Should Government Be in the IT Business?

We asked the Chief Information Officer (CIO) of a large state health and human services agency an interesting question recently: “Do you need a large information technology (IT) organization?”

At the time, the CIO was engaged in the procurement of a Medicaid Management Information System (MMIS). The project was stretching his resources thin and he was relying on us (PK) to supplement his staff with MMIS procurement expertise. We were leading a discussion of procurement strategies and the question came up “Why can’t we just outsource the whole thing, can we just rent one like other people rent applications?” The discussion that followed established the following benefits and roadblocks of the approach.

Potential Benefits

  • In a time of budget cuts, this would cut capital (one time expenditure) budget and may even offer operating budget cuts as well.
  • With attrition due to retirement and the difficulty in recruiting and training new staff, there is decreased worry about getting and keeping the staff required to implement and maintain a large system.
  • Allows staff to devote efforts to more strategic projects (as opposed to the operational nature of an MMIS) that would better support the agency.

Potential Roadblocks

  • A waiver from CMS would be required – the law technically says states have to construct and maintain an automated system to handle Medicaid claims.
  • Most MMIS vendors, despite what their marketing literature tells you, are not prepared to run Medicaid as a software service.
  • Vendors may try and create lock-in with their product through proprietary data formats and unique features.
  • Issues with privacy and security meant these systems may be no less secure than existing systems.

Though we didn’t reach any definitive conclusions, we all realized this approach has significant potential. This CIO is on the forefront of identifying ways to deal with budget shortfalls and effectively using technology to further the mission of his agency.