Wait — Healthcare.Gov Cost HOW Much?!?!

Wait — Healthcare.Gov Cost HOW Much?!?!

Anytime the government touches any project, costs explode and quality disintegrates. So I blindly assumed that the costs of health care plans offered at Healthcare.Gov would be high, and dismissed the concerns about the website's initial service disruptions. 

That changed when I read a comment on an article here on PolicyMic. The comment said that the cost to build HealthCare.Gov was more than $600 million. Given my experience, detailed below, my initial reaction was to dismiss the comment as a typo or urban legend stemming from chain-mail internet spam. There is no possible way to spend that much money on a website. It is a laughably stupid figure, roughly five times the loss of the legendary internet bust Boo.Com.

But the more I saw the figure popping up, I had to research the claim. The source for the figure seems to be an article by Andrew Couts from Digital Trends. The article isn't specifically about the high cost of the government website. The writer highlights the cost of the Healthcare.Gov as an example of the flaws in the government's procurement process. 

In the article, the author scales back his original claim from $634 million to "more than $500 million." The source for his information is the General Accounting Office, which says that the bulk of the money went to contracts: "CMS data indicated that the agency spent almost $394 million from fiscal year 2010 through March 31, 2013, through contracts to complete activities to establish the FFEs and the data hub and carry out certain other exchange-related activities (page 30)." The rest of the cost seems to be attributed to salaries and administrative expense.

Just how absurd is $394 million? The author points out that these contracts exceed the venture-capital funding of companies like Facebook, Twitter, Instagram, and LinkedIn. But these comparisons really understate the absurdity of the expense. In 2010 the government could have simply bought EHealth, owner of EHealthInsurance, the leading online marketplace for individuals to buy health insurance products. 

So the government spent twice as much to build a website that already exists. But even that comparison doesn't capture the absurdity of the expense either, because EHealth is more than just EHealthInsurance. It is more than just a website. Ehealth is a multi-line business which generates earnings.

We do not see the stupidity of this waste until we put the $394 million into human terms.  Until then $394 million dollars is just millions within trillions of someone else's money.

What is $394 million dollars? It is approximately 57,000 low-income kids who were dropped from the Head Start program due to the funding cuts of the sequester. 

What is $394 million dollars? It is approximately eight times the $51 million cut from Meals on Wheels, which caused the projected closure of one in six programs. This organization uses nearly two million volunteers to help offset hunger among the elderly.

Three hundred ninety-four million dollars is an absurd expense by itself. The problem is that it is likely a lowball estimate. The Digital Trends article cites a Center for Medicare Services budget request $1 billion in 2013, ostensibly "needed to support operational infrastructure and to prepare for open enrollment in the Federally-facilitated Exchanges prior to FY 2014." So let us hope that the ACA compliant-insurance covers starvation.

I can't capture the absurdity as well as the the writer did when he said, "We, the taxpayers, seem to have forked up more than $500 million of the federal purse to build the digital equivalent of a rock."

Thanks, Washington.

How much do you trust the information in this article?

Brenton Smith

Professionally, I manage credit risk in bank deriviatives. Politically I write commentary for www.FixSSNow.Org on the issue of Social Security reform.

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