Four States Wasted $474 Million On Healthcare Exchanges That Didn't Work

| by Jared Keever

The federal government sent $474 million to four states to set up healthcare exchanges that never worked. Now state and federal officials must decided whether Massachusetts, Oregon, Nevada and Maryland will need more money to repair the failed websites or if they will need  help to transition to the federal exchange.

The exchange websites were intended to facilitate the purchase of private healthcare plans under the new rules of the Affordable Care Act, the federal legislation often referred to as Obamacare. Politico reports that the authors of the bill had originally intended that most states would take that course of action, offering a federal exchange only as a backup plan. 

In practice though the federal exchange site, HealthCare.gov, is now serving 36 states. And that number seems likely to grow as the states who failed try to decide what they will do before the next open enrollment period.

Oregon, where $248 million was spent, never enrolled a single person through its website and has already announced that it plans to join the other 36 states on the federal site.  

Nevada spent $51 million and has not yet decided if it will join those other states or attempt to repair its own site.

Sen. Harry Reid, D-Nev., said Xerox, the company the state hired to design its exchange, is responsible for the problems. 

“They’re the ones that should be held accountable,” he said Tuesday.

Xerox officials said the failed exchange can be salvaged and the long list of problems can be easily addressed.

“While the list may, in fact, look daunting … when you get under the covers and start to look at the outputs in terms of the progress that we’ve made over the last several months, I am actually less daunted,” said David Hamilton, a Xerox official working with the state.

Officials in Maryland still believe that a state exchange is within their grasp. The state spent $118 million in federal money last year for a failed program, but there is hope among lawmakers that the state can adopt technology being used in Connecticut and avoid having to join HealthCare.gov.

Massachusetts is moving ahead to repair its exchange but is also pursuing plans to join the federal website if those repairs don’t work.  

Josh Archambault, of the Foundation for Government Accountability, said that two-pronged approach is foolish. 

“Instead of a quixotic sprint to rebuild the whole site in five months, state officials should instead pivot quickly to utilize the federal exchange, saving taxpayers tens of millions of dollars in the process,” he said.

He may be right. A recent blog from the Heritage Foundation points out that the federal government sent over $4 billion to states to help them build their own exchanges. Experts say that other states, including Minnesota and Hawaii, have also failed. 

In contrast, only $693 million has been spent on the federal site that, after some initial stumbling, managed to meet the enrollment goals set by the White House.

Sources: Politico, Heritage Foundation