Healthcare.gov and the History of Failed IT Projects

Many years before the creation of Healthcare.gov, President Obama embraced  data analytics during his early years in the Senate.

In 2006, he and senator Tom Coburn (R-Okla.) successfully sponsored the Federal Funding Accountability and Transparency Act, which resulted in creation of  usaspending .gov, “a significant tool that makes it much easier to hold elected officials accountable for the way taxpayer money is spent“.

A History of Failed Federal IT Projects

A considerable amount of taxpayer money is spent on federal IT projects, but in contrast to the aspirations of Obama in his early years in the Senate, it is not spent responsibly.

According to the Standish Group report, from 2003 to 2012 only 6% of the federal IT projects with over 10 million dollars of labor cost were successful.

52% of them were either delayed, went over budget or did not meet user expectations. The remaining 41% of the IT projects were abandoned or started from scratch. Perhaps most troubling is that healthcare.gov is just a one example among many.

Federal Grants to States for Insurance Marketplace R&D

The 319 million dollars spent on healthcare.gov is a relatively small figure compared to the 4.6 billion dollars of federal grants awarded to different states for research on and development of insurance marketplaces.

Although the online marketplaces in some states such as Kentucky, have performed exceedingly well, in some other states such as California, the websites had similar problems to healthcare.gov.

Total Value of R&D GrantsIt’s interesting to note that the amount of federal funds allocated to California is four times more than the amount which was assigned to Kentucky. The map above shows how much each state received.

The role of contractors in governmental IT projects has often been neglected. Although the government’s IT contracts can be categorized as public knowledge, the contractors and their performance in federal and state IT projects often remain unnoticed.

A Better Solution for Government IT Projects

A better approach to improve outcomes in federal and state IT projects is to increase transparency. Governments can release the performance evaluations of their IT contractors to the public and let the free market reward and penalize contractors accordingly.

CGI Group, the initial contractor of healthcare.gov faced the consequences of its poor performance when its stock price declined by 2.9%.

This is a unique exception, which happened mainly as a result of full media coverage and public scrutiny of healthcare.gov’s problems. It is not easy for the public to access data on performance of any of the state marketplace contractors.

For example, we know Accenture helped to solve the problems of healthcare.gov and Deloitte did a pretty good job in Kentucky, but we do not exactly know what went wrong with the exchanges in California or Maryland or who was responsible for these problems.

Easy access to details of IT project descriptions and performance evaluations, will enable researchers to conduct comprehensive studies on critical success and failure factors of these projects.

We need to know how different states managed to build their insurance marketplaces, how effectively the federal grants were spent and how future problems can be avoided.

Niam Yaraghi (@RiskPersia) is a Phd candidate in management science and systems at the State University of New York at Buffalo. This post originally appeared in the Brookings TechTank Blog.

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  6. Scott,

    I know the article is dated but, the idea is still valuable. I think that some of Nicholas Carr’s assertions are a bit extreme on the in estimating IT relevancy to strategic innovation. However, one cannot argue at the current pace that IT is changing the way that business benefit from IT. The thing I think is pertinent is that once a new development is made there are several competitors standing in the throws ready to duplicate the new idea cheaper and faster. That is not to say that strategic innovation cannot happen. When I think about it on a continuum of things happening the chances are slimmer now versus 15 years ago.

    Secondly when you analyze what is happening in healthcare’s IT and their cutbacks from a reduction with Medicaid/ Medicare I’m of the opinion that these not for profits particularly need to get back to the basics of finance, when it comes to assessing and implementing technology.

  7. The HBR article you refer to doesn’t come close to describing the benefits of information technology and its conclusions have been thoroughly debunked in the years since it was published.

    Please see the recent book “The Second Machine Age” by Erik Brynjolfsson and Andrew McAfee for a much more relevant and up-to-date treatment of the value of information technology.

  8. I was reading an article out of Harvard Business Review talking about IT as it relates to business in 2003 by Nicholas G. Carr. The Idea put forth was that companies are facing the challenge of increasing technology to the point that it is now a commodity. So the amount of returns available for IT infrastructure has gone away. I think that some of the issues are from the valuations of these entities are based off of their technology. I applaud the move to have transparency of finances. These guys need to get back to business 101 and scrutinize these technology expenditures.

    The Harvard Review article is here http://hbr.org/2003/05/it-doesnt-matter/ar/1

  9. “Is it fair to call healthcare.gov a failed IT project?”

    No, it is not. More broadly, Republicans saving over & over & over & over & over that the PPACA “isatotalfailurethatskillingmillions ofpeopleandcostingmillionsofjobs” doesn’t make it so.

  10. Here’s the real talking point. Is it fair to call healthcare.gov a failed IT project?

    I’m not sure it is.

    We had an aborted takeoff, we had smoke and flames, we had an embarrassing moment of failure and we had what looked like immiment disaster – but despite all that, the numbers seem to be coming back around …

    Should we judge IT projects by the same standards as we do political campaigns? I’m not sure we can. And I’m not sure we should.

  11. This would be a good time for the administration to call a press conference and announce that they will be looking at ways to reform the current system of awarding and managing federal contracts – especially in IT. What we have is badly broken. We need a “GCI rule” that allows taxypayers to collect a refund- plus damages – in cases where negligence is shown.

    Will that happen? No it probably won’t. There are too many careers at stake.

  12. “CGI Group, the initial contractor of healthcare.gov faced the consequences of its poor performance when its stock price declined by 2.9%.

    Seriously? Across what period?

    Some consequences. Look back 5 years. April 3, 2009, $8.49 per share. Today, $31.82