A Monument To Government Waste

The “Healthcare.gov” Boondoggle Keeps Getting Worse

It seems “healthcare.gov” is very likely the most expensive web site ever designed – and it is still not working. The cost for setting up the site is fast approaching the princely sum of $ 1 billion (current estimate: $840 million, but is seems the costs keep exploding by the month, so this is not final). To us this sounds as if it is approximately 100 times overpriced. If it weren't so sad, it would be funny – no, strike that, it is funny. According to administration officials, in spite of its enormous cost to date, one can still not expect the site to be “perfect” after two years of tinkering by various tinkerers.

The question “how the marketplace works” greeting visitors on the welcome screen apparently must still be answered with “it doesn't”.

“Year two of Obamacare “won’t be perfect,” a top Obama administration official said today as the government’s website to sell health insurance plans continues to be developed.

Andy Slavitt, the principle deputy administrator of the Centers for Medicare and Medicaid Services, would not promise that the site, healthcare.gov, will be “fully ready” in November, when people can start buying insurance plans for 2015.

“It’s a bumpy process at times,” Slavitt, a former UnitedHealth Group Inc. executive, said at a congressional hearing. “We’ve got committed people who by-and-large are doing a good job. There will certainly be bumps.”

The budget to get the site ready for the next round of enrollments, starting in November, jumped to $840 million as of March, according to theGovernment Accountability Office. That’s a $163 million increase since December.

Accenture Plc (ACN), which took over building the site that failed at its introduction this past October, is expected to be paid $175 million as of June, an $84 million increase from the estimate in January when it signed a contract.

The data are part of testimony from the Government Accountability Office prepared for today’s hearing in the Republican-led House. The GAO places blame for the site’s rising price on poor planning and supervision of contractors who built the federal health exchange.

[…]

Healthcare.gov was built primarily by CGI Group Inc. (GIB/A) ofMontreal. While top Obama administration officials publicly blamed CGI for not meeting the terms of its contract, the company wasn’t severely punished, losing only about $267,000 of their fees, Woods is scheduled to testify.

[…]

While Accenture has been working since January to improve the site, parts of it still don’t work, according to prepared remarks for the hearing, including features intended to allow health insurers to easily exchange financial information with the government.

The result is “hundreds of millions of taxpayer dollars wasted on an exchange that is still not ready for prime time,” Representative Fred Upton, a Michigan Republican and the Energy and Commerce Committee chairman.

You really couldn't make this up. In terms of its sheer size, this boondoggle is quite likely record-breaking (not even the Pentagon's laughable attempts to fix its various accounting software systems come close in terms of money down the drain for a single project. Of course we cannot be sure about their totals, since Pentagram expenses remain completely non-trackable, inter alia due to the consistent failure of fixing the war bureaucracy's accounting procedures).

“How the marketplace works” – that's easy: it doesn't.

(Photo credit: Andrew Harrer | Bloomberg | Getty Images)

However, as a general principle, none of this should be surprising. Bureaucracies lack a profit motive, so they have no way of actually evaluating their expenses. Opportunity costs remain a closed book to them and there is no objective way of measuring success or failure, which only the profit and loss system of free enterprise can provide.

If there were a market for health insurance exchange web sites, then customers would choose the ones that work best. If such privately run sites existed, they would of course have to make money somehow, either by charging a user fee or charging insurers per insurance enrollment achieved through them, or perhaps just via ads. Undoubtedly it would be a lot cheaper in any case. But there is of course actually no marketplace for competing sites, as only one“affordable (hahaha!!) healthcare” web site exists, or rather partially exists at this juncture: the government's.

Yet another monument to the wastefulness of the State, this time in cyberspace.