The Corner

How Much Did Really Cost? More Than the Administration Tells Us

As you may remember, back in May we were told by the Department of Health and Human Services (HHS) secretary Sylvia M. Burwell that the cost of building totaled $834 million, glitches and all. HHS’s Office of the Inspector General (OIG) provided its own estimate of $800 million. However, that $800 million price tag is roughly 40 percent of the actual cost of the defective website. According to a new report produced by Bloomberg Government (BGOV), the cost of is closer to $2,142 million than $834 million.

The difference is mostly due to the fact that, according to BGOV, the administration’s estimates omit some pretty significant costs such as the budgetary cost of the IRS (which among other things is doling out subsidies through and other agencies. That discrepancy accounts for $387 million.

Another $300 million comes from omitting the contracting costs for processing paper applications as backup in case of the failure of the website. 

Another $255 million comes from using a different time frame. BGOV uses a longer one than HHS does, but as the report notes: “The Burwell and OIG estimates stopped counting just as a major drive got underway to make permanent repairs to” 

And then there is $400 million unaccounted for in OIG’s estimate due to HHS’s questionable accounting techniques. Most of that is owing to HHS’s need to find money that Congress didn’t originally appropriate in the Affordable Care Act (ACA) for the construction of a federal exchange ( HHS had to get creative and ended up shuffling money around from 204 other existing contracts to pay for the construction of one of the most defective websites ever. Yet this money needs to be counted as a cost of, as BGOV noted:

Of the 434 contracts BGOV identifies as used to implement the full ACA, 204, or nearly half, were signed for other purposes before the law’s 2010 enactment and only later re-worked to help pay for the law. Half of the dollars spent have been via old contracts.

So far the cost of has been $2.1 billion. That’s a lot, but it is nothing compared with the overall cost of the “reform,” which BGOV estimates to be $73.4 billion to this date. Note that this figure doesn’t include the cost of ACA’s expansion of Medicaid “because reliable data on actual spending, as opposed to forecasts, isn’t publicly available.”

BGOV adds:

CBO estimates the health law will boost Medicaid spending by $20 billion in fiscal 2014 and by more than $350 billion through 2019

If the CBO forecast proves correct, reform costs to date would be almost 25 percent higher, or more than $90 billion.

Ultimately, BGOV’s $73 billion estimate is probably an underestimate, but considering the extreme difficulty of knowing the actual cost of the law, it provides a great starting point. The report even notes that “the issue has grown so complicated that the Congressional Budget Office (CBO) has given up trying to keep tabs on total costs.” 

The whole thing is here

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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