Report: Cost of HealthCare.Gov Approaching $1 Billion

Correction appended July 30, 9:22 p.m. ET

Federal officials badly managed the development of a website to sell health insurance under the Affordable Care Act, potentially costing taxpayers hundreds of millions of dollars in cost overruns, according to testimony that will be delivered to a House subcommittee on Thursday.

In prepared remarks posted online Wednesday, William T. Woods, an official at the General Accounting Office, says HealthCare.gov, a federal website charged with managing new individual health plans for consumers in 36 states, was marred by inadequate oversight by officials from the Department of Health and Human Services. The Centers for Medicare and Medicaid Services (CMS), an HHS agency in charge of the insurance website, “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,” according to Woods.

Details of Woods’ testimony were first reported by the Associated Press. The GAO conducted its investigation of HealthCare.gov at the request of the Investigations and Oversight subcommittee of the House Energy and Commerce Committee.

As became obvious in the days and weeks after HealthCare.gov launched on Oct. 1, 2013, the website was hobbled by technical problems and software glitches that prevented consumers from signing up for health plans until a repair effort was undertaken months later. The episode was a significant embarrassment for the Obama Administration, which had promised buying health plans through the website would be akin to purchasing any other goods or services on the Internet. Contractors charged with building HealthCare.gov and a data hub meant to verify identities, eligibility and income used to calculate federal subsidies had not completed their work by the time the site launched, according to Woods’ testimony. But the GAO placed blame on federal officials for not anticipating problems that would occur and for incurring significant cost increases as well as improperly approving additional spending.

According to Woods’ testimony, the cost of building one part of HealthCare.gov increased from $56 million to more than $209 million between September 2011 and February 2014. Expenses for the associated data hub ballooned from $30 million to $85 million. Woods says that by March 2014, CMS reported “obligating $840 million for the development of HealthCare.gov and its supporting systems.”

Federal officials, according to Woods, delayed assessing whether HealthCare.gov was ready for launch from March 2013 to September 2013, noting that this was just weeks before the site went live. Software experts have said in the months since HealthCare.gov launched and crashed that such a short window is far too narrow to evaluate a brand new, complex system like a new national website to sell health insurance and dole out federal subsidies to those who qualify.

As it became clear that the building of HealthCare.gov was not going smoothly, Woods says federal officials approved additional expenditures to contractors, including CGI Federal, the lead company hired to build the website. The GAO, he says, found approximately 40 instances in which CMS employees approved additional spending totaling $30 million.

“This is not to say the work was not necessary,” says Woods, “however, the work was not approved properly.”

As HealthCare.gov’s launch approached and CMS officials had the chance to withhold major funds from contractors, they chose not to. To save HealthCare.gov after its failed launch, HHS hired the firm Accenture to continue work on the website. But that contract, too, has cost far more than planned. According to Woods’ testimony, the $91 million contract awarded to Accenture in January 2014 increased to $175 million by June 5.

Eventually, HealthCare.gov was repaired and some 8 million Americans signed up for health plans through the federal website and 14 others run by individual states by the spring of 2014.

Correction: The original version of this story incorrectly described how 8 million people signed up for new health care plans following the passage of the Affordable Care Act. They used the exchange created by the federal government, Healthcare.Gov, and 14 exchanges run by the individual states.