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Finding lessons to learn from Md.'s health exchange

Perhaps the most troubling thing about the fiscal audit of the Maryland Health Benefits Exchange that legislative auditors released Friday is that the problems they found — violations of procurement policies for single-source and emergency contracts, failures to verify that the work it paid for was actually done, insufficient protections for consumers' personal data and more — are likely just the tip of the iceberg. This audit excluded analysis of 13 contracts totaling $209 million that made up the bulk of the work to set up the flawed exchange in the first place, and that may be where the real problems lie. Those contracts are subject to a separate analysis that will be released later, and it is in that evaluation that we stand the best chance of learning in detail how it is that Maryland wound up with one of the worst performing exchanges in the nation.

Much of what this audit focuses on is the scramble of actions the state took to recover after its website crashed on the first day of operations, and we have at least some sympathy for the desperate measures officials' took at that time. The clock was ticking on the first open enrollment period for the Affordable Care Act, and the ability of hundreds of thousands of Marylanders to obtain health insurance depended on developing a minimally functional system — online and otherwise — under tremendous deadline pressure.

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Lacking though financial controls may have been in some respects during that period, the effort at least produced results. Moreover, the most crucial management decision of that time, the choice to scrap the flawed website Maryland had created and instead to modify Connecticut's successful software, has worked out well. Nonetheless, this audit does offer some clues to what lessons we need to learn from the health exchange debacle to make sure nothing like it happens again.

When legislators voted to create the Maryland Health Benefits Exchange, they structured it in such a way that it was generally exempt from state procurement laws, though it was required to develop its own policies and procedures. That didn't mean it got a complete pass from such good government practices as competitive bidding; indeed, there were multiple bidders for the initial contract to develop the website, and the company that won the award scored highest. But as the agency's own response to the audit makes clear, that left it with less robust processes than it might otherwise have had.

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MHBE Executive Director Carolyn Quattrocki said Friday in response to the audit that during the period in question, the exchange was "a young agency still in the process of putting in place best practices when it comes to fiscal oversight and protocols." The agency disagreed with some of the auditors findings — particularly the question of whether it violated its own procedures for emergency and sole-source contracts — but officials nonetheless say they have taken a number of steps to improve oversight of contracts and procurement, including the hiring of a consultant to strengthen its procedures, train staff and monitor contract performance.

All that's well and good, but it begs the question of whether the state would not have been better off if the agency did not have to develop its own protocols and instead could have been governed by the state's general procurement rules. There's no way to know whether things might have turned out differently if the agency had been required to get contracts approved through the Board of Public Works, for example, but it certainly couldn't have hurt.

The question is where to go from here. Gov. Larry Hogan, who was a major critic of the exchange's performance during his run for office, has been relatively quiet about it since he was elected. That likely reflects the fact that the exchange, since switching to the Connecticut system, appears to be performing well, as well as the reality that any reform effort he put forward would be seen by the Democratic legislature as overly political.

However, there is no reason for procurement reform to be a partisan cause. Governor Hogan, a Republican, and Comptroller Peter Franchot, a Democrat, have been outspoken on the subject — the two have teamed up numerous times to reject or delay contracts when they feel the procurement process hasn't followed best practices, even though at this point that mostly entails the governor beating up on his own agencies. The legislature should get into the act, too. We expect to see a robust set of hearings into the findings of this audit and the next one. After all, Maryland may not soon see a procurement process weighted by so many logistical, technological and political pressures as this one, but every year it allocates far more on contracts than what was wasted on the exchange. We need to make sure that's money well spent.

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