A consumer waits by a laptop as she tries to sign her father-in-law up for health insurance. (Jeff Roberson/AP)

Federal health officials were responsible for the problem-pocked start of HealthCare.gov last year because of poor planning and lax oversight of outside contractors, according to government investigators who warned that “significant risks remain” that some Americans could again have trouble buying coverage in the federal health insurance marketplace this fall.

Such management failures are the central conclusion of the first report issued by the Government Accountability Office as part of a wide-ranging appraisal of the reasons the computer system was not ready when the marketplace opened in October.

The initial slice of the GAO’s work focuses on the main contractors the government hired to build HealthCare.gov, the Web site for the federal insurance exchange created under the Affordable Care Act. In particular, the report examines the shepherding of the contractors by the Centers for Medicare and Medicaid Services (CMS), the branch of the Department of Health and Human Services responsible for developing the marketplace.

Building “a first-of-its-kind marketplace” was certain to be a complex undertaking, the investigators conclude in the report, made public on Wednesday. But agency officials aggravated the situation by allowing too little time for the work; changing the directions it gave the main contractor, CGI Federal; and not scrutinizing the contractor’s progress, the investigators found.

The results, the GAO says, were “significant cost increases, schedule slips” and delays. Between September 2011 and February of this year, the cost for building the marketplace ballooned from $56 million to $209 million. Building HealthCare.gov, the report said, had cost $840 million as of earlier this year, the GAO found.



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The report, planned as the centerpiece of a hearing Thursday morning before the House Energy and Commerce Committee’s oversight and investigations subcommittee, provides a detailed, interior view of the now-familiar dynamics that led to what President Obama characterized as a disastrous launch of the federal marketplace.

For the first months after the opening of the federal marketplace, on which three dozen states have relied, many people were stymied trying to shop for health plans. By early spring, the end of the first enrollment window, the marketplace was working well enough that most insurance-seekers could get coverage, and 5.4 million people had signed up — more than predicted. The second sign-up period for people to renew coverage in the federal marketplace or buy a health plan for the first time begins Nov. 15.

Hours before the report became public Wednesday, federal health officials predicted that this next sign-up opportunity would go smoothly, in part because they are now relying on a different main contractor to finish building the computer system and they are monitoring the company more closely.

In testimony prepared for the House hearing, Andrew Slavitt, the new CMS second-in-command, said, “We are keenly aware of the challenges of Year Two in a new program of this scale, particularly one that faced significant challenges in its first year.” Slavitt, who until recently was a top executive for Optum, a contractor that helps oversee work on the federal health exchange, said the agency is focusing on helping to improve consumers’ ability to shop for and afford health plans in the marketplace as it works to finish building parts of the computer system and create “a more disciplined, highly accountable and visible management structure.”

In recent months, other documents and analyses have suggested that CGI, the main contractor, bore some of the blame, in part by giving assurances about aspects of the computer system that were not yet working. Federal health officials ousted CGI in January, replacing it with Accenture Federal Services.

The GAO points out that, under Accenture, federal officials still have been changing requirements and driving up costs, from an estimated $91 million last winter to more than $175 million by early June. In its official response to the report, health officials counter that costs increased because they added to the new contractor’s workload — for example, adding for a separate online marketplace for small businesses that has still not been completed.

Overall, the GAO concludes, the efforts of federal health officials “were plagued by undefined requirements, the absence [of] a required acquisition strategy, confusion in contract administration responsibilities, and ineffective use of oversight tools.”

Once officials belatedly realized that CGI was running far behind, the report says, they “increasingly faced a choice of whether to stop progress and pursue holding the contractor accountable for poor performance or devote all its efforts to making the October deadline.” Staffers chose the latter, the GAO says, noting that they considered but rejected withholding fees from CGI last August, two months before the marketplace opened. Ultimately, the agency withheld just 2 percent of the contractor’s fees.

Although the report is largely retrospective, it includes a stern caution: “Unless CMS improves contract management and adheres to a structured governance process, significant risks remain that upcoming open enrollment periods could encounter challenges.” Even now, parts of the computer system are unfinished — particularly a financial management system to handle payments to insurers and exchange information with states that are running their own marketplaces.

A senior CMS official, briefing reporters Wednesday on the condition of anonymity before the GAO’s findings became public, outlined improvements the agency has been making. They include more training for staffers who select and monitor contractors and a different kind of contract for Accenture that ties payment more to the work that is accomplished. “We are going to have a successful second open enrollment,” the official predicted, but acknowledging that “we know we have a lot of work to do to regain the trust of the American people.”