rather than the amount federal taxpayers have been forced to send to the states, which he believes to be to be the more significant number.  I strongly disagree.

First, it is highly likely the states will keep the full amounts, because there is no obvious mechanism, unfortunately, to force them to return the funds.  Consider Oregon, which has about $57 million remaining. Ace reporter Chelsea Kopta of KATU – which has owned the Cover Oregon scandal story – immediately asked Oregon’s state CIO Alex Pettit about the unspent funds when the state exchange voted to shut down. His answer? They’re keeping it all.

Second, the amounts “spent so far” are self-reported by the states and almost certainly – in the case of the states with scandalous failures – lowball estimates to minimize political embarrassment.  The only absolutely accurate numbers we have are federal grant data.

Third, as federal taxpayers, we want to know how much we have spent, not how much the states have spent.  So far, that bottom line, according to HHS? “As of January 2014, 37 states and the District of Columbia had received over $4.9 billion in grants to operate Marketplaces since 2011.” That number will continue to climb as more grants are announced, including potentially another $120 million requested by Massachusetts to build a new exchange to replace the defunct exchange they are shutting down.

So how much of the nearly $5 billion spent by federal taxpayers on state exchanges has been pure waste, fraud, and abuse?  Let’s review the worst of the worst.

There are three states that have officially shut down.

Massachusetts was the latest; they made it official last week.  Remarkably, this is a state that already had a functioning state health exchange under RomneyCare; after receiving $179 million from federal taxpayers they were able to break that existing exchange beyond repair.  They are now pursuing a dual-track approach, requesting another $120 million from federal taxpayers to start all over again, while also preparing to transition into the federal Healthcare.gov is the reboot effort fails.  Hey, why not try? It’s not their money.

Oregon pulled the plug last month on the Obamacare exchange the Washington Post once indicated was the White House’s favorite.  That comes on the heels of Maryland scrapping its health exchange - although, oddly, they intend to build a new one based on technology from Connecticut. Again, why not if federal taxpayers are willing to pay?

Here’s the total federal taxpayer tab for the three states that have officially shut down.

How Much Did Federal Taxpayers Pay for Three Shuttered Exchanges?

Maryland

$171,013,111

Massachusetts

$179,036,455

Oregon

$305,206,587

Total

$655,256,153

Source: CMS  

Some other states are also struggling mightily, and might soon pull the plug as well.

Politico included Nevada in their “already shut down” list, and so did the initial version of this article.  But we’re updating to move them into this second section, because even though the state’s Health Information Exchange shut down was back in January, the state’s Obamacare exchange, Silver State Health Insurance Exchange, is still in limbo.  According to a report they commissioned DeLoitte to issue the options are to “undertake significant remediation and enhancements,” license technology from another state, or move into the federal Healthcare.gov.

Hawaii’s “Health Connector” has signed up the smallest number of people of any state in the country and has no plans to finance their operations moving forward.  Their current plan appears to be to all-but-close-up-shop and outsource all of the exchange functions to the state Department of Human Services.  The state’s leading insurance company says it is time to pull the plug.  Expect this one to be official any day now.

Minnesota’s exchange has been a disaster, and they recently brought in DeLoitte on a nine-month $4.95 million contract to fix it. It is unclear whether they will be successful.  Cheney’s Politico article notes Minnesota and Hawaii may be the next states to pull the plug.

Vermont, the tiny state with giant ambitions to use Obamacare as a stepping stone to single-payer, government-run health care is still facing enormous problems dealing with its tiny population.  They are using CGI, the same vendor that failed on the federal healthcare.gov, and have given them a deadline of July 2 to get the site working.  It is unclear what Vermont will do if they fail to deliver by that date.

So here’s the billion dollar question – how much of your federal taxpayer money went to these states for their failed and failing Obamacare exchanges?

Three Officially Failed States

$655,256,153

Nevada

$90,773,768

Hawaii

$205,342,270

Minnesota

$155,020,465

Vermont

$172,641,081

Total

$1,279,033,737

Source: CMS  

Check my math for yourself.

How Much Did Federal Taxpayers Pay for 7 Really Bad Exchanges? $1,279,033,737

Federal Grants for Oregon’s State Obamacare Exchange

Award Amount Award Date
State Planning Grant

$1,000,000

9/30/2010

Early Innovator Grant

$48,096,307

2/16/2011

Establishment Grant Level One

$8,969,600

8/12/2011

Establishment Grant Level One

$6,682,701

5/16/2012

Establishment Grant Level One Administrative Supplement

$2,195,000

9/27/2012

Early Innovator Grant Administrative Supplement

$11,820,905

1/17/2013

Establishment Grant Level Two

$226,442,074

1/17/2013

Total:

$305,206,587

Source: CMS

Federal Grants for Maryland’s State Obamacare Exchange

Award Amount Award Date
State Planning Grant

$999,227

9/30/2010

Early Innovator Grant

$6,227,454

2/16/2011

Establishment Grant Level One

$27,186,749

8/12/2011

Establishment Grant Level Two

$123,048,693

8/23/2012

Establishment Grant Level Two Administrative Supplement

$13,550,988

7/23/2013

Total:

$171,013,111

Source: CMS

Federal Grants for Massachusetts’s State Obamacare Exchange

Award Amount Award Date
State Planning Grant

$1,000,000

9/30/2010

Early Innovator Grant*

$35,591,333

2/16/2011

Establishment Grant Level One

$11,644,938

2/22/2012

Early Innovator Grant Supplement

$8,895,029

3/21/2012

Establishment Grant Level One

$41,679,505

9/27/2012

Establishment Grant Level Two

$80,225,650

1/17/2013

Total:

$179,036,455

*”a multi-state consortia proposal led by the University of Massachusetts Medical School and will benefit individuals and small businesses in Connecticut, Maine, Massachusetts, Rhode Island, and Vermont…The proposed project approach will be to create and build a flexible Exchange information technology framework in Massachusetts and share those products with other New England states.”
Source: CMS

Federal Grants for Nevada’s State Obamacare Exchange

Award Amount Award Date
State Planning Grant

$1,000,000

9/30/2010

Establishment Grant Level One

$4,045,076

8/12/2011

Establishment Grant Level One

$15,295,271

2/22/2012

Establishment Grant Level One

$4,397,926

5/16/2012

Establishment Grant Level One

$9,020,798

7/9/2013

Establishment Grant Level One

$6,998,685

1/22/2014

Establishment Grant Level Two

$50,016,012

8/23/2012

Total:

$90,773,768

Source: CMS 

Federal Grants for Hawaii’s State Obamacare Exchange

Award Amount Award Date
State Planning Grant

$1,000,000

9/30/2010

Establishment Grant Level One

$14,440,144

11/29/2011

Establishment Grant Level One

$61,815,492

8/23/2012

Establishment Grant Level Two

$128,086,634

4/8/2013

Total:

$205,342,270

Source: CMS 

Federal Grants for Minnesota’s State Obamacare Exchange

Award Amount Award Date
State Planning Grant

$1,000,000

9/30/2010

Establishment Grant Level One

$4,168,071

8/12/2011

Establishment Grant Level One

$26,148,929

2/22/2012

Establishment Grant Level One

$42,525,892

9/27/2012

Establishment Grant Level One

$39,326,115

1/17/2013

Establishment Grant Level Two

$41,851,458

10/23/2013

Total:

$155,020,465

Source: CMS 

Federal Grants for Vermont’s State Obamacare Exchange

Award Amount Award Date
State Planning Grant

$1,000,000

9/30/2010

Establishment Grant Level One

$18,090,369

11/29/2011

Establishment Grant Level Two

$104,178,965

8/23/2012

Establishment Grant Level One

$2,167,747

1/17/2013

Establishment Grant Level One Administrative Supplement

$4,517,000

1/29/2013

Establishment Grant Level One

$42,687,000

7/9/2013

Total:

$172,641,081

Source: CMS 

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