State Health Insurance Marketplaces:

CMS Should Improve Oversight of State Information Technology Projects

GAO-15-527: Published: Sep 16, 2015. Publicly Released: Sep 16, 2015.

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What GAO Found

States reported to the Department of Health and Human Services' (HHS) Centers for Medicare & Medicaid Services (CMS) that they spent about $1.45 billion in federal marketplace grant funding on information technology (IT) projects supporting health insurance marketplaces, as of March 2015. The majority of this spending was for state-based marketplaces (i.e., marketplaces established and operated by the states). These marketplaces reported spending nearly 89 percent of the funds on IT contracts, and CMS has ongoing efforts to track states' IT spending in more detailed categories. States also reported spending, as of December 2014, $2.78 billion in combined federal and state funds designated for Medicaid eligibility and enrollment systems—a portion of which was used for marketplace IT projects. However, the specific amount spent on marketplace-related projects was uncertain, as only a selected number of states reported to GAO that they tracked or estimated this information. Regarding the status of states' marketplace IT projects, 14 states with state-based marketplaces had developed and were operating IT systems to support their marketplaces, but, as of February 2015, not all system functions were complete. In addition, as of November 2014, 7 of 37 states using the federal marketplace system could not transfer health insurance applications between their state Medicaid systems and a key component of the federal marketplace or had not completed testing or certification of these functions. According to CMS officials, states operating their own IT systems and states using the federal marketplace system were continuing to improve the development and operation of their marketplaces in the enrollment period that began in November 2014.

CMS tasked various offices with responsibilities for overseeing states' marketplace IT projects. However, the agency did not always clearly document, define, or communicate its oversight roles and responsibilities to states as called for by best practices for project management. According to some states, this resulted in instances of poor communication with CMS, which adversely affected states' deadlines, increased uncertainty, and required additional work. CMS also did not involve all relevant senior executives in decisions to approve federal funding for states' IT marketplace projects; such involvement, according to leading practices for investment management, can increase accountability for decision making. Further, while CMS established a process that required the testing of state marketplace systems to determine whether they were ready to be made operational, these systems were not always fully tested, increasing the risk that they would not operate as intended. For their part, states oversaw their IT projects through state agencies or quasi-governmental entities, depending on marketplace type, as well as using other oversight mechanisms.

States reported a number of challenges in establishing the systems supporting their marketplaces. These fell into several categories, including project management and oversight, system design and development, resource allocation and distribution, and marketplace implementation and operation. States also identified lessons learned from dealing with such challenges, including the need for strong project management and clear requirements development. CMS has taken various actions to respond to state challenges, identify lessons learned, and share best practices with states; continuing these efforts will be important as states work to complete their marketplace systems.

Why GAO Did This Study

The Patient Protection and Affordable Care Act required the establishment of health insurance exchanges—or marketplaces—to allow consumers and small employers to compare, select, and purchase health insurance plans. States can elect to establish a state-based marketplace, or cede this authority to CMS to establish a federally facilitated marketplace. To assist states in establishing their marketplaces and supporting IT systems, federal funding was made available, including grants and Medicaid matching funds. CMS has responsibilities for overseeing states' use of these funds and the establishment of their marketplaces.

The objectives of this study were to (1) determine how states have used federal funds for IT projects to support their marketplaces and the status of the marketplaces, (2) determine CMS's and states' roles in overseeing these projects, and (3) describe IT challenges states have encountered and lessons learned. To do this, GAO surveyed the 50 states and the District of Columbia, reviewed relevant documentation from the states and CMS, and interviewed CMS officials.

What GAO Recommends

GAO is recommending that CMS define and communicate its oversight roles and responsibilities, ensure senior executives are involved in funding decisions for state IT projects, and ensure that states complete testing of their systems before they are put into operation. HHS concurred with GAO's recommendations.

For more information, contact Valerie C. Melvin, at (202) 512-6304 or melvinv@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: The department concurred with this recommendation and noted that a State Officer is assigned to each state to serve as the primary point of contact and that CMS's roles and responsibilities are communicated through this official. The department also stated that these roles and responsibilities are documented in several resources, including standard operating procedures and weekly newsletters to state officials. However, the department did not indicate that CMS would develop a communications management plan to provide a comprehensive and consistent means of identifying and conveying the roles and responsibilities of key CMS organizations to all states and the District of Columbia. As we noted in our report, CMS's standard operating procedures and other documents did not identify all the relevant stakeholders or activities involved in its oversight process. Thus, we maintain that a comprehensive communications management plan would be a valuable resource as states move forward on any further marketplace IT efforts. Subsequent to receiving evidence from the agency, we will plan to review actions taken to implement this recommendation.

    Recommendation: To improve the oversight of states' marketplace IT projects, the Secretary of Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services to clearly document, define, and communicate to all state marketplace officials and stakeholders the roles and responsibilities of those CMS officials involved in overseeing state marketplaces in a comprehensive communication management plan.

    Agency Affected: Department of Health and Human Services

  2. Status: Open

    Comments: The department concurred with this recommendation and stated it already includes senior executives in its funding decisions for these projects. However, as noted in our report, CMS did not provide evidence that key senior executives from CCIIO, CMCS, and OTS were involved in various funding decisions associated with the states' IT projects. For example, CMS did not demonstrate that senior-level executives from all relevant business and IT units were involved in the initial approval of grant awards or the release of restricted IT funds from marketplace grants as states progressed with their projects. In addition, CMS did not provide evidence of senior executive involvement in the approval of Medicaid funds for marketplace IT projects. By ensuring such executive involvement, CMS would increase accountability for decisions to fund states' IT projects and ensure that these decisions are well informed in order to make efficient use of federal funds. Subsequent to receiving evidence from the agency, we will plan to review actions taken to implement this recommendation.

    Recommendation: To improve the oversight of states' marketplace IT projects, the Secretary of Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services to ensure that all CMS senior executives from IT and business units who are involved in the establishment of state marketplace IT projects review and approve funding decisions for these projects.

    Agency Affected: Department of Health and Human Services

  3. Status: Open

    Comments: The department concurred with this recommendation and noted that it will continue to follow its guidelines to determine if state marketplace system functions are ready for release. The department added that it will continue to work closely with state-based marketplaces to improve their systems and verify that system requirements are met. We agree that following its review guidance as defined is important. In particular, as noted in our recommendation, CMS should ensure that states' systems are fully tested before approving them for release into production, rather than relying on workarounds and manual processes. Subsequent to receiving evidence from the agency, we will plan to review actions taken to implement this recommendation.

    Recommendation: To improve the oversight of states' marketplace IT projects, the Secretary of Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services to ensure that states have completed all testing of marketplace system functions prior to releasing them into operation.

    Agency Affected: Department of Health and Human Services

 

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