Why Are The Obamacare Exchanges Such A Mess?

Have you ever wondered how the Obamacare law was written? Close your eyes and imagine a smoke filled room full of overweight, white males, all puffing on ….   Oops …. That was Tammany Hall. These days they don’t allow cigar smoking. There were women and minorities present. And just about everybody there was on a diet. But other than that, not much has changed.

Obamacare was fashioned by special interests – all of whom were very self-interested. They chose to mandate a health insurance plan that they wanted for themselves – without ever asking whether it was appropriate for moderate income families living paycheck to paycheck. They imagined an electronic exchange with all kinds of bells and whistles, without ever asking the techie folks whether this had ever been done before. Or even if it could be done.

The result has been disaster.

Take the state of Oregon. Grace-Marie Turner writes:

Oregon, under then-Gov. John Kitzhaber, aspired to create a shining model for other ObamaCare exchanges, but instead, it became its poster child of dysfunction. After spending more than $300 million in federal taxpayer dollars, Oregon pulled the plug last year and decided to default to the federal exchange.

The state is now involved in lawsuits with Oracle, the primary vendor and the federal government could actually ask for its $300 million back. Like the federal exchange (heathcare.gov), the Oregon exchange seems to have been designed by people who knew a lot about health care, but nothing about technology:

One after another, Cover Oregon directors were fired and replaced, but never with anyone who had IT experience or expertise. Deadlines were missed, directives were repeatedly changed, and state officials ultimately refused to meet with the Oracle contractors who were trying to, and ultimately did, salvage the project.

Things are not much better in other parts of the country. Here is a state round up (HT: Michael Cannon) from ACASignups.net:

Hawaii: Jeff Kissel, the Connector’s executive director, told lawmakers at a briefing Thursday that if the exchange created by the Affordable Care Act does not get state funding soon, the federal government will abolish Hawaii’s marketplace and run it directly.

Vermont: The cost of fixing the dysfunctional Vermont Health Connect website will be roughly $200 million, and maintaining the state’s health care exchange on an annual basis will be about $51 million a year.

Nevada: Critics pointed to the major technical problems in the first few months of the program that prompted the state to prematurely cancel its $75 million agreement with contractor Xerox last year.

New Mexico: The New Mexico Health Insurance Exchange board has decided to drop plans for building a state website for individual consumers and instead will continue using the federal website.

Rhode Island: A significant number of state lawmakers, up to and including Democratic House Speaker Nicholas Mattiello, have questioned whether the state should bother keeping (and paying for) HealthSource RI rather than default back to HealthCare.gov.

Minnesota: The Democratic governor has proposed creating a task force to study the future of MNsure and health care in Minnesota. Some Republicans say that’s an admission that MNsure has been a bust.

Even the federal exchange still isn’t working the way it is supposed to. All of the emergency repair has been focused on the front end of the system – where enrollees (voters) were having so much trouble and enduring so much frustration. But the back end, which is supposed to reconcile payment, subsidy, and eligibility data, still isn’t complete. Nor are the delayed exchanges for small business. It’s hard to know the exact extent of the problems because the administration has been forcing the health insurance companies to keep quiet about them.

Here is betting that the Obamacare exchanges will never be able to do what they were originally supposed to do: check with the IRS to verify your income; check with Social Security to see how many different employers you work for; check with the Department of Labor to see if those employers are offering affordable, qualified insurance; and check with your state Medicaid program to see if you are eligible for that. No one has ever designed a workable computer system that is able to do all those things. It’s no easy task. Consider that after trying for more than a decade and spending more than a billion dollars, the VA computers still can’t talk to the Department of Defense computers about service personnel medical records.

There is one simple solution that could solve the problem of the exchanges overnight: convert the Obamacare tax credits into a uniform tax credit that is independent of income. In other words, the credit for health insurance should be just like the child tax credit – the same for everyone. As I previously wrote:

With a universal tax credit, all these problems go away. It doesn’t matter where you work or what your employer offers you. It doesn’t matter what your income is. It doesn’t matter if you qualify for Medicaid. You get the same subsidy regardless of all of the above. That means that we could turn all of the exchanges over to e-Health, which has been operating an online private exchange for a decade and has insured more than 4 million people.

Originally posted on Forbes on April 16, 2015.