Connector cost debate

The state’s health care exchange website is about to return from the dead, but the cost of resuscitation remains far from clear.

Gov. Deval Patrick earlier this week said the website is being fixed at a total cost of $254 million, which is $80 million, or 46 percent, more than initially projected. Aides say the federal government is picking up most of the cost; the state’s share is only $42 million, and only $26 million represents new state money.

Patrick called the extra $26 million significant, but nowhere near the “hundreds of million or billion-dollar figures that some have bandied about,” a reference to a report by the Pioneer Institute estimating state and federal costs associated with the failed website could top $1 billion.

At a meeting on Thursday of the Connector Authority board, which administers the website, state officials continued the positive drumbeat. They reported that the newly refurbished website is on track to start processing some 400,000 applications in November and costs so far are being kept under control. Maydad Cohen, the state official in charge of the massive website rollout, put it this way: “Thirty-six days out from open enrollment 2015, we believe that the website will work.”

Glen Shor, the secretary of administration and finance, said the failure of the Connector website created some additional costs for the state beyond the $26 million in additional IT expenses. He cited a $26 million expenditure for support staff needed when many people on Medicaid had to be enrolled manually and additional unspecified costs for a call center. He indicated the state share of those costs was a little more than $5 million.

But beyond those bills, Shor said the state is managing its costs and remaining within budget. He said the state paid nearly $139 million for temporary Medicaid coverage in the fiscal year that ended June 30 and $182 million over the next three months providing coverage for some 306,000 people. Both numbers are gross costs, before federal reimbursement.

In an interview after the meeting, Shor acknowledged a $10 million-a-month state cost associated with a specific group of Massachusetts residents who couldn’t be placed in the proper coverage because of the website failure. But he said that cost, when viewed amid the entirety of Medicaid spending, netted out as nothing extra. “We’re paying no more than what we paid per user previously,” he said.

Shor’s only cautionary note was about fiscal 2015, which he said is still a work in progress. “FY15 is something we continue to track,” he said.

James Stergios, executive director of the Pioneer Institute, sent a letter to the governor on Thursday in which he stood by the institute’s work and pointed to a number of other media reports indicating the state’s Medicaid finances may be shakier than they are being portrayed.

Stergios urged the Patrick administration not to focus just on the state costs associated with the failed website but to also incorporate federal expenses into the mix, just as officials did with cost overruns on the Big Dig.

“The media and public did not divide that important project’s costs into ‘the state share’ and ‘the federal share.’ The case of the Health Connector should be viewed through the same big picture lens, especially since the Commonwealth could easily have opted to join healthcare.gov at little or no cost to the state, or to stick with a somewhat modified version of the original website, which was working well pre-Affordable Care Act,” Stergios wrote.

There are also other costs that no one is including. The insurance companies that cater to many of the state’s Medicaid recipients say the failed website caused them to accept many members who were misclassified in terms of their relative health needs. As a result, they say they are losing tens of millions of dollars serving customers who are much sicker than expected.

Shor said the state is working closely with the insurers to address their concerns. As part of that effort, he said, the state awarded them a 3.7 percent average increase in rates for the coming fiscal year, although the companies say the increase was not sufficient to stem their losses.