10059276646_97320b473e_z (1)

The Centers for Medicare and Medicaid Services (CMS) failed to conduct sufficient oversight over state-based Obamacare exchanges prior to the 2014 enrollment period, according to a recently released report by the Government Accountability Office (GAO). Taxpayers gave over $5.5 billion in grants to all 50 states and DC to plan and construct exchanges, with the 17 states that proceeded to construct an exchange receiving almost $4.6 billion of that amount. Since then, these funds have largely been wasted by inept bureaucrats on systems that do not work.

As the report notes, state exchanges faced numerous problems during the 2014 enrollment period, beginning October 1, 2013 including:

  • Poor system performance and delays in addressing information security,
  • Partially completed software functionality,
  • Hardware problems
  • Enrollment errors causing long wait times and applications to get stuck in the system
  • Difficulties getting individuals’ identities verified through the systems,
  • The inability to easily make changes to individuals’ insurance coverage in response to events such as births or income changes.


Prior to launch, CMS was required to evaluate the operational readiness of each state exchange. But based on the abysmal performance of many state exchanges at launch, officials clearly failed to do their job.

In Oregon, officials were forced to install “dozens of extra fax lines” months after the launch date because the exchange website was unworkable. Key functionality in Vermont remains incomplete even today, and the system has been described as “hellish” by enrollees. In Maryland, there was zero accountability for the $190 million exchange and just four people could enroll on the first day. In Massachusetts, officials and contractors joked that their system was based on the idea that “users do testing.” The poor performance of the exchange resulted in an estimated $1 billion in costs for the state.

In all likelihood, officials were aware of the issues facing these states before exchanges launched. According to GAO, CMS conducted reviews on 15 state-based exchanges in August and September of 2013. But as the report notes, these tests were insufficient and ineffective:

“CMS conditionally passed all of those states without fully ensuring that they had conducted all required system testing and demonstrated that their systems were ready for production.”

Even though these tests found multiple issues related to the functionality of state exchanges, CMS passed all states. GAO’s report notes several examples where CMS found a state to have severe operational deficiencies ahead of launch, yet officials ultimately ignored these findings. GAO found documentation revealing that officials were aware that Maryland’s exchange had 100 “outstanding high-priority defects” and almost 500 defects in total, while Massachusetts had reported 1,170 defects.

As the report concludes, these problems were so severe in four states (Massachusetts, Maryland, Nevada, and Oregon) that these exchanges had to rely on alternative ways to enroll customers during the first enrollment season.

Given that state exchanges received $4.6 billion in federal grant money, their poor performance is concerning to say the least.

While several exchanges have already defaulted back to the federal system, and many others have been characterized by severe operational problems and inept management, GAO reports that just over $1 million of the $4.6 billion of taxpayer money has been returned to the federal government.