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Federal Obamacare market still faces cost overruns, delays: watchdog

By David Morgan

WASHINGTON (Reuters) - Ten months after the botched rollout of HealthCare.gov, Obamacare's federal health insurance exchange is still dogged by cost overruns and technology delays that could hamper enrollment when it resumes in November, a U.S. watchdog said.

The total cost of HealthCare.gov and its supporting systems hit $840 million in March, according to a forthcoming report by the nonpartisan Government Accountability Office (GAO). Excerpts of the report were released on Wednesday by a U.S. House of Representatives oversight committee.

Part of the cost stems from the federal government's work with Accenture Plc, the lead contractor for the HealthCare.gov website. The value of that contract soared more than 92 percent in less than six months, from $91 million in January to more than $175 million by early June, a GAO investigation found.

The GAO report blamed cost increases on lax oversight, the complexity of the system and the need to rework technology. Multiple failures caused HealthCare.gov to crash during its Oct. 1 debut, hampering early enrollment for benefits under President Barack Obama's healthcare law and prompting a congressional investigation.

The administration spent weeks repairing the site, helping more than 5 million people use it to sign up for coverage in 2014. It has since changed many of the contractors that worked on the initial website.

The overall cost of developing the federal marketplace, which helps consumers in 36 states sign up for subsidized private health insurance, nearly quadrupled to $209 million by last February from $56 million in September 2011, GAO said. The cost of developing a related federal data hub jumped from $30 million to $85 million.

Meanwhile, large segments of the marketplace system still remain unbuilt, including a financial management system to automate payments of federal subsidies to health insurers that is due to be completed in December.

A senior official with the Centers for Medicare and Medicaid Services, part of the Department of Health and Human Services and the government's lead agency on Obamacare implementation, said it has taken steps to tighten contractor oversight. But the GAO said inconsistent oversight had led CMS officials to inappropriately authorize more than $30 million in contractor spending.

The GAO report is not due to be released until early Thursday, ahead of a House Energy and Commerce subcommittee hearing on implementation of Obama's Affordable Care Act. GAO acquisition and sourcing management director William Woods is scheduled to testify.

Enrollment for 2015 health coverage is scheduled to open on Nov. 15.

"Unless CMS improves contract management and adheres to a structured governance process, significant risks remain that upcoming open enrollment periods could encounter challenges," Woods said in written testimony.

Despite concerns about the performance of HealthCare.gov's former lead contractor, CGI Federal, CMS was able to withhold only about 2 percent of the contractor's fees paid. That was partly because CGI Federal's contract allowed for payment even when work was not completed.

(Reporting by David Morgan; Editing by Tom Brown)

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