May 24, 2014

Obamacare: Home of the $11,500 Paper App

Move over, Pentagon.

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This column went up at PJ Media and was teased here at BizzyBlog on Tuesday.

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Remember the good old days when the Pentagon was spending only $640 for a toilet seat and $400 for a hammer?

Yes, I wrote “only.” (And yes, I understand that the problems at the Defense Department had far more to do with bureaucratic bloat than with genuine fraud or abuse.)

It turns out that procurement officers there were, relatively speaking, wise stewards of taxpayer dollars, at least when compared to the Obama administration’s Centers for Medicare and Medicaid Services. CMS has given the American people the $11,500 paper Obamacare application — and that may be a lowball estimate.

On July 1 of last year, the agency contracted with Serco, a company which has before and since built a history of fleecing the British and Australian governments, to process those apps. The potential price tag: $1.25 billion over five years in what the government says is “a Cost-Plus-Fixed-Fee type contract with a 12-month base period and four (4) 12-month option periods.”

If the contract’s profit is really “fixed” in the correct and not corrupt sense of the word, Serco certainly isn’t acting like it. A whistleblowing employee alleges that the company “gets paid for the number of people they employ, so they want us there even if we’re not doing anything.”

Based on the number of employees and former employees who have come forward to tell their stories to St. Louis TV station KMOV, the fact that the vast majority of the workers at the facilities Serco has established to carry out the contract are in fact doing almost nothing productive is beyond dispute.

Here is just a sample of the dozens of outrageous statements contained in the five reports (here, here, here, here, and here) KMOV had posted as of when I submitted this column:

  • “[W]eeks can pass without employees receiving even a single application to process.”
  • Employees “sit at their computers and hit the refresh button every 10 minutes … to hopefully look for an application.”
  • One supervisor allegedly said that “if we process one or two of these a month we have done our job.”
  • “Multiple employees said there were days they did not process even one application, in fact they believe they only averaged seven to nine processed applications per month since the facility opened in October, 2013.”
  • “1,800 people … (try) to get one of 30 applications to pop up.” (Serco originally anticipated hiring “approximately 1,500 staff.”)
  • “They want to hire more people even though we still don’t have work to keep the people that we have busy.”

Additionally, when supervisors knew that CMS officials were going to pay them a visit, employees were told to “dress professionally and act like we were working … (and to) pull our chairs into our cubicles and yes look at the screen as if we were reading things with fingers on the keyboard.” As PJ Media’s Glenn Reynolds has often observed: “It’s Potemkin Villages all the way down.”

One employee astutely observed that “somebody has figured out how to make a lot of money off this deal to do nothing.” That’s why I question the alleged “Cost-Plus-Fixed-Fee” nature of the contract. Based on the company’s described behavior, either Serco is allowed to formally raise its not really fixed fee if its workers put in more hours, or it has figured out how to pad its submitted “costs” to a point well above what they truly are.

Here is how I estimated the per-app cost Serco is incurring:

SercoEstimatedCostPerObamacareApp0514

Scenario 1 uses information relayed to KMOV by a Serco employee in Kentucky, where all paper apps are apparently first received and scanned. This person recounted how the facility got about 1,000 apps one day back in November or December, and how that represented roughly a full day’s work for all locations to fully process. This person estimated that about seven or eight days’ worth of additional work had come in on all other days during what she said was Serco’s eight months of operation.

Even after reducing the total contract cost incurred thus far to reflect the fact that it has really only been 7-1/2 months since Obamacare went live, and using a high-end estimate of 9,000 applications received since inception (the big day of 1,000 plus eight more equivalent days), I calculated an estimated cost per app of over $17,000.

Scenario 2 uses the midpoint between what we were told supervisors were expecting employees to process. Some employees thought it was one or two per month; others claimed it was two or three. Two apps per month times 1,800 employees would be 3,600 apps per month. Divided into the monthly contract cost of $20.8 million, that comes to almost $5,800 per app — an amount that is inherently conservative because it assumes that all employees are in data entry, with none in supervision, and because it assumes that all employees are able to achieve the two apps per month goal.

A rough average of the two scenarios yields an estimated cost of $11,500 per Obamacare app. That’s the equivalent of about 18 old-fashioned Pentagon-purchased toilet seats, or 29 DOD-bought hammers.

I would be more than glad to revise these estimates to reflect facts brought out in sworn Congressional testimony by the miscreants at Serco and CMS responsible for this fiasco. Don’t put it past these people to see if all of this blows over and to try to renew Serco’s contract for another year in early July.

Serco’s skulduggery is a very small tip of a huge iceberg. $474 million has been squandered on failed state exchanges, while a perfectly operational web site built by three guys over a long weekend to help people find plans continues to mock them. California recently acknowledged that it will spend $1.2 billion more than expected on its Obamacare program. HealthCare.gov is spending $121 million more on repairs. Even then, its “back-end” communication with insurance companies “might not be completed by the summer.”

Readers should rest assured that yours truly completely understands that there are far bigger problems with Obamacare than its mountain of waste, fraud and abuse. But stories about workers getting paid $17 an hour while having nothing to do and sleeping on the job out of sheer boredom can get the attention of otherwise apathetic voters. KMOV hasn’t run five consecutive daily stories on Serco because people don’t care.

The need to avoid generating serious interest in this outrage explains why the establishment press’s alleged watchdogs are as fast asleep on this story as some employees reportedly have been during their workdays at Serco. As of when this column was submitted, the Associated Press’s national web site had no coverage, instead incredibly choosing to afford it only one regional story with the most boring headline imaginable (“Contractor for Obama health reform law scrutinized”).

From the national press’s perspective, nothing can be allowed to disturb Dear Leader’s “signature accomplishment” and its quiet march towards grudging acceptance by a disengaged populace. Nothing will until Obamacare’s opponents figure out how to shake them out of their lethargy.

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2 Comments

  1. It would not surprise me if most of these hires were previously employees/activists from OWS, ACORN or other DNC/liberal groups. IF they are, even this degree of separation should be cause for a fraud or political corruption case.

    Comment by dscott — May 26, 2014 @ 12:54 pm

  2. I think the chances that activists are in top and maybe middle management are pretty good. I think the chances go down when it comes to the everyday troops.

    Comment by Tom — May 26, 2014 @ 1:09 pm

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