Modern society depends enormously on computer systems. Computer systems are complex, though, and in the worst-case situations, big problems can arise when designing or reconfiguring major systems. It’s important to prepare for such contingencies.
Nebraska state officials are learning that lesson the hard way. The state government has pulled the plug on two major computer projects after spending more than $12 million on them.
One project, begun under the Heineman administration, was the creation of a new computer system to handle Medicaid eligibility, a requirement for state governments under the Affordable Care Act. Nebraska officials had grown increasingly concerned by how the private company handling the project had fallen significantly behind schedule.
When the federal government’s 90 percent contribution toward that project is included on top of the $6 million spent by the state, the project cost a total of nearly $60 million in taxpayer funds — for naught.
This situation hardly gives Nebraska taxpayers reassurance about how carefully present-day government is managing public funds.
It’s true that many states have run into problems in working with private firms developing the complex software for new Medicaid-processing systems. In many cases, companies have gone years past the deadline in completing the software. New Hampshire, for example, didn’t get its new system operating until more than seven years after the original target date.
In California and Montana, Xerox pulled out of Medicaid software overhauls altogether due to problems. The company paid the California state government $123 million in compensation.
After ending the Medicaid software project, the Nebraska Department of Health and Human Services is consulting with federal officials about options. In the meantime, the department will continue using its N-FOCUS system to enroll Medicaid participants, including those made eligible after Medicaid expansion was approved via a statewide initiative.
The other software project that Nebraska has stepped away from involved building a computer system to consolidate five personnel and budget systems. As an alternative, the state Department of Administrative Services will upgrade the state’s existing payroll and invoicing system. The project can be done for less than $900,000, the department says, would be supported through 2030 and would not require new training or recoding.
Nebraska government is a sprawling, complex entity, and it’s no surprise that complications arise. But after being bitten so painfully by these two failed projects, Nebraska officials need to demonstrate their resolve on future contracts, management and oversight.
These failures should spur state officials to hold private vendors to high standards, set rigorous monitoring in place and negotiate contracts that minimize taxpayer vulnerability to needless financial obligations.
Complex projects sometimes don’t go as planned, but it’s imperative that government do everything possible to protect taxpayers from undue costs and frustrations. Call it a $60 million lesson.