

Ask HN: How did the Covered California System cost so much? - briandear

It blows my mind that the Covered California insurance exchange cost $313 million, yet companies like Facebook and Twitter were able to build out their technology stack for much, much less and yet handle more traffic.
======
staunch
Version 1.0 of Twitter had to handle 200 friends and family with the most
trivial of tasks.

Version 1.0 of Covered California had to handle 1+ million users, in the
extremely complicated world of health insurance, while dealing with extremely
sensitive data.

I'm sure it could have been built for a heck of a lot less, but I doubt it's
quite as wasteful as you might imagine.

------
byoung2
Advertising, for one:

 _With at least $86 million earmarked for ads, Covered California is counting
on global marketing firms to get the job done: Weber Shandwick and Ogilvy
Public Relations. According to Covered California, ads will appear in multiple
languages on TV, radio, newspapers, billboards and social media._

[http://www.bakersfieldnow.com/news/local/California-could-
se...](http://www.bakersfieldnow.com/news/local/California-could-
see-300-million-ad-blitz-for-Obamas-health-care-overhaul-216821451.html)

EDIT: It looks like they also opened 3 call centers, with about 400 operators,
with plans for a 4th next month with 150 more.

[http://www.latimes.com/business/money/la-fi-mo-california-
he...](http://www.latimes.com/business/money/la-fi-mo-california-health-
exchange-glitches-20131001,0,7108713.story)

~~~
briandear
yes, but according to this LA Times article[1], it was a "$313 million
enrollment system." To me that implies that the enrollment system itself cost
$313 million as opposed to the entire budget for Covered California.

But even allowing for $86 million in advertising (which is still insane
considering that the entire Obama campaign spent a little less than a billion
-- and that was for an entire country and that money did not all go towards
advertising. So $86 million for a single state? That number itself is mind-
blowingly ridiculous. Allowing that the $86 million came from the $313
million, we're still looking at over $200 million to build a software
application. I'm pretty sure the TurboTax guys didn't spend that much on their
first application -- and they're dealing with 50 states plus the federal
government's tax laws that change every year.

I just wonder how many uninsured people in California could have been covered
with that $313 million they've spent building a web application that's trying
to help the uninsured. There are apparently 7 million uninsured in California
(the highest number and percentage in the country) so that comes out to about
$500 per person. Considering that there will not be a 100% insurance rate in
California, it seems like that money spent to build a software application
could have covered a pretty high percentage of those uninsured. I'm obviously
simplifying, but it seems like the goal of helping the uninsured took an
expensive, wrong turn somewhere. That 313 million doesn't include the ongoing
salaries and expenses of actually running Covered California. The amount of
money spent is staggering considering that not a single dollar of that is
actually going to pay any healthcare -- it's only a service to help people
find insurance.

[1] [http://www.latimes.com/business/money/la-fi-mo-california-
he...](http://www.latimes.com/business/money/la-fi-mo-california-health-
exchange-glitches-20131001,0,7108713.story)

~~~
byoung2
Here you go:

[http://www.healthexchange.ca.gov/Pages/FinancialReports.aspx](http://www.healthexchange.ca.gov/Pages/FinancialReports.aspx)

Looks like $120 million for the 4 call centers, $100 million for outreach and
advertising, $50 million "other", and $30 million "eligibility and
enrollment". Maybe the enrollment system is in that $30 million?

------
dragonwriter
The Exchange isn't just a technology stack.

~~~
byoung2
This is the best answer. If you asked me to create Amazon from the ground up,
I wouldn't just be building a website, I'd be building warehouses and stocking
inventory. Covered CA has 3 call centers with 400 agents, with a 4th on the
way with 150 more. There are hundreds of employees working on regulation,
compliance, support, integration, etc. 1000 employees at $50,000 contracted
for a year is already over $50 million.

------
jgeorge
Government organizations have never traditionally been concerned with the cost
of anything. Startups traditionally are extremely aware of the cost of
everything.

~~~
briandear
I wish the voters would get aware. We keep electing these same people that are
spending OUR money unwisely. It's situations like these that make me resent
every dollar I must pay in taxes. If the money was actually going to help
INSURE people as opposed to simply being wasted, then I'd be ok with the
existing tax burden. But when a state like California is teetering on the edge
of fiscal disaster, it's almost unconscionable that they'd spend 1 cent more
than was actually necessary.

But you're correct. Government organizations don't care -- I just wish more
people could make them care!

~~~
dragonwriter
> I wish the voters would get aware.

Many of the bureaucratic rules that increase costs are the direct results of
the voters getting aware of costs and demanding that something be done to
constrain them.

If you want the voters to get a deep understanding of what specifically drives
costs in IT (or other particular domains of concerns), that's a nice wish, but
its not particularly realistic.

