Policy & Regulation News

What Happens When Medicaid Expansion Goes Wrong?

By Stephanie Reardon

State officials terminated a $118.3-million contract with Hewlett-Packard for failure to implement a functional eligibility system to aid Medicaid expansion in New Jersey.

- As part of the launch of the Affordable Care Act (ACA), an expansion of Medicaid came into effect in 2014. For most states that decided in favor of Medicaid expansion, the result was beneficial as indicated by a study by the Colorado Hospital association which shows a correlation between Medicaid expansion and a decrease in care going uncompensated.  For New Jersey, this was not the case.

In November, state officials terminated a $118.3 million contract with Hewlett-Packard, which it had hired to update the online system designed to bring all the public welfare programs run by the state and the counties together. Failure to implement a functional Medicaid eligibility system ultimately led to the contract’s termination.

As Kathleen O’Brien of NJ.com reports, New Jersey was one of 28 to accept federal money designated by the ACA to expand Medicaid programs. As a result, Medicaid enrollment in New Jersey has grown by 25 percent over the past 12 months to over 1.6 million, which represents one-sixth of the state’s population.

In 2009, New Jersey hired Hewlett-Packard to establish new software to prepare for Medicaid’s expansion. after the federal government urged states to find a universal way to determine Medicaid eligibility. In many cases, this required updated computer software, an expanse that the healthcare reform law took into account by including funds for these upgrades.

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  • Problems began to pile up for providers when the Hewlett-Packard project failed to meet its completion deadline in time for the launch of the ACA last fall. New applications were separated from the old system although there was an expectation that they would be incorporated into the new system.

    The failure of the system resulted in a delay in service for patients and in turn a delay in patient volumes and a decrease in patient payments for healthcare facilities because of requirements on hospitals and federally-funded clinics to treat all patients, even the uninsured.

    An audit of the project indicates that Hewlett-Packard was supposed to complete the project by July 2014. However, there were “several contract amendments, extensions and delays that have increased both the cost and the time needed to complete the project.”

    After the amendments were made, the total cost of project increased from approximately $190 million to $227 million.

    “While some of the modifications and cost increases were unavoidable, such as the implementation of the ACA requirements, others appear to be the direct result of poor performance by HP and management oversight,” the audit states.

    The failure of this program means that providers need to complete applications on an outdated system or even by hand. The outdated system that providers in New Jersey are forced to use does not connect to the other healthcare tracking systems within the state, making interoperability impossible.

    Meanwhile, patients whose Medicaid applications are delayed in being processed continue to go without insurance. A previous publication on RevCycleIntelligence.com, stated that uninsured individuals can cost hospitals approximately $44.6 billion in healthcare services.