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Major flaw in Maryland health site may mean $30 million in unnecessary Medicaid payments Maryland begins to put a price on health-care exchange debacle
(about 9 hours later)
A single flaw in Maryland’s troubled online health insurance system will cost the state an estimated $30.5 million in excess Medicaid payments over the next 18 months because the system cannot accurately identify recipients who should be removed from the rolls, a report by state budget officials said. The cost to taxpayers of flaws in Maryland’s online health insurance exchange is coming into focus, with officials estimating at least $30.5 million in unnecessary Medicaid spending and conceding that they have no idea how much it will take to get a system that works.
The money will pay for coverage for thousands of individuals who are enrolled in Medicaid but whose income likely has increased to the point that they no longer qualify for the subsidy, which helps cover health costs for low-income individuals. The state has paid $65.4 million to the contractor hired to build the system and fired this week because of the protracted problems. Costs are likely to keep rising as Maryland figures out how to fix or replace the system.
Maryland’s system cannot check whether Medicaid recipients earn too much to re-qualify. Rather than remove people incorrectly, the state reached an agreement with federal officials to delay reviews and continue payments until the site is repaired. Costs were outlined Thursday in a routine budget review presented to state lawmakers after months of outrage and political finger-pointing over the health-exchange debacle. Hopes of developing a site that would be a model for the nation have melted away as the exchange has become a major embarrassment for Democratic Gov. Martin O’Malley and Lt. Gov. Anthony G. Brown.
The report provides the first look at the potential dollar cost of the debacle, after months of public outrage and political finger-pointing over who is to blame for the deeply flawed site, which crashed within minutes of its public debut Oct. 1. In addition to identifying the “potentially very costly” Medicaid flaw, the report also found “significant uncertainty” about how much money it will take to fix the health insurance marketplace and where that money will come from. The review of the Maryland Health Benefit Exchange, by the legislature’s budget analysts, found that state spending on the site has exceeded expectations. The report says the state is seeking to tap $30 million from the federal government that was not to be allocated until later. Also, the rate of spending is unlikely to taper off next year, as planned, because of the problems.
“It seems like we’re shooting in the dark,” Del. Adelaide C. Eckardt (R-Dorchester) said during a budget hearing after the report was released Wednesday. Another hearing is scheduled for Thursday afternoon in Annapolis. “At this time, it is impossible to know if the funding” Maryland has appropriated and proposed for the health exchange “will be adequate to achieve what needs to be done,” the report concludes.
Eckardt said that the more she learns about the exchange’s finances, the more concerned she is that the state is not being “good stewards of people’s money” during difficult economic times. “All that I see is more and more money being put into something when we don’t have a definite plan.” Maryland’s decision to build the complex online exchange on a tight deadline was a “high-risk undertaking” from the outset, budget officials wrote in their report. Maryland made the process more challenging by trying to add features — like a Medicaid renewal function — to the health insurance marketplace.
Joshua Sharfstein, Maryland’s secretary of health and mental hygiene, insisted that the situation is getting better. Five months after the launch of the site, he said, state health officials are now in a position to evaluate their options, using data on how the current system is and is not working. The report warns against overreaching and dallying as the state searches for solutions.
“When we started, it was a little bit like shooting in the dark,” Sharfstein said. “But the lights are on. . . . We can use actual information about how different systems are doing in order to inform this decision.” “It seems like we’re shooting in the dark,” Del. Adelaide C. Eckardt (R-Dorchester) said during a budget hearing Wednesday in Annapolis. “All that I see is more and more money being put into something when we don’t have a definite plan.” A second hearing was held Thursday.
In addition to the inability to verify the income of existing Medicaid recipients, the site has been problematic for new Medicaid applicants, who have struggled with “incorrect eligibility determinations, stuck cases, difficulties in choosing managed care organizations, as well as with sending enrollment data” to the federal Medicaid hub, the report said. Joshua M. Sharfstein, Maryland’s secretary of health and mental hygiene, tried to reassure lawmakers that the situation is getting better. Five months after the launch of the site, he said, state officials are in a position to evaluate the options.
The report was prepared by Maryland’s Department of Legislative Services, a nonpartisan state agency that advises the General Assembly on policy and budget decisions. The 31-page analysis provides the first detailed public breakdown of exchange expenses thus far and the first indication of how much more the problems could cost taxpayers. Sharfstein said Eckardt’s “shooting in the dark” reference was once accurate. But, he said, “the lights are on. . . . We can use actual information about how different systems are doing in order to inform this decision.”
The federal government — which shares the costs of Medicaid with the state — has approved an extension in the deadline for reconfirming the eligibility of recipients. Budget officials say the delay will likely cost Maryland $17.8 million in unnecessary payments this fiscal year and $12.7 million in fiscal 2015, which begins in July. Among the system’s problems, according to health officials, it cannot identify Medicaid recipients who should be removed from the rolls because their income has increased.
The state could make all its Medicaid recipients reapply for coverage through the exchange. But many eligible recipients would likely fail to complete that process, state officials said, increasing the number of uninsured state residents and the amount of uncompensated health care. To avoid dropping people incorrectly from the program, Maryland received a six-month extension to confirm the eligibility of recipients. Budget officials say the delay is expected to cost Maryland $17.8 million in unnecessary payments this fiscal year and $12.7 million in fiscal 2015, which begins in July.
Maryland was one of 14 states that built its own health-care exchange to offer health insurance under the President Obama’s Affordable Care Act, rather than relying on the federal site as part of the program. Gov. Martin O’Malley (D) signed an executive order to plan Maryland’s exchange a day after Obama signed the act into law, as a way of demonstrating his strong support for it. The site has also been problematic for Medicaid applicants, who have struggled with “incorrect eligibility determinations, stuck cases, difficulties in choosing managed care organizations, as well as with sending enrollment data” to the federal Medicaid hub, according to the budget report.
Despite high goals and expectations, however, the site has been plagued with problems that have hindered thousands of Marylanders seeking health-care coverage. The exchange’s governing board voted this week to fire Noridian Healthcare Solutions, the contractor hired to build the system, and state officials have said they could sue Noridian or others to legally recover damages. Because of the challenges posed by the new health system, the federal government, which shares Medicaid costs with the states, had offered them all a three-month grace period beyond the deadline for confirming the eligibility of existing Medicaid recipients.
Maryland’s decision to build the complex exchange on a tight deadline was a “high risk undertaking” from the onset, budget officials wrote in their report. The state added to the risk when exchange officials decided to build a single system that would handle applications for both Medicaid and private health insurance plans. And the stakes grew even higher as exchange officials struggled to coordinate with other agencies and manage the project, especially when Noridian clashed with the subcontractor it had hired to handle most of the technical work. Maryland officials asked for twice as much time.
The report said officials must decide quickly what to do about their broken health exchange. They have five options, it said: Fix the system; develop a new one; adopt technology that was successful in Connecticut, Kentucky or other states; join a multi-state consortium; or use the federal marketplace. O’Malley was an early and enthusiastic supporter of the Affordable Care Act, legislation championed by President Obama. The governor wanted Maryland to be among the states building their own health insurance exchanges — 14 have done so — rather than relying on the federal site.
Lawmakers have said health officials are leaning toward adopting another state’s technology or joining a consortium. But those two options “do not appear to specifically address” the state’s need to quickly verify the income of existing Medicaid recipients, the budget report said. Despite high goals and expectations, however, the site has been beset by flaws that have hindered thousands of Marylanders seeking coverage. The exchange’s governing board this week fired Noridian Healthcare Solutions, the lead contractor, and state officials have said they reserve the right to sue or penalize Noridian and other firms that worked on the project.
In addition, adopting Connecticut’s technology would “likely take at least 9 to 12 months,” meaning the exchange might not be functioning well in time for the next open enrollment period, which starts Nov. 15. The report says officials must decide quickly what to do about the broken health exchange and have five options: Fix the system; develop a new one; adopt technology that was successful in Connecticut, Kentucky or other states; join a multistate consortium; or use the federal marketplace.
“Not having a solid back-up plan could lead to a similar situation faced by the State in October 2013,” the report states. State lawmakers have said health officials are leaning toward adopting another state’s technology or joining a consortium.
Until exchange officials decide how they will fix or replace the system, budget officials said, “it is impossible to say with any certainty” if the funding currently appropriated for the exchange this year and proposed for next year is enough to cover everything that needs to be done. But those options “do not appear to specifically address” the need to quickly verify the income of existing Medicaid recipients, according to the report, which was prepared by Maryland’s Department of Legislative Services, a nonpartisan agency that advises the General Assembly on policy and budget decisions.
The exchange was supposed to be fully built and functioning by the end of June, at which point the budget for the project was supposed to shrink substantially. The need to overhaul the system or replace it with something else changes that picture completely. In addition, adopting Connecticut’s technology, for instance, would “likely take at least 9 to 12 months,” the report says. That means the exchange might not be working well in time for the next open enrollment period for buying health coverage, which starts Nov. 15.
Maryland has received $182.2 million from the federal government to pay for the exchange, and those funds are suppose to cover expenses through the end of this year. The state has been spending the money earlier than planned, however, and officials recently asked lawmakers for permission to use more than $30 million that was not supposed to be available until later. The money might be needed to make repairs to the exchange this spring, officials said. Medicaid enrollment is always open.
It is likely that Maryland will ask the federal government for more money, budget officials wrote in the report. The state may also try to redirect money that was intended to pay Noridian, and use it to cover the costs of getting the system working better in coming months. “Not having a solid back-up plan could lead to a similar situation faced by the State in October,” the report states, referring to the Oct. 1 debut of the Maryland site, which crashed almost immediately.
The exchange was supposed to be completely built and functioning by the end of June, which would have shrunk the project’s budget substantially. The need to overhaul or replace the system upends that plan.
Maryland has received $182.2 million from the federal government to pay for the exchange, and those funds are suppose to cover expenses through the end of the year. Exchange officials recently asked state lawmakers for permission to use more than $30 million that was not supposed to be available until later. The money might be needed to make repairs to the exchange in the spring, officials said.
It is likely that Maryland will ask the federal government for more money, budget officials wrote in the report. The state might also try to redirect money that was intended to pay Noridian to help cover the costs of improving the system. Noridian has submitted invoices for $12.6 million more than what it has been paid.
Sharfstein told lawmakers that the state is working closely with federal health officials, who are “very aware of the challenges” Maryland faces.Sharfstein told lawmakers that the state is working closely with federal health officials, who are “very aware of the challenges” Maryland faces.
“We are sharing our plans with them,” Sharfstein said, “and they have basically said that if what we are doing is sensible and necessary for the exchange, that they will do their best to continue to fund us.“We are sharing our plans with them,” Sharfstein said, “and they have basically said that if what we are doing is sensible and necessary for the exchange, that they will do their best to continue to fund us.
“The key thing that this hinges on is the decision about which direction we go.”“The key thing that this hinges on is the decision about which direction we go.”