Obamacare’s Exchange Crises

Published May 13, 2015

Obamacare’s Exchange Crises

Consumer Power Report #461

The Pioneer Institute reports on the behind-the-scenes crisis in Massachusetts, where the launch of the Obamacare exchange was disastrous.

The Pioneer Institute will publish a scathing report on Monday about the state’s management of Massachusetts’ troubled Health Connector website under former governor Deval Patrick.

The Pioneer Institute is a conservative think tank that has been critical of the Affordable Care Act and Massachusetts’ implementation of it. The report is based on accounts from two primary whistle-blowers, conversations with other officials and reviews of internal audits, which are public documents.

The report finds that Massachusetts officials failed to hold CGI, the technology company contracted to build the website, accountable for shoddy work and missed deadlines. It did not provide CGI with adequate resources or proper state leadership. State officials apparently misrepresented the progress of the website to the Health Connector board and the federal agency overseeing Medicaid, according to the report.

The report is here. This is apparently only the beginning of the process for the Massachusetts Connector, which will now have additional investigations to deal with:

Late last week the administration of Massachusetts Gov. Charlie Baker (R) confirmed that the FBI and U.S. Attorney for Boston have subpoenaed records related to the commonwealth’s “connector” dating to 2010. This insurance clearinghouse was Mitt Romney’s 2006 beta version for Obamacare’s exchanges, but updating the connector to comply with the far more complex federal law became a fiasco rivaling any of the other federal and state Obamacare failures.

The target of the investigation hasn’t been disclosed. But the best autopsy of the connector mess is being published Monday by Boston’s Pioneer Institute think tank, where Josh Archambault reviews internal audits and whistleblower testimony he obtained. The evidence is damaging to both Massachusetts’ exchange contractor, CGI Corp., and the administration of former Democratic Governor Deval Patrick.

Mr. Archambault reveals years of third-rate technological work, disregarded deadlines, pervasive mismanagement, little outcome measurement and general bureaucratic incompetence. An outside auditor noted as early as 2012 that the “quantity and/or skills/experience level of project resources may be impacting the ability to complete project tasks within planned timeframes” and questioned if staff were “sufficiently knowledgeable.”

A test before going public showed a 90 percent failure rate, and the new connector detonated on the launch pad. Some 320,000 residents attempting to gain coverage had to be dumped into a temporary “free” Medicaid program without any income eligibility determination. Pioneer pegs the total cost of the mess at around $1 billion.

These stories will only continue to extend into future years and administrations given the extreme waste involved and the actions by irresponsible bureaucrats at all levels. But the real problem is that the underlying issues extend to virtually all areas of Obamacare’s implementation and are going to continue to be a cost future taxpayers must pay. All of this could have been avoided if Obamacare’s launch was delayed – but that would have been too responsible given the very real political stakes.

— Benjamin Domenech



About 5 percent of Medicaid beneficiaries account for almost 50 percent of program spending, according to a new report from the nonpartisan Government Accountability Office.

The report says a small number of “super-utilizers” consume much of healthcare spending.

The GAO found that from 2009 to 2011, 5 percent of enrollees in Medicaid, the government health insurance program for the poor, made up 48 percent of costs; the most expensive 1 percent made up 25 percent of costs.

The dynamic is not unique to Medicaid. The Department of Health and Human Services found that in 2010, 5 percent of the overall population accounted for 50 percent of healthcare spending.

The report notes that Medicaid costs are expected to increase as more people are covered under ObamaCare’s expansion of the program. Therefore, studying high-expenditure enrollees “could enhance efforts to manage expenditures and facilitate improvements to care,” it notes.

Disabilities tend to contribute to high costs. The report finds that 63 percent of high-expenditure enrollees are disabled. Fifty-two percent have mental health conditions, 19 percent have substance abuse problems, and 18 percent have diabetes.

SOURCE: Peter Sullivan, The Hill The full GAO report is here.


Drugmakers have long argued they should have the right to talk to doctors about unapproved uses for their products, as long as they are being truthful. And in some cases, courts have agreed. But the federal government still frowns on the practice and, in recent years, has fined drug companies billions of dollars for talking to doctors about so-called off-label uses for their medications.

On Thursday, Amarin Pharma took the unusual step of suing the Food and Drug Administration, arguing that it has a constitutional right to share certain information about its product with doctors, even though the agency did not permit the company to do so. Lawyers for the company said that they believed their case was the first time a manufacturer had pre-emptively sued the agency over the free-speech issue, before it had been accused of any wrongdoing. Other companies have sued the agency only after they have gotten into trouble.

“If you tell the truth – if you’re not misleading – then the First Amendment protects you when you provide this sort of information,” said Floyd Abrams, a noted First Amendment lawyer who is representing Amarin in the case, which was filed in United States District Court in New York. Amarin has its corporate headquarters in Dublin.

But others said that doing so sidesteps the authority of the F.D.A., which is responsible for making sure that drugs are safe and effective. “The First Amendment right is not an absolute right. It has limits. And it’s always been subject to a balancing test,” said Dr. Michael Carome, director of the health research group at Public Citizen, an advocacy group in Washington. “If this lawsuit were to succeed, it would be devastating for drug safety and undermine the drug approval process.”

At issue in the lawsuit is the F.D.A.’s stance on Amarin’s only product, Vascepa, which is a prescription omega-3 fatty acid that is derived from fish. In 2012, the F.D.A. approved Vascepa for use in patients with extremely high levels of triglycerides, a kind of fat in the blood that has been linked to heart disease. But when the company sought to expand the drug’s reach to a wider population of people with severe levels, the agency turned it down. The company has said the F.D.A. denied its request because, although a clinical trial showed the drug reduced triglycerides, it had not been proved to reduce the risk of heart disease.

SOURCE: Katie Thomas, New York Times


Predictions that the health insurance exchanges would significantly shift the insurance business toward an individual market have yet to come true. In fact, the largest gains in health coverage are from increased enrollment in employer-based plans, according to a new study from Rand Corp. that was published in the journal Health Affairs.

Since 2013, 6.5 million people have signed up for an exchange plan, and about 9 million have enrolled in Medicaid through the Affordable Care Act’s expanded programs. Employer-sponsored plans, meanwhile, grew by 9.6 million new enrollees.

“We don’t see any evidence of a decrease in the offer of employer-based insurance,” Katherine Carman, lead author and a Rand economist, said in the report. “The ACA has greatly expanded health insurance coverage in the United States with little change in the source of coverage for those who were insured before the major provisions of the law took effect.”

However, it’s important to note that the individual market is growing with a 46 percent increase in enrollment since last year, and that experts predict individual plans will likely continue to expand, though at a slower pace, FierceHealthPayer previously reported.

The Rand report also found that almost 26 million remain uninsured. “I think for some people [health insurance] still is expensive,” Carman told CNBC. “They may be unaware of the penalties … they may not know how much the penalties are going up next year, and some people might not think the insurance is worth it.”

“We still have some people who are uninsured who have offers of insurance and are not taking it up,” Carman added. “We’ve got people that are going to be harder to convince, for a wide variety of reasons.”

SOURCE: Dina Overland, FierceHealthPayer


Doctors have many tests and procedures to choose from when treating you. But is it possible to have too much of a good thing?

It is. Overuse and waste in medical care–which include ordering more tests and treatment than scientific evidence supports–make up as much as 30% of health-care spending according to a 2013 Institute of Medicine report. That’s approximately $750 billion a year, which we all pay for in premiums and taxes to support Medicare and other insurance programs.

A massive new effort to eliminate wasteful spending has begun. This year the Department of Health and Human Services announced plans to pay doctors and hospitals more for quality, not quantity. Private insurers are likely to follow suit.

We recently published findings in the Annals of Internal Medicine from a national survey of hospitalists–physicians who primarily treat patients in the hospital setting–that sheds some light on how medical tests and treatments are overused, and how often.

We asked hospital doctors to imagine two common patient scenarios–a cardiac evaluation before surgery and a patient who suddenly loses consciousness–and asked what they thought most of their colleagues in their hospital would do. Evidence-based guidelines exist for both scenarios.

More often than not, the hospital doctors said that their colleagues would choose the option that meant overuse of testing–not because of a lack of awareness of the guidelines, but to reassure themselves or their patients. This unwarranted testing and treatment can lead to medical complications.

For example, an unnecessary cardiac stress test in a patient may return with a false positive finding leading to an unneeded and risky cardiac catheterization. Similarly, a patient being treated with an antibiotic for a viral infection may develop serious side effects from the unnecessary medication.

Financial incentives are part of the reason why unnecessary tests and treatments are ordered. Defensive medicine–ordering unnecessary tests or treatment to reduce legal risk–is another.

Physicians should not feel compelled to order more testing or procedures to shield themselves from malpractice lawsuits brought by patients who may feel that their doctors did not do “everything possible.” Unfortunately, many medical malpractice reforms–such as limiting financial awards for “pain and suffering” damages or creating pretrial screening panels–have not uniformly lowered defensive practices.

We see potential in creating “safe harbors” that protect physicians from liability if they follow approved guidelines or evidence. Another option: Remove medical malpractice lawsuits from ordinary civil courts and resolve them administratively (or in special health courts) that do not require the adversarial litigation process that can generate tremendous legal anxiety and cost.

SOURCE: Allen Kachalia, Wall Street Journal


Kelly Fristoe operates his financial planning company in Wichita Falls, Texas, an oil-producing town about 140 miles northwest of Dallas, near the Oklahoma border.

As part of his job, Fristoe, CEO of Financial Partners, helps people in the area buy health insurance both on and off the exchanges created by the Affordable Care Act.

The oil industry, like other resource-based businesses, is fickle with people’s incomes. That can directly affect how people buy and retain coverage in the individual market under the healthcare law, Fristoe said. When times are good, well-paying jobs usually follow. Insurance is easier to afford if companies don’t offer it.

More recently, the price of crude oil has fallen precipitously. When that happens, employees in oil havens brace for pay cuts and layoffs. And even small changes in income can affect whether it makes sense to shop for health coverage in the Affordable Care Act’s exchanges.

The exchanges were built as an outlet for people to buy more affordable health plans in one streamlined setting if their jobs didn’t provide any coverage. Americans who make less than 400% of the federal poverty level receive tax credits that go toward paying premiums, and those who earn less than 250% can receive additional cost-sharing subsidies to help pay down deductibles and copayments. Exchange plan subsidies are also at the center of a major U.S. Supreme Court case to be decided next month.

But what about those at the general cutoff? An individual at 400% of poverty makes about $47,000 per year, while a family of four makes $97,000–by no means poor, but firmly in the trenches of the middle class. Do they decide to purchase health insurance through the exchanges knowing they won’t receive financial assistance, or do they buy directly from health insurers and brokers?

“Right there at 400%, it could go either way,” Fristoe said. It depends on plan design, other ancillary costs and sometimes politics.

Instead of one, seamless individual market, the ACA has generated “two different marketplaces for the same kind of product,” said Katherine Hempstead, the director of health insurance research at the Robert Wood Johnson Foundation. And health insurance companies continue to sell millions of plans to people off the exchanges, a group of people often overshadowed by consumers navigating the new exchanges.

SOURCE: Bob Herman, ModernHealthCare