Kusserow on Compliance: CMS makes errors on federal marketplace contract costs

The HHS Office of Inspector General (OIG) released a report that found CMS did not identify all federal marketplace contract costs and did not properly validate the amount to withhold for defect resolution on the principal federal marketplace contract.

The federal marketplace offers private insurance plans, known as qualified health plans, and enrolls individuals in those plans through HealthCare.gov or through other means. The OIG reviewed the 62 contracts that CMS awarded for the development, implementation, and operation of the federal marketplace to determine the contract requirements for the processing and payment of contractor invoices. It found that CMS recorded $24.3 million of obligations and $22.9 million of expenditures in the Healthcare Integrated General Ledger Accounting System (HIGLAS). However, CMS failed to identify these obligations and expenditures as being related to the federal marketplace. The items were recorded in HIGLAS without the necessary project codes, or, in some cases, CMS recorded transactions using project codes that it did not identify in HIGLAS as being related to the federal marketplace. As a result, CMS is unable to accurately account for the amount spent on the development, implementation, and operation of the federal marketplace and to report that amount to interested stakeholders.

The OIG did find that contractors generally invoiced and CMS paid federal marketplace contracts correctly. CMS withheld fixed fees that were identified by CGI Federal, the IT contractor behind HealthCare.gov, as being related to defect resolution and rework; however CMS did not validate the accuracy of the amount. CGI Federal did not agree that the work was related to correcting defects or rework. CMS had not made a final decision about the fixed-fee payment that it withheld. CGI Federal had not filed a certified claim under the Contract Disputes Act.

In its report, the OIG made the following recommendations:

  • Include all relevant contract costs when it identifies total obligations and expenditures related to the design, development, and operation of the federal marketplace; and
  • Review all charges submitted by CGI Federal for the federally-facilitated marketplace contract and make a final determination on the appropriate amount to withhold for correcting defects by validating the amounts withheld for the fixed fee.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2015 Strategic Management Services, LLC. Published with permission.