Obamacare: Home of the $11,500 Application


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:


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.