Maryland is ditching the health insurance exchange it has spent tens of millions in federal and state dollars to develop, and Gov. Martin O'Malley's critics are heaping well-deserved condemnation on him for the debacle. Where they go wrong is in suggesting that he's making the same mistake all over again.
Rep. Andy Harris, who has quite correctly sought to remedy the lack of accountability for the system's failure thus far, criticized the governor for adopting Connecticut's system, which he said will cost tens of millions more and be uncertain to work, instead of using the federal government's exchange, which he implied would be free of cost and risk. Republican gubernatorial candidate Larry Hogan sounded a similar theme, saying in a statement that "states such as Virginia opted not to spend any money developing an exchange yet boast enrollment rates far greater than those of Maryland."
The truth is, switching to the federal government's exchange is no simple matter, is not without risk and would most assuredly not be free. The same is true of the decision to adopt Connecticut's system, but there is good reason to conclude that it was the less costly and less risky option.
The critics are right that the federal government isn't charging states for use of healthcare.gov. But that website also does not provide a key function required by the Affordable Care Act, which is a modernization of Medicaid eligibility and case management rules and systems. Maryland's current system (which, incidentally, it also imported from Connecticut) is more than 20 years old and is programmed in the archaic COBOL language. It lacks the flexibility to migrate to a new Medicaid eligibility system that was designed to make the process simpler for individuals and to provide the opportunity to automatically verify income and other components of eligibility with the IRS.
All states had to upgrade their Medicaid systems, and those that chose to use the federal health care exchange had to do it as a stand-alone information technology project. Virginia, to use Mr. Hogan's example, approved a contract in 2012 that authorized spending $63.5 million on the effort, though according to a January report, the modernization has proved more complicated and time consuming than initially expected and will cost at least an additional $12.5 million. Maryland attempted to upgrade its system in one fell swoop along with the creation of its exchange. Connecticut did, too. Connecticut's system worked; Maryland's didn't.
Maryland will not be paying for the use of Connecticut's software, but it will incur some costs in customizing it and testing it. For example, Maryland's Medicaid eligibility rules vary somewhat from Connecticut's, though because the new system is much more modern than our existing one, those parameters can be changed without altering the basic code of the software. Maryland will have to test the system to make sure it interfaces correctly with the insurance carriers here, with our Medicaid system and with the IRS, and it will have to test its capacity to handle consumer demand. All that is expected to cost about $40 million to $50 million. It's likely that the federal government will pick up most of that tab. Additionally, state officials think they can repurpose some of the resources they bought to build the failed site, and Governor O'Malley has indicated that Maryland will take legal action in an effort to recoup some of the payments to the vendors so far.
An analysis by Optum/QSSI, the Columbia-based firm that both helped fix healthcare.gov and has been working with Maryland officials since January, estimated the expense of switching to the federal site as comparable to the Connecticut option, but with one major caveat: That doesn't include the cost of developing new Medicaid eligibility software. That means going with the federal site would cost tens of millions more than using Connecticut's and would require the state to undertake another major information technology project with a six-month deadline. Given recent history, that seems like a bad idea.
The big question is this: The same people who made what in hindsight appear to be colossally bad decisions about what systems to employ in the development of our health insurance exchange website and back-end software are the same ones who are now deciding to adopt Connecticut's system. Why should we have any confidence that this will work out better? The answer is we won't know for sure until enrollment opens again on Nov. 1. Any choice Maryland made at this point would involve risk. But there is a difference between now and three years ago. Then, we had a prospective vendor's promise that its system would work. Now we are adopting a system we have seen in operation. That's no guarantee that things will go smoothly six months from now, but its the best assurance we're going to get.
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