Privatization and the Affordable Care Act

One of the main problems with the Affordable Care Act web site began with the Reagan administration, which has adversely affected government performance since then. At that time, the management habit of concentrating on your core capabilities and contracting out other processes was applied to government. Government, it was decided, should contract out such non-core capabilities as logistics, food services and information technology (IT).

While it sounded good, the policy had motives other than improved government operations. The practice of taking taxpayer money away from government salaries and moving it to contractor revenue and profits was and is certainly a part of conservative and business goals to this day. If government were left with fewer internal capabilities and then failed at some important program, well, we were told government does not work. That was and seems to still be the Reagan mantra.

These policies of contracting out government work also help the administration’s claim they were reducing the size of government. Even though as much money—or more—is spent, there are fewer civil servants on the payroll, and that was and is a good political message. So from Reagan, through Bush I, Bill Clinton and Bush II, contracting out was standard policy. For this reason, President Obama inherited a government, especially a Health and Human Services agency, with no internal IT expertise. Thus, when the Affordable Care Act required a quite complicated web site and interface with other parts of health care networks, it became time to write contracts.

Excellent reporting in the Washington Examiner has revealed some details on the contracting for this web site. In an October 13, 2013, article, Richard Pollack reported that “CGI Federal, the U.S. subsidiary of a Canadian company” received the award of a contract to do the website work. The contract was awarded on a sole source basis under a contract that CGI qualified for in 2007. After qualifying, CGI was eligible for direct awards, although competition was the preferred way to place such contracts. Although the Health and Human Services’ Centers for Medicare and Medicaid contracting office will not comment, Pollock’s sources indicate the website award was awarded to CGI without competition.

CGI had “an uneven record of IT pricing and contract performance,” according to Pollack’s reporting. It had failed on a contract to produce a database registry for Ontario. The Canadian province had to cancel the contract and has refused to pay any fee on the contract. In November 2010, the GAO denied a CGI protest on another contract, noting that CGI had been rated only fair (out of an excellent/good/fair/poor rating scheme) on previous contract work, not a recommendation for the scope of Obamacare.

According to The Washington Post, CGI Federal moved into the US market by acquiring American Management Systems. The Post wrote, “A year before CGI Group acquired AMS in 2004, AMS settled a lawsuit brought by the head of the Federal Retirement Thrift Investment Board, which had hired the company to upgrade the agency’s computer system. AMS had gone $60 million over budget, and virtually all of the computer code it wrote turned out to be useless, according to a report by a US Senate committee.” The AMS people were the core of the Affordable Care Act team. How can something like this happen you ask?

Well, did CGI Federal have an incentive to perform or to make as much profit as possible? Poor performance does not seem to have cost CGI any Federal government work. In November 2013, the Army Contracting Command at Rock Island, Illinois, announced that on October 31 it awarded Option Year 4 against Contract W52P1J-10-C-0003 to CGI Federal for services in support of the Army Sustainment Command’s Integrated Materiel Management Operation System. The awarded amount was $20.7 million, increasing the contract value to $120 million. Does CGI have friends in high places? Only the Shadow knows.

Why HHS decided that of all qualified IT contractors, CGI was the one to go with without further competition is hard to explain. Competitions can be done very quickly, especially if there is a pool of previously qualified contractors. Only fair performance on previous contracts will generally disqualify you from competing for new awards, because there are generally several contractors with excellent or at least good past performance.

So far, HHS will not release documents without a (FOIA) Freedom of Information Act request. Mr. Pollack’s article notes that such requests can take more than a year for a response and that the response often does not provide the requested information. HHS appears to be stonewalling the release of information. This raises questions concerning how CGI received the award. Past reports indicate the possibility of some form of networking, rather than best value, as the deciding factor.

Using CGI Federal has resulted in poor contractor performance. All reports indicate an inability to handle high traffic, poor links between federal and state exchanges, glitches that crash the system and inoperable internal site links, which does not bode well for Obamacare. Reuters reported, “The level of functionality they’re offering today is worse than we might have anticipated. I expected a level where you could at least get to the point of shopping,” said Austin Bordelon, an analyst with health care consulting group Leavitt Partners, which monitors federal and state marketplaces through the day. “But really, you just can’t get through the door.”

Several reviews of the government site have questioned its design and the site architecture of operational aspects. It appears that to create an account, the personal computer must load a large number of programs and a large amount of data, which can crash many home computers. The site, of course, should have been designed to work with PCs from the start. On first review, the approach taken by CGI appears to have been inadequate for the required use.

These problems are inherent to privatization and the use of a contractor for this job. Had HHS used internal web site design and IT support, the process had greater potential for success. A team would have been put together for the task with constant contact between the Affordable Care Act implementation team, which had responsibility for the site requirements and the IT experts putting the site together. The team would have had a goal of ensuring that the website worked, not of maximizing company profits.

Privatization required using a contractor for the project. At this point, requirements had to be transmitted to a contracting officer, who is the government official authorized to award and manage the contract. Any changes regarding requirements, price or schedule must go through the contracting officer. Communication between the requirements people at HHS and the contractor doing the IT work are much more difficult than they would be for an internal team. The contractor is on notice not to accept any requirement changes unless authorized by the contracting officer. Sources indicate that there were a number of requirements changes that had to go through the contracting process, some fairly late for October 1 implementation.

Following the award, there must be proper oversight of a contract. Once an agency has decided to privatize IT work, it often loses in-house expertise capable of contract oversight. There is simply more money to be made by working for contractors. Even the Defense Department, with the Defense Contract Management Agency devoted to this task, had a hard time finding the oversight people for the vast increase in service contracts in the past 20 years.

Since the Reagan administration, privatization has been the preferred way to provide services, such as IT, in the government. The problems with implementation of the Affordable Care Act highlight the ways in which this policy can go wrong. Opponents of the act will use its IT problems as a way to attack the progressive goal of providing greater access to health care to those who cannot afford necessary insurance. It will be cruelly ironic if the conservative policy of privatization will, by failing, further another conservative goal of restricting access to health care. Here’s a summary of what’s now happening from NBC News Health, Did the feds fix How we’ll know.

For starters, Saturday was the deadline—the last day of November has passed and it’s December 4, four days after the Obama administration promised its health insurance website would be working smoothly for “the vast majority” of people. And public announcements say everything’s okay today, except the numbers are not up to what they should be.

In fact, officials say there won’t be an obvious “before and after” picture of November 30 does not represent a re-launch of It is not a magical date,” says Julie Bataille, spokeswoman for the Centers for Medicare and Medicaid Services, which operates the site.

To show how serious they are, CMS took the website down for an extended maintenance from 9 p.m. ET Friday to early morning Saturday.

Bataille said technicians added new servers to speed up the process. “The site is performing well today with low overall error rates and response times despite heavier than usual weekend traffic. We are making additional hardware upgrades and software fixes tonight as part of a planned set of improvements to improve speed and reduce errors,” she said in a blog post.

But if you really want to know it’s working, look for insurance company ads. So far, insurers have been a bit quiet about the site which, after all, is supposed to be driving lots of business to them. This indicates some skepticism about whether it will be working right in the near future.

“As the technical issues get worked out, health plans are going to get more and more engaged,” says Robert Zirkelbach of America’s Health Insurance Plans,” meaning they’re waiting until it works better before they start a full-court press of ads to prospective buyers.

The administration says the site, which crumpled almost as soon as it opened on Oct. 1, is now working for just about everyone. “We’re happy to report that 90 percent of users are now able to create accounts,” the Health and Human Services Department said in a statement Tuesday night.

“Two key factors are whether the site can handle the volume of people who are expected to want to enroll through the end of the year and whether the process is smooth and error-free,” says Larry Levitt of the Kaiser Family Foundation, which has been monitoring the rollout. “It doesn’t have to work perfectly for everyone.” Why not, one asks?

CMS says it can now handle 50,000 users at the same time, or 800,000 a day, which was the original specification. CMS also cautions that it may not work perfectly for people with complicated situations. Again, why not?

But Zirkelbach says the “back end” of the site—the part where the policy actually gets bought and paid for—is still rough. Health insurers are still seeing enrollments that are duplicated, missing information, things like that,” he said.

And one big piece is missing: so-called direct enrollment. If that ever works as it should, people should be able to go directly to a health insurer’s site and sign up with a small detour to to see if they are eligible for a subsidy. That function is barely working now.

Nonetheless, the government says it is ready for an end-of-the-month rush, combined with a post-Thanksgiving pile-on. Pass the pumpkin pie.

“Health care is going to be a popular topic of conversation over the holidays,” Levitt said. The Monday after Thanksgiving has, in the past, been a popular day for people to sign up for Medicare Part D (the prescription drug coverage plan) and Medicare Advantage (Medicare provided by a private insurer) coverage, for example.

The White House knows it cannot count on the insurers for now so it’s turned to advocacy groups. Organizing for America, which campaigns for President Barack Obama, plans a public relations blitz called “Health Care for the Holidays.” Ho! ho! ho!

“Are your family members traveling home for the holidays? There are a few things they’ll need to sign up for health coverage,” it advises. Their “packing list’ includes W-2s and Social Security numbers.”

“Don’t forget to follow up: ‘Have you signed up yet?’” it urges.

AARP, the group for people over 50, has its own campaign, with e-cards ready to send out to adult children. One choice: “Get health insurance so I can stop pestering you to sign up and start pressuring you to get married.”

The White House has asked Democrats to reach out to constituents, and urged them to tell success stories.

The right-leaning Heritage Foundation has counter-programming e-cards. “Let’s be thankful the government doesn’t regulate how much we can eat at Thanksgiving dinner,” one reads. Not funny.

A little worried about all this propaganda working too well, the White House and HHS officials have asked groups like Enroll America and labor unions to hold off on driving traffic to the site until it’s clear what it can handle. HHS Secretary Kathleen Sebelius advised shoppers to “Shop during off-peak hours (mornings/nights/weekends).”

The health insurance exchanges are the centerpiece of the 2010 Affordable Care Act. They’re the main vehicle for getting insurance coverage to the more than 40 million Americans who don’t have any now.

No one expects all those people to sign up on the exchanges, however. The Congressional Budget Office originally projected that 7 million people would sign up for private insurance on the exchanges the first year, with another 9 million signing up for Medicaid in states that are expanding their programs.

It’s not clear whether the publicity surrounding the slow start has put a significant number of people off. During the first month the exchanges were open, HHS says about 26,000 people signed up on the federal exchange, operating on behalf of 36 states, while close to 80,000 signed up on the state-run websites.

Some states say they have done much better since then. New York says 76,177 have signed up on its exchange.

“The way we are going to be evaluating success will be based largely on anecdotes,” Levitt says.

It may be hard to tell, given that critics of the site have been pushing out tales of woe from people who said they couldn’t sign up, found their insurance premiums were more expensive than they had expected, or found their favorite doctors or hospitals were excluded from the new insurance networks. The White House has countered with first-name-only anecdotes of people who have succeeded in enrolling.

Hard new numbers from the administration will come in mid-December, when HHS will release enrollment numbers for November.

“More important than how many sign up is who signs up,” Levitt says.

Experts agree it will be important to get the right mix of sick vs. well people into the exchange plans. Insurance companies will go broke if they have to cover too many sick people without premiums from healthy people to balance them out.

That’s why there’s been so much attention lavished on the “young invincibles”—young adults who don’t yet have the chronic health conditions that are so expensive to pay for, and who may be wary of shelling out for health insurance.

The administration already had to admit that parts of the system don’t work. Last Wednesday, it said small businesses will have to wait until next year to use the exchanges. It’s extended the open enrollment period for people who want health insurance to start on Jan.1—they get an extra week now, until Dec. 23.

But the White House has repeatedly reminded people that they have until March 31, to sign up for insurance to get credit for being covered in 2014 and avoid the tax being levied on those who don’t have health insurance. Good luck and good health to everyone who has dived into

Jerry Mazza is a freelance writer and life-long resident of New York City. An EBook version of his book of poems “State Of Shock,” on 9/11 and its after effects is now available at and He has also written hundreds of articles on politics and government as Associate Editor of Intrepid Report (formerly Online Journal). Reach him at

One Response to Privatization and the Affordable Care Act

  1. The fact that a health care resource is privatized was shocking enough; to further find that it was outsourced to a Canadian firm was a quantum leap into the absurd. The U.S. has morphed into the landscape of a Margaret Atwood novel, a dystopia that tests credulity. It is, moreover, (and inevitably), a landscape filled with paradoxes. The fear of “big government” shared by figures as ostensibly disparate as Orwell, Chomsky, Ayn Rand and Trotsky has given us a world in which Big Brother is not some dreaded Leninist cadre but a handful of corporate oligarchs whose goal is to protect their hoards of wealth rather than the needs of ordinary men and women around the globe.