Report: Health Exchange Glitch Could Cost $30.5M

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ANNAPOLIS, Md. — A problem with Maryland’s defective health care exchange could cost the state $30.5 million, because the state is unable to determine whether people remain eligible for Medicaid, according to a report by state budget analysts released Thursday.

The exchange can’t convert income data from the existing Medicaid enrollment system into a calculation needed to review whether enrollees are qualified “because of a variety of system architectural flaws,” the report by the Maryland Department of Legislative Services said.

As a result, the state has agreed with the federal government to a six-month delay in determining eligibility, meaning that payments will continue to be made to people who are not eligible until the system is fixed. The report estimated the delay will cost the state $17.8 million in fiscal year 2014 and $12.7 million in fiscal year 2015.

The 31-page report also said “there is significant uncertainty about the way forward” with future information technology spending that will be needed.

Maryland’s health exchange has been plagued by computer problems that have made it difficult for people to enroll in private health care plans since its debut Oct. 1. Although improvements have been made, computer problems remain. As of Feb. 14, 31,112 people have enrolled in qualified health plans.

State officials have decided to stick with the exchange through the open enrollment period that ends March 31. The state is evaluating alternatives with an eye toward the next enrollment period that begins in November. It is considering adopting technology developed by another state, joining a consortium of other states, partnering with the federal exchange or making major fixes to overhaul Maryland’s existing system.

The report said the state may need to develop an interim solution while a long-term solution is being developed. The report said one of the solutions being discussed for qualified health plans is to adapt the Connecticut system for Maryland. However, that process would likely take at least nine to 12 months, pushing up against the next open-enrollment period.

“Not having a solid backup plan could lead to a similar situation faced by the state in October 2013,” the report said.

The report also noted that from the outset, the development of the exchange was “a high risk undertaking.” That’s because the project was developed under tight deadlines and requirements for the project were constantly evolving. The report also said the level of system complexity was high, based on the need for interoperability with to-be-developed federal databases and existing state systems.

“Maryland chose to increase the risk by developing a single system for (qualified health plans) and Medicaid eligibility determination,” the report said.

The report also noted that issues concerning the broken relationship between the contractor, Noridian, and its subcontractor, and coordination with other state agencies and project governance within the health care exchange all added to project risk. The state announced it fired Noridian as the prime contractor earlier this week.

“While the decision to go-live even with limited functionality was generally supported by the independent consultants employed by (Maryland Health Benefit Exchange), the risks identified by those consultants was high, including that few activities in the months leading up to the go-live date had gone smoothly …” the report said, adding that there was a lack of clarity concerning whether security features had been adequately tested or configured and that there was a concern about whether the federal Centers for Medicare and Medicaid Services testing activities had been rigorous enough.

(© Copyright 2014 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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