Obamacare Website Chews Up $1 Billion in Tax Dollars

The Government Accountability Office (GAO) has been touting a "modest" $394 million price tag for the flailing Obamacare website, but the truth is that the Obama administration has awarded contracts totaling over $1 billion in U.S. taxpayer dollars, a Bloomberg Government Analysis (BGOV) found.

The GAO did qualify its $394 million number. The study took into account only costs running from the ACA's outset in 2010, up to March 31, 2013. Also, it just looked at the costs of implementing the federal exchanges plus the data services hub.

On the other hand, the BGOV analysis looks at a longer time period (Obamacare enactment, through Sept. 30, 2013). That means it takes into account any recent, last-minute spending - more on that momentarily.

The BGOV study is also broader than the GAO's.

The BGOV uses the GAO to determine the top 10 contractors that are implementing exchanges in those 36 states in which the federal government is primarily handling the new

healthcare marketplaces. In other words, states where the federal government is using U.S. taxpayer money to set up marketplaces, as opposed to states that opted to set up marketplaces on their own using state dollars.

Then, instead of just focusing on federal exchange and data services hub costs like the GAO, the BGOV looks at the full range of Obamacare-related contract awards to these 10 firms.

These factors make the BGOV analysis more fairly centered on how much money it's really taking to implement the Obamacare website.

The result: More than $1 billion in contract awards is going to just these 10 firms, more than two and a half times more than reported by the GAO.

Equally appalling to this $1 billion price tag might be that one-third of the funding was awarded to IT contractors just over the last six months - despite indications that the contractors were aggregately doing a horrible job building the website. Programmers raised an alert prior to the Obamacare website going live, insurance companies had been complaining about problems when trying to use it prior to launch, and it even crashed in a test run before Oct. 1.

Perhaps the old adage, courtesy of Albert Einstein, applies here: "Insanity: doing the same thing over and over again, and expecting different results."

The fact that the lion's share of the money was doled out only a few months before the Oct. 1 exchanges were set to open, in a rash of last-minute spending, is disturbing.

For instance, take a look at CGI Federal Inc., a subsidiary of Canadian IT solutions company CGI Group Inc. (NYSE: GIB).

CGI Federal is the largest recipient of Obamacare contract awards. The firm collected $149.9 million from April through the end of September - an impressive 35.5% of the total $421.8 million it has received since March 2010. 

Obamacare Website: Rushing Is Bad for Your Health

It's no wonder the Obamacare website is largely defective - it was a rush job.

In fact, of the 10 companies examined, Navigant Consulting Inc. (NYSE: NCI) is the only one that has received no new contract awards since the GAO's March 31 study cutoff date. (The firm is tasked with data collection and customer outreach.)

In late October, Health and Human Services Secretary Kathleen Sebelius testified under oath to Congress to address the Obamacare website launch disaster. She began with a prepared statement, with comments like "You deserve better," "I apologize," and "I'm accountable to you."

Sebelius also said that roughly $175 million in taxpayer dollars had been spent on the website so far.

So, it seems her estimate was a "little" low.

Editor's Note: Keep in mind, no matter how Obamacare affects your health, your wallet, or your politics, there is always a bright side when it comes to investing. We've found a way to profit from the shift in our nation's healthcare process. You can get started here.

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