System Failure

National Review Online

Tuesday, October 22, 2013

The rolling fiasco that is the launch of the health-insurance “exchanges” — the government-run online marketplaces at the heart of the Affordable Care Act — is something the Obama administration is attempting to explain away as a “glitch,” but it now threatens to throw an entire AutoZone worth of wrenches into the Rube Goldberg machine that is Obamacare. Health and Human Services managers close to the project privately say that hitting early enrollment goals will be all but impossible. The White House has called the situation “unacceptable” (yet it is accepted); insurance companies attempting to use the system are in a state of panic; only a handful of states have their own working exchanges; and the federal exchange is snarled up in Washington’s usual managerial incompetence. Nobody knows how long it will take to fix the problems, or whether they even can be fixed. The president has said that there is “no excuse” for this mess, but there is no one taking responsibility either, nor any credible timetable for getting it sorted out.

In retrospect, those Republicans who sought a delay of Obamacare’s implementation would have been doing the Obama administration — to say nothing of the country — a favor had they been successful.

The problem is not only crash-prone servers that make signing up for the exchanges a Sisyphean task. A larger problem is that they are running on faulty data. The exchanges are there to facilitate transactions involving consumers, the federal government, and insurance companies, but information is not reliably transmitted among the three. For example, faulty programming has led to miscalculations of subsidies that consumers are to receive under the program, which means that a great many of them will get premium bills that are far different from what they expect. (Far higher or far lower? Bet on the former.) Insurers are not receiving enough accurate information to process applications from consumers. As of October 19, not one person in New York State had been able to complete a purchase through that state’s exchange. Consumers are not getting accurate information about the plans that are available to them.

The deeper problem for Obamacare is that in order for the new ACA-compliant insurance plans to succeed, a very large number of healthy young people need to enroll — paying much higher premiums than they would have paid before Obamacare — in order to offset the costs incurred by extending subsidies and coverage to the old and the sick. If the insurance plans offered under Obamacare attract too many old and sick people and too few young and healthy people, they will not be financially viable. But young and healthy people do not have much incentive to comply with the ACA in the first place, and the catastrophically dysfunctional enrollment process has given them a very strong incentive to wait it out.

Uninsured Americans subject to Obamacare’s individual mandate are required by law to sign up for new policies by February 15 or face a fine. Those seeking new policies beginning in January of the coming year must sign up by December 15. It is unlikely that the defects in the system will be repaired by December or by February.

And those are just the computer-system problems. The deeper problems with the bill will not be repaired by December or February or by two summers hence, because the administration is not interested in repairing them. Obamacare will leave many Americans paying premiums that are twice as high — or more than twice as high — as those they paid before, and facing prosecution if they do not buy those more expensive plans. This is being done in the name of improving the market for insurance, while in fact converting insurance from a hedge against disaster into a universal system of prepaid health care at a substantially higher cost than the old one.

One of the reasons for that higher cost is that the new program is just a front for the old program: Medicaid, an expensive and dysfunctional mess of an entitlement. In Oregon, the 56,000 people who enrolled in health-care coverage under the new law in the first two weeks of October went exclusively into Medicaid — not one person was enrolled in a private insurance plan. Illinois has sent more than 100,000 into Medicaid under the program. Medicaid’s perverse incentive structure has ensured explosive growth in its spending over the years, while, more perverse still, its attempts to reduce costs by restricting providers’ payments to below-market levels means that few Medicaid recipients actually have access to care — and fewer still to very good care.

Republicans may have failed thus far in their efforts to repeal Obamacare, but the administration is in the midst of a much more significant failure: a failure to execute its own vision with a minimum degree of competence. The president can blame software developers and vendors all he likes, but this is his mess, and if he can’t clean it up — and he can’t — then it is up to Congress to do it for him. Repealing and replacing Obamacare remains a live issue, and Republicans would do well to pursue it.