Initial Development Of Mass Obamacare Exchange Website 20x More Expensive than Romneycare Exchange

According to public records the recently redesigned Health Connector website, referred to as HC 2.0, cost twenty times more to develop than the initial Health Connector Exchange.  A review of public records, confirmed by Health Connector spokesman Jason Lefferts, shows that $3,449,520 was spent on initial development of the Romneycare Exchange.  The Health Connector has signed a $69M contract for the still malfunctioning Obamacare exchange, of which $11,000,000 has been paid according to representatives of the Health Connector.

In an emailed statement Lefferts told Red Mass Group, “total payments to CSC [the HC 1.0 contractor] from Jan. 2007-Sept. 2009 total $3,449,520.” As time went on tweaks to the code and maintenance were needed, Lefferts continued, “additional website development and maintenance costs from 2009-Sept. 2013 total $5,290,124.”

The Boston Herald has reported heavily on the development of the new website.  Consistently reporting that the new site cost $69,000,000.  That is an approximate 20 time higher initial cost.

Under the original website, the Commonwealth achieved a 97% health insurance coverage rate of her citizens.  The website allowed people to purchase insurance, or download forms to apply for subsidized coverage.  A quick review of the Health Connector Facebook page this morning shows that as of the past 24 hours, the new site is not allowing for the same level of service.

On October 30, 2013 the President and Governor Patrick took to the stage at Faneuil Hall to tell the nation that they should be patient, that in Massachusetts it took some time for the website to work and the program to be effective.  The implied notion was that Romneycare and Obamacare were the same.  Public records and the statements of the Health Connector’s Lefferts tell a different story.

Trying to explain why the new site cost significantly more than the old site Lefferts said:

Massachusetts has been a national leader in health care access and affordability, and by implementing the reforms of the Affordable Care Act – which bring new choice, benefits and expanded subsidies – Massachusetts can maintain that leadership role. The new online system is extremely big and complex, and our old system looks very basic in comparison. We are going from tapping out “Chopsticks” on a piano to conducting an orchestra. In the past, for example, those seeking subsidized coverage would need to fill out a paper application. Right now, through the first phase of our new system, online applications are available to everyone, and the information is run through the federal data services hub for confirmation. Additional functionality that will be added soon will create an immediate determination of program type and subsidy amount. This includes checking on over 250 program types and making a proper determination. After the determination is made, users can compare plans and make a selection. The Massachusetts Health Connector received an Early Innovator Grant from the federal government, along with other funding, to create this new system. This system will let anyone apply for subsidized care through any program, which we call a “no wrong door” model. It is a very ambitious goal and one that when completed will be more robust than what most states are offering.

Ed Lyons, a Boston Technology executive with experience building health insurance websites, had this to say about the $69M price tag to achieve their goals, “The numbers I have seen for the ACA implementation for the Health Connector software – something around $69 million so far, seem extraordinarily high to me. I cannot come up with an excellent comparison to a private-sector insurance application, but I have seen many online insurance enrollment applications that have a similar user experience for less than 10% of that cost, even though they don’t have to talk to the federal government and have fewer plan options. I have seen some state government applications related to Medicaid that were large and cost between $10 and $15 million”

Governor Patrick recently said that health care reform is “not a website, but a values statement.”

Emmalee Kalmbach, communications director of the Massachusetts Republican Party said, “our Governor claims to be concerned about the value of a website, yet what value does a website have when you spend 20 times the amount of money for something that doesn’t work properly?”

Correction: An earlier version of this story said that $69M had been spent so far on the exchange website.  Jason Lefferts of the Health Connector says that a $69M contract has been awarded but only $11M has so far been paid out.

About Rob "EaBo Clipper" Eno

  • edfactor

    (Note that these opinions are my own and not that of my current or previous employer.)

    Rob asked me to look at the publicly available stuff he has and draw on my own private sector experience, as well as what I have seen using the connector for the past few years. (A close friend has Commonwealth Care and I have helped her manage her insurance needs for years.)

    So I was cautious in the comments I sent him (which ran into a few pages) as I had no idea what kind of piece he was going to write. I want to say a bit more.

    First, the cost is outrageous and there is no possible justification for spending $69 million. (Heck there is no justification to spend $5 million on four years of maintenance to the bare-bones exchange we had before.)

    Look at it this way: there are only a few major drivers of cost of an IT project, and it’s impossible to come up with how these numbers are somehow responsible spending. (I have done cost estimates and statements of work for scores of clients for many years.)

    The biggest cost in these kinds of projects is always labor – whether the client is paying that directly to people, or paying a consulting firm a flat fee, which ends up being mostly labor on their end. Yes, you can spend a significant amount of money on infrastructure, but those costs have been dropping dramatically in the past ten years.

    Let’s look at the labor, which should be mostly technical labor. (Yes you need some graphic designers – not that either site shows they had much of that – and some project managers. But almost all should be technical people.)

    Imagine the average hourly rate for these people. In 2013, most of the work on any huge project is offshore, being less than half the rate in the US. But let’s say they ignored the norm and hired only on-shore people. A reasonable hourly rate would, at most, be $100/hr. There are roughly 250 working days in a year. For an 8-hour day, this comes to $200,000 per year per person.

    So, if you had 100 people – which is probably double the size of the team needed to build this website – and paid them that good rate for a full year, you get $20 million.

    Think about that. If you pay way more than you should per person, if you have double the number of people you need, for a year – and you get only $20 million out of $69 million.

    If you paid what you should – a blended on/offshore rate of maybe $60, and had 50 people in total, you get $6 million a year.

    So, what exactly, is all the money being spent on?  Yes, you can picture a few million being spent on hardware and software when that number should be 10% of that. Yes, there are lots of non-technical people you can pay that don’t really contribute anything to the final delivered project.

    I could go on and on and on. But I think you get the idea. This project, in my opinion, squandered tens of millions of dollars compared to a similar project in a large corporation. If you compare it to how startups build web applications that meet the same type of requirements, I would say that most of the money was wasted.

    I do not make those comments in haste, in ignorance, or in partisanship. Just as a citizen who is upset our government has to keep taxing me more and more while wasting tens of millions each year on bad information technology. If anyone from the Health Connector – technical or non-technical – wants to discuss this with me or debate this with me, I can be anywhere, anytime to discuss this. And you had better bring your A game and not consultant-style obfuscation. Remember – I am from their world.

  • Vote3rdpartynow

    It stands for High Cost 2.0 you…

    OOOOO HEEEEE TOLD YOUUUUUU……!!!!!

    The Democrats will once again spin this using some kind of rational mumbo jumbo.  Deval Patrick will stand up and, in his squeaky mousey voice, say something like ‘Gee, we had to raise the cost of insurance to cover the added expensive of giving you a more inferior product’.  

    This whole thing is a Democrat joke!  What a group of buffoons demonstrating that they have no idea how to manage process, costs or reach a goal.  This is failed leadership 101.  

    This is why in political campaign debates the candidates should deb asked how hey would perform a basic business project i.e “Tell me Governor Patrick how a private business would accommodate for Obamacare”?  The guy’s head would explode!  Democrats are jokes…

  • Yeah, the Website provides nice fodder, and is a glaring example of the ridiculousness of ObamaCare (and a simple message for the masses). But we need to get some focus on what is really bad about ObamaCare (and RomneyCare for that matter) – the individual mandate and government control that is destroying healthcare.  

  • As soon as the website starts working properly, people will find out for sure what Democrats have inflicted on them.

    Then it gets bad for them.