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The Associated Press March 17, 2011, 8:30AM ET

APNewsBreak: Minn. to pay $7.25M in software suit

The cost of Minnesota's failed health care software program climbed to more than $41 million after the state agreed to pay $7.25 million to a company fired from the project in 2008, the state Department of Human Services said Wednesday.

The agency released its settlement agreement with ACS State and Local Solutions Inc., a Dallas-based software developer that sued the state after it was dismissed from HealthMatch. Coding bugs and delays dogged the project, and by the time state officials canceled it three years ago, the state had paid ACS and its predecessors $8.3 million.

An additional $21 million was spent on staffing, equipment, software and consultants through June 2008. The total cost, not including the state's legal bills, came to $41.25 million, department spokeswoman Karen Smigielski said in an e-mail.

The department agreed to pay for partially completed work under the terminated contract, Deputy Human Services Commissioner Anne Barry told lawmakers in a letter Wednesday. She signed the settlement Tuesday, and the agency gave a copy to The Associated Press.

Barry said the department will cover the settlement costs with administrative accounts and leftover HealthMatch funds. The state had counter-sued the company, but some of its claims were dismissed by a Ramsey County judge.

"The settlement agreement does not require any new appropriations and has no impact on the Governor's budget recommendations," Barry wrote.

The state must pay by March 31. Messages left for ACS weren't immediately returned.

HealthMatch began nine years ago and was intended to streamline the application process for public health programs, allowing human services workers to seamlessly navigate complex eligibility rules to match applicants with the appropriate coverage.

Instead, the agency still uses aging systems developed decades ago and paper applications processed by state, county and tribal workers.

When Gov. Mark Dayton switched nearly 100,000 patients into the federally funded Medicaid program this year, Human Services Commissioner Lucinda Jesson predicted the behind-the-scenes processing for 51,000 people on the state-funded MinnesotaCare program would take six months.

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