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A Sick Medicaid System Case Study

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Updated: Dec 20th, 2019


Low-income earners benefit from Medicaid, which provides the means to receive health care. The U.S. federal government put in place measures to ensure that all states complied with the Health Insurance Portability and Accountability Act (HIPAA). The states were required to secure Medicaid records.

Different states adopted different options that they deemed fit for them. States could either update their current (legacy) systems or develop a new one. Maine developed a new system that turned disastrous (Oz, 2008).


The Medicaid System was developed with an aim of assisting persons with low incomes to obtain health care services. Since the program was sponsored and funded by the government, it had to comply with some of the laws put in place concerning healthcare and other related issues. In 1996, the government enacted an Act that required healthcare providers in the states to secure Medicaid records.

Every state had to find a way of integrating their Medicaid claim systems to comply with the Health Insurance Portability and Accountability Act of 1996. Different states adopted different options that they thought best suited them. One of the ways in which states complied with the provision was by maintaining their ‘legacy’ systems while updating them and providing a web link to the system.

However, other states (such as Maine) decided to develop a totally new system in order to comply with HIPAA and ensure that it was flexible enough to accommodate changes whenever need arose. However, the option of developing a new system proved disastrous in this case.

In the case of the Medicaid system, the states that decided to maintain their ‘legacy’ systems benefited more than those states that decided to create a new system. One of the advantages was the ability to save more money while at the same time complying with HIPAA.

Maine’s Department of Human Services (DHS) spent $70 million within six year while developing and maintaining the new system. A significant proportion of this amount went to paying CNSI.

Another advantage of not adopting a new system was the fact that there was no need for employing new staff for the development team. The IT department head of DHS knew that the team needed between 60 and 70 members in order to complete the exercise in time (1st October 2013).

The states that maintained their legacy systems did not require more staff to develop a system since all they needed was to update their current systems and link them to a website. Another advantage is the fact that there was no need for training.

Maine, which decided to develop a new system, had to train the providers how to use the new system. However, training was not done and this lead to more problems. Another advantage of using the legacy system is the fact that there was no risk of getting more errors. The new system was characterized by numerous errors.

Problem Definition

One of the problems that has been identified is the development of a new system rather than maintaining the ‘legacy’ Medicaid system. However, the main problem that was associated with the failures of the new system was the lack of communication among programmers. The lack of communication led to the waste of resources including time and money.

It led to the loss of money that was required to outsource the development procedures to other companies such as CNSI. Even before the problem of lack of communication was sorted, it took a long time, which lead to disappointments among the medical practitioners.

After the issue was sorted, the DHHS director announced that the new system was working as efficiently as the old one. This was after spending millions of dollars in a system that was supposed to work better than the previous one.


Gopal, Mukhopadhyay and Krishnan (2002) argued that communication is one of the issues that affect software project management. According to them, communication is most vital during the software development process. Communication and coordination is required in order to ensure that there is improved performance.

For this case, Maine’s DHS should have ensured that there was proper communication between the state’s programmers and those of CNSI. They worked on different parts and yet did not consult each other. For this reason, the different parts of the system conflicted and created numerous errors. After the nomination of a physician to head the unit, things worked for the better.

Miller and Luse (2004) also identified that communication was important among information systems staff and other users and managers in order to ensure that the projects are successfully developed. They pointed out that ineffective communication led to the failing of IS projects.


Communication is vital for the success of any organization especially when it comes to the information systems staff. They require coordinating with other users and managers in order to ensure that systems are successfully developed (Miller & Luse, 2004).

The new systems for DHS failed because of lack of communication among programmers. This led to the loss of valuable time and money. For this reason, a new leader for MaineCare was nominated to sort the communications issue.


Gopal, A., & Mukhopadhyay, T., & Krishnan, M. (2002). The role of software processes and communication in offshore software development. Communication of The ACM, 45(4), 193-200.

Miller, R., & Luse, D. (2004). Advancing the IS Curricula: The identification of important communication skills needed by IS staff during system development. Journal of Information Technology Education, 3(1), 117-131.

Oz, E. (2008). Management information systems (6th ed.). New York: Course Technology Ptr.

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