By Melissa Attias, CQ Roll Call
July 31, 2014 -- A key Obama administration official told House lawmakers last week that there will be bumps in the road during the health law's forthcoming second open enrollment period for people to buy coverage but that the situation is "vastly different" from the rocky rollout last fall.
Andy Slavitt, principal deputy administrator at the Centers for Medicare and Medicaid Services (CMS), noted that the federal insurance exchange website is already up and running and that officials are making improvements in a much less risky manner with frequent releases over the course of the summer.
When the first open enrollment period began on Oct. 1, 2013, the website was plagued with problems that sparked fierce public scrutiny and backlash from opponents of the law.
Slavitt's comments before the House Energy and Commerce Oversight Subcommittee followed the release of a new report from the Government Accountability Office (GAO) that offered a critical look at the contracting for the federal exchange website.
William T. Woods, GAO's director of acquisition and sourcing management, said in his written testimony that CMS needs a risk mitigation plan to address outstanding issues.
"Unless CMS improves contract management and adheres to a structured governance process, significant risks remain that upcoming open enrollment periods could encounter challenges," he wrote.
Looking back to the first enrollment period, Woods confirmed during the hearing that the files his agency reviewed suggest that people within CMS knew the website would not work on Oct. 1, drawing concern from lawmakers from both parties. He said GAO found some indication that estimates from the spring of 2013 found that the federal exchange would only be 65 percent complete by the Oct. 1 deadline. But he said he did not have evidence that CMS Administrator Marilyn Tavenner or former agency official Gary Cohen knew the website would not work when they testified before the committee that it would be ready.
Slavitt was also asked about the inconsistencies in applications for coverage submitted through the federal exchange and how many people were affected. He estimated that a couple million people had inconsistent information, roughly half of which arose from income changes that will force recipients to go back to the website and make adjustments. Of the other half, he said federal officials have cleared 425,000 inconsistencies as of July 1 and that more 90 percent of those were in favor of the individual who had more updated information than the government.
Slavitt also said they're learning that some of the discrepancy problems are "a fact of life." But the change for next year, he added, is that the officials have software that allows them to address the inconsistencies faster.
Asked about premium rates for next year, Slavitt said the rate increases that are publicly available from some states thus far have been in the mid-single digits.
"While this isn't going to be true for every single individual in every single county in America, by and large the early results look positive–very positive," he said, also noting that there will be greater choice in the exchange than last year.
In addition, Slavitt said that, to the best of his knowledge, no one has successfully penetrated the security system for the federal exchange website.
In his prepared testimony for the second panel, Woods said GAO found that CMS "undertook the development of healthcare.gov and its related systems without effective planning or oversight practices, despite facing a number of challenges that increased both the level of risk and the need for effective oversight." CMS program and contracting officials said the process was aggravated by "compressed time frames and changing requirements," Woods wrote, with a desire to meet project deadlines affecting a number of decisions.
GAO also noted that the type of contract chosen for the federal exchange and the data hub is considered to be high risk because it could lead to higher costs and the certain payments are made whether or not the work is completed, which boosted the need for oversight.
The estimated costs for developing the federal exchange increased from a $56 million initial obligation to more than $209 million from September 2011 to February 2014, the agency said. The data hub costs also rose from a $30 million obligation to nearly $85 million.
The GAO additionally said that CMS moved a readiness assessment for the federal exchange from March to September 2013 without receiving required governance approvals. That meant that the agency launched the website without verifying that it met required performance metrics. And GAO found about 40 instances during the exchange's development where CMS staff authorized contractor requests to spend money for additional work without proper approval, totaling more than $30 million.
According to Woods' testimony, CMS detected significant performance problems with CGI Federal, the contractor for the federal exchange, as the Oct. 1 deadline approached. But the agency only took limited steps in response. In the end, CMS declined to turn over roughly $267,000 in requested fees, or about 2 percent of the $12.5 million paid to the contractor.
CMS then awarded a new contract to Accenture at the start of 2014 to continue development of the federal exchange, GAO said. The pact had an estimated value of $91 million, but costs on the contract had risen to more than $175 million as of June 5 and the system necessary to carry out financial interactions with insurers was still unavailable. The watchdog group said that is currently scheduled to be implemented incrementally through December.
The new GAO report includes five recommendations for CMS, and Slavitt said he agrees with all of them. But he did take issue with the watchdog's characterization of the Accenture contract. While he said he thinks it was characterized as ballooning in costs, he noted that there was an initial contract before the work was scoped out.
Asked about steps the agency is taking to implement the recommendations, Slavitt said it's now very clear who can give work to the contractor and how it gets approved, and that Accenture has skin in the game to ensure it delivers. He also said there is intensive management of the project on a daily basis and early-warning indicators, among other things.
"Fortunately or unfortunately, the GAO report wasn't news to people at CMS. I think the people at CMS who've worked awfully hard but lived through that nightmare don't want to go through that again. So I think actions were underway well before seeing this report," Slavitt said.
