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'Exchange Innovator' States Get $241 Million in Grants

By Dena Bunis, CQ HealthBeat Managing Editor

February 16, 2011 – Seven states that Department of Health and Human Services (HHS) officials say are leading the way in designing the information technology needed to run the health insurance exchanges created by the health overhaul law will share $241 million in "early innovator" grants.

"These states are leading the way on building a better health insurance marketplace, one that allows individuals and small-business owners to pool their purchasing power to negotiate lower rates,'' HHS officials said in a statement announcing the grants.

The states getting the grants are Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin and a consortium of New England states. The idea is for these states to use the grant money to create exchange IT models that can be adopted and tailored by other states. All of the states labeled as early innovators have committed to ensuring that whatever technology they develop can be reused and transferred to other exchanges.

"Everyone wins," Centers for Medicare and Medicaid Administrator Donald Berwick said in a statement. "This grant program means that states don't have to waste money reinventing the wheel, and consumers get the best of the best."

HHS officials say a "sophisticated, consumer-friendly IT infrastructure" will be key to the success of the exchanges which, according to the health law (PL 111-148, PL 111-152) must be up and running in 2014. States have the option of creating their own exchanges or deferring to the federal government to run them.

The state agencies receiving the grants and the amounts include: Kansas Insurance Department, $31.5 million; Maryland Department of Health and Mental Hygiene, $6.2 million; University of Massachusetts Medical School for the New England consortium, $35.6 million; New York Department of Health, $27.4 million; Oklahoma Health Care Authority, $54.6 million; Oregon Health Authority, $48.1 million, and the Wisconsin Department of Health Services, $37.8 million.

The money for these seven states are getting is substantially more than the $1 million planning grants states received at the beginning of the implementation process.

"This is one of the more costly aspects of setting up an exchange,'' Paul Dioguardi, HHS director of intergovernmental affairs, said during a conference call with reporters. Dioguardi said they want these IT systems for the exchanges to be "first class" and when the work is complete there will be seven off-the-shelf systems that other states can use without having to spend the kind of development money that these grants will fund.

The announcement of the grants is being made even as Republican lawmakers in the House are trying to pare down federal spending for this year. But the money for these grants was authorized and made part of mandatory appropriations so are not subject to any congressional actions now being taken on federal spending.

Governors in three of the states that received the awards–Kansas, Wisconsin, and Oklahoma–signed on to a recent letter from GOP governors to Sebelius calling on HHS to be more flexible in a number of areas of implementation of the health law, including exchanges and Medicaid maintenance of effort.

Dioguardi said funding these approaches in these different states is an example of HHS being flexible when it comes to the development of the exchanges.

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