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$50 million Medicaid fight goes on

PIERRE -- Frustration filled the room at a legislative meeting Wednesday over what's become a three-year deadlock between the state Department of Social Services and a major technology company hired to create a new Medicaid management information system for processing claims.

CNSI received the contract in 2008 but halted work in 2010 as the two sides went to state court against each other on the far-from-finished project. Federal authorities, who are responsible for 90 percent of the project's costs, made the company and South Dakota use a mediator instead.

Approximately $50 million has been paid so far on what was supposed to be a contract for $62 million. CNSI has won a variety of major contracts from the federal government and other states but is facing a lawsuit and investigation in Louisiana over a state contract there.

The sessions with the mediator haven't been fruitful yet, according to state Social Services Secretary Kim Malsom-Rysdon.

She told members of the Legislature's Government Operations and Audit Committee that CNSI has asked for contract changes that are unacceptable to the Daugaard administration and CNSI wants more time than the 36-month completion schedule that South Dakota and federal officials proposed.

Malsam-Rysdon acknowledged she was off the mark when she stated in June that work could resume in August. Asked how much the project will cost to finish, she replied, "That is the key question."

She wouldn't give a range. One reason for her refusal, she said, was the federal government ordered additional changes in Medicaid expense reporting during the three years the project sat stalled.

Several legislators spoke frankly about their disgruntlement with the situation.

Rep. Mark Mickelson, R-Sioux Falls, said CNSI is "not someone any of us have a lot of confidence in."

Jim Edman, the deputy commissioner for state government's technology bureau, said the project could take three to five years to complete once work starts again.

"That is not satisfactory," said Rep. Susan Wismer, D-Britton. "I don't think we're doing our duty if we don't push harder on this."

She added, "I think we knew it was a mess and we ignored it for a while." She said it can't be ignored any longer.

Edman said the cost for operating and maintaining the new system can't be estimated yet. He had approximately 10 people assigned to the project while CNSI was still active on it, and work by some members of his staff continues to this day.

The big challenge in CNSI's design is the use of more than 20 different types of software and getting them to consistently work as intended, according to Edman.

For each type, he said, the state Bureau of Information and Telecommunications will need to hire experts or develop service contracts within South Dakota or nationally.

"It's certainly a roll of the dice," Edman said.

He said BIT plans to take over management and maintenance 12 months after the new system is put into full operation.

Meanwhile, Social Services continues to use the mainframe system that's been in place for more than 30 years for Medicaid claims processing.

Said Mickelson, "They have their $50 million and we have no product."