Massachusetts Scraps Its Broken Obamacare Exchange, Requests $121 Million to Build Another One


Before Obamacare became law, Massachusetts was the only state in the nation with a functional, widely used health insurance exchange. But because the state's system didn't have all the fancy new features required under the new health law, including real-time verification of eligibility for subsidies, it began work on a new exchange to replace the old one.

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The Bay State received $179 million in federal funding to help build its new exchange, and last October, it replaced the old system with a new one designed to have all the nifty tricks that Obamacare requires, plus some more that state officials wanted.

But there was a problem. Unlike the old system, which could be slow but was generally functional, the new one didn't work. State officials began a repair effort, but ended up firing their tech contractor in March. Last week, the state announced that it was scrapping all work to date and starting over. Officials said they would attempt to install a completely new exchange that was based on existing technology, while also making backup plans to use the federal exchange if the new installation effort failed.

Naturally, the state now says it wants another $121 million from the federal government to get its exchange going. That's in addition to the nine-figure chunk of federal money they already wasted.   According to the Boston Herald, when you add up all the costs involved in attempting to build out an exchange for the state, that brings the total price tag to more than $500 million.

To recap: The state had an exchange that worked—well enough, in fact, that it was often cited as the model for the federal law. Officials scrapped that exchange for an expensive new one, which not only didn't work, but was eventually deemed beyond repair. And now the state wants $121 million in federal funding to try yet again.

It's the best they can do! They had no other choice!

"The reality is, this is it," Sarah Iselin, who is managing the state's exchange effort, said, according to the Herald. "When we look at what we can reasonably do for the fall, this is it. I wish we had more choices, but we don't. We're making the best of a really lousy situation."

I suspect that Sarah Iselin might benefit from Googling the phrase "sunk costs."

The state could probably just give up on its big dreams and join the federal exchange system for far, far less. Officials in Oregon, which also scrapped an expensive state-run exchange, say it will cost about $5 million to become part of the federal system.

Of course, that would require admitting failure, and giving up on the desire to have the fanciest, shiniest, most impressive insurance exchange in the nation. As the Herald notes:

Publicly, state officials — including Gov. Deval Patrick — have blamed the debacle largely on [tech contractor] CGI.

But documents obtained by the Herald and interviews with project staffers in February revealed infighting among top Patrick administration officials and an obsession with building "the absolute Rolls-Royce of any health exchange" that helped doom a website plagued with delays since March 2012.

Well, they certainly spent Rolls Royce money. But they didn't even end up with a Yugo.