Deval’s Big Dig: Responding to the Governor on Connector Report

When we talk about the Big Dig, we talk in big, round numbers. Why?  Because it cost gobs of money. You can debate whether it was worth it, and for years we did. Journalists dug into the story. Careers were dashed and fortunes were made in the process.

We don’t distinguish between federal and state dollars in discussing the Big Dig. We say it cost $16 billion, not $XX for the state and $YY for the Feds. And rightfully so: The question has always been about value and how the associated costs spiraled out of control.

[quote align=”right” color=”#999999″]We join that call on the Administration to release a full and detailed response to the report, so we all can settle on a cost estimate for the project. Is it $1.1 billion or $1.2 billion? Let’s have that conversation, instead of the snide attacks coming from the corner office.[/quote]

Jet forward a decade and the media has been asleep at the switch on the question of how much Health Connector 2.0 has cost. Massachusetts started with a Connector, developed after the passage of the 2006 reform, which cost under $10 million to build and which was working. Then we adopted the ACA. With that, Governor Patrick wanted to rebuild the health connector website and charted out a path to create Health Connector 2.0.

The administration promised the moon and the stars with the new site for residents, bragging that we could lead the nation in how innovative it was. Yet behind the scenes the reality was not so rosy. CGI, the primary contractor, turned out to be not only expensive, but also non-compliant as a partner, and produced reams of shoddy work. For example they repeatedly submitted old code as “updates.” It often took the state weeks to notice.

Yet, the state was equally to blame, if not more, as the project manager and steward of taxpayer funds. Independent audits document the numerous ways the state was over its head, agency infighting, and how they repeatedly changed the project scope and goalposts on the contractor mid-project.

Recently Ed Lyons, a software developer, helped the public understand the human cost of the failure to launch a successful website by telling to story of how his close friend was adversely impacted. Ed also laboriously documented how the Governor and senior staff repeatedly misled the public about the state of the project during development, and continued to do so even after open enrollment began and problems were on full display.

Now, the question with a website that’s not working (but may soon be working) is this: how much did we spend and was it worth it?

Here’s our case:

• We examined all of the costs directly related to running a state based exchange, and paying for contractors and work done to transition to the new website.
• We added in the cost of a new Medicaid program that was created only because the website failed the first time.
• We readily acknowledge that our figure is an estimate. We openly state in our report that there may have been some double counting of funds in our calculations. That was unavoidable because of the lack of transparency on the cost of the project. We balance that by being overly conservative on many big line items. Our estimate is, in fact, on the lower end of the likely costs of this project. Finally, we identify numerous costs that we know of, but cannot calculate, given the state’s lack of transparency.

The Governor’s office has objected to a few points in the report.

• First, the administration doesn’t believe we should include administrative costs to run the exchange. That’s odd. Not including administrative costs is like a company excluding the cost of running the headquarters and advertising for a new product when reporting to investors. Such a standard would be widely panned. In addition, if the state had decided to default to healthcare.gov instead, the administrative budget would have been wiped out almost completely. It’s understandable why the Secretary of Administration and Finance, Glen Shor, and the Governor want to ignore this argument. The administration has released reports that severely downplay the skyrocketing costs associated with administration of the Connector. Before the ACA was signed into law, the Commonwealth was spending $29 million annually on administrative costs, by FY14, that number had quadrupled to $117 million. Again, we understand why they want to ignore those costs.
• Second, the administration objects to Pioneer’s reporting on total cost — both state and federal costs. They believe we should focus only on the state share. Yet as taxpayers, we are the source of both kinds of funds, so we want to know the total cost, not just the state share. Again, when we talk about the Big Dig, we talk total numbers. We should here, too.
• Third, the administration contends that $37 million of our costs for Customer Service, outreach, personnel are really “revenue” as the federal government will pay for these functions. Our response: Read the previous bullet.
• Finally, the administration contends that Pioneer is double counting funds. Turns out, that happens when cost data is rarely released. At issue is roughly $100 million, less than 10 percent of our estimate.

This goes to the main reason we released this report: We want to force the administration to make public the costs associated with Health Connector 2.0. Even former Democratic chair of the health committee, former Senator Kennedy health staffer, former head of the liberal Health Care for All group, and current Harvard professor John E. McDonough was quoted in the Globe this morning as saying, “I do think the Pioneer folks have a legitimate criticism concerning the overall lack of transparency and accountability with this matter.”

We join that call on the Administration to release a full and detailed response to the report, so we all can settle on a cost estimate for the project. Is it $1.1 billion or $1.2 billion? Let’s have that conversation, instead of the snide attacks coming from the corner office.

Look, Pioneer did not make friends with the Weld-Cellucci administrations over the South Boston Convention Center project. We opposed the project, releasing repeated reports calling into question that administration’s case for the new center. We estimated that it would only bring in about 350,000 room nights; the Weld administration contended they would reach 800,000. Pioneer was right — the number of room nights has ranged from 300,000 to 425,000 room nights over the past few years.

Now the Governor calls the Pioneer report spurious. Nice word to cover bad homework on his part. We did not make friends with the Patrick administration in June when we released a report showing that the Governor’s billion dollar ten-year Life Sciences Initiative had only created between 571 and 3,024 additional jobs during the first five years of the program according to federal employment statistics, far less than the 250,000 jobs the governor had promised. His administration responded by saying that it could not understand how we had arrived at the surprisingly low job creation figures. Problem is this: our report used job analysis methodologies employed by the administration itself and also by the industry, as the report explicitly explained and documented. And, lo and behold, Batelle, the analyst of reference for the industry, came out with a report on the day after Pioneer issued its report, while the Governor was at the BIO Conference, documenting that only 55 additional life sciences jobs had been created in Massachusetts between 2010-2012. After that, not a peep was ever heard again from the administration about the accuracy of our analysis.

Take the governor’s aspersions of “spurious” with a Big Grain of Salt, as he is facing an IT-version of the Big Dig. Or at least a steady drip of costly bungled IT projects at the department of unemployment insurance, the department of children and families, and now the Connector.