Oregon’s Obamacare Disaster

Published January 21, 2014


Consumer Power Report #403

Oregon’s dedication to Obamacare has been complete and total since the law passed, with Democratic Gov. John Kitzhaber seeking to put the state front and center in developing an Obamacare exchange. But when it came time to launch, Cover Oregon fell flat – and now the politicians are scrambling to back away from the approach.

Democratic governor John Kitzhaber, himself a physician, admits he was “entirely outside the loop” on development of the $160 million website. He’s earned widespread ridicule for his lax management as he prepares to run for reelection. The Oregonian reports that some of his officials actively tried to squelch internal critics who warned the website was doomed: “The Oregon Health Authority last January withheld payment from the company hired to monitor the project, claiming its persistent criticism was inaccurate and inflammatory.” Just two months later, in March 2013, Rocky King, Cover Oregon’s executive director told the Oregonian he was constantly being asked by legislators “will it work?” His stock answer: “I haven’t the foggiest idea.” King has admitted he had very little experience in IT, so he was no doubt being truthful.

King has been replaced by Bruce Goldberg, who is now trying to help legislators decide whether to scrap the multi-million dollar project entirely.

Interim Cover Oregon head Bruce Goldberg said Wednesday that while his team is making progress on fixing a flood of problems with the health exchange’s foundering website, it might ultimately have to scrap all or part of a system in which two years and tens of millions of dollars have been invested.

Goldberg testified Wednesday morning before the Joint Committee on Legislative Audits, Information Management and Technology.

“It’s no secret to anybody in this room or in this state that we don’t have a fully functioning website,” Goldberg said, the first in a long series of admissions that there are major problems with the site. …

“We need to start looking at – beyond March – what are our contingencies,” Goldberg said. “Be that other state systems or parts of the federal system to help with open enrollment. I don’t think we are at the point in time to make that decision, but we need to begin to make that plan.”

Goldberg said if the decision is made to move on, the state will try to leverage parts of the current system to avoid completely wasting a program in which the federal government initially invested $48 million.

How does something like this happen? It happens when politics trumps policy, and warnings go ignored because of it.

Three months since the Cover Oregon fiasco exploded into public view, questions have grown about the management failures and communication lapses that allowed it to happen. After dozens of interviews and the review of thousands of pages of legislative reports, memos and emails, The Oregonian has determined:

  • The project’s significant flaws were well documented dating back to November 2011. Multiple independent analysts repeatedly raised questions about poor management along with strong doubts that it could be operational by the Oct. 1, 2013 deadline.
  • Cover Oregon leaders wavered between despair and an almost evangelical enthusiasm that they could complete the site. In the end they charged ahead, piloting an unfinished, largely untested exchange project right up to the Oct. 1 go-live date with no backup plan ready to go.
  • Senior officials in Gov. John Kitzhaber’s office and elsewhere read at least some of these warnings but took no significant steps to intervene, apparently after being convinced by others the project was on track.
  • A key official in the massive IT project took steps to silence the critics. The Oregon Health Authority last January withheld payment from the company hired to monitor the project, claiming its persistent criticism was inaccurate and inflammatory.

The path forward for Oregon will probably end up with a shift to reliance on the federal exchange – a far cry from the promises of the Kitzhaber administration at the time their project launched. Well, at least it’s only a loss measured in the millions – the taxpayer bill if Kitzhaber mismanages his massive coordinated care gamble could be much, much bigger. And that’s a harder lift than a just launching a website.

— Benjamin Domenech



For years, Americans were told ad nauseum that converting uninsured patients who overuse the ER into insured patients whose doctors could catch problems earlier would help contain exploding healthcare costs. But the very latest data from the ongoing Oregon study demolished this fiction. The researchers found that Medicaid enrollees landed in the ER 40% more than the uninsured control group, “including increases in visits for conditions that may be most readily treatable in primary care settings.” A central justification for the Affordable Care Act lies in tatters.

What about access to care? The news here looks little better. Like any health insurance, Medicaid functions by reimbursing doctors and hospitals at an agreed-upon rate after they perform needed services. But when state governments (like California) need to quickly cut costs, they frequently opt to slash the reimbursement rate that their Medicaid program pays out. Policymakers set arbitrary reimbursement rates that make state budgets look sounder but bear little relationship to the actual economics of medicine.

The entirely predictable result is that caregivers become reluctant to treat folks on Medicaid, knowing full well they won’t receive the going rate for their efforts. Fully a third of primary care physicians accepted no new Medicaid patients at all in 2010-11, and anecdotal accounts are piling up from cash-strapped states where vulnerable people cannot find doctors for whom it makes financial sense to treat them.

That leaves only financial security and peace of mind. Here, there is finally good news. The same Oregon experiment found that Medicaid patients experienced “lower rates of depression” and less “financial strain” relative to the uninsured.

Understandably, progressive commentators cling to this finding like a life raft. Krugman argues that we don’t call fire insurance a failure because it fails to prevent fires; rather, it is a financial product whose purpose is to cushion our bank accounts in case of disaster. Therefore, his comparison implies, financial and psychological benefits are all we should demand from health insurance.

This last-ditch effort to salvage a sinking narrative flunks the smell test. Since money is fungible, giving a subset of Americans free health insurance through the government effectively increases their income. And social science – not to mention common sense – clearly shows that financial gains push up happiness among low-income individuals. So any sizeable transfer of resources to relatively poor Americans is sure to reduce their financial strain and thus relieve some stress. This much is tautological.

SOURCE: The Federalist


“Only 11% of consumers who bought new coverage under the law were previously uninsured,” according to a survey of 4,563 consumers eligible for the health insurance exchanges done by McKinsey & Company and reported in Saturday’s Wall Street Journal.

The Journal reports that “insurers, brokers, and consultants estimate at least two-thirds” of the 2.2 million people who have so far signed up in the new exchanges are coming from those who already had coverage.

This is consistent with anecdotal reports from insurers I have talked to that are seeing very little net growth in their overall individual and small group markets as of January 1.

That’s even worse than I thought it would be even considering the January 1 individual policy cancellations and small group renewals that are driving employers to reconsider offering coverage – and that is saying something. The vast majority of the individual cancellations, particularly because of the early renewal and extension programs, are yet to come. The same can be said for the small group renewals.

This also tells us why the first three months of the Obamacare enrollment had a relatively high average age – they came from the same market that tended to skew older that the health plans already covered.

When McKinsey asked why subsidy eligible people weren’t buying, 52% cited affordability as the reason. Readers of this blog will know that I’m not shocked to hear that given what I have been writing about the high after-tax premiums, net of the subsidies, people are finding, as well as the high deductibles and narrow provider networks the subsidized Silver and lowest cost Bronze exchange plans are offering people.

Another 30% cited “technical challenges” with the website as reasons they have not yet bought. That said, enrollment in the state exchanges that have generally been running well – California, Washington state, New York, Connecticut, Kentucky, and Colorado – are also only enrolling a very small number of people relative to the number of policy cancellations in their markets and the size of their uninsured population.

Private exchange Health Markets reports that of the 7,500 people it has enrolled, 65% had prior coverage.

At Michigan’s Priority Health about 25% of their new exchange customers came over from employer coverage and 50% from the individual market – leaving only 25% to come from the ranks of the uninsured.

SOURCE: Health Care Policy and Marketplace Review


A Bangor Township family of four, all of whom have disabilities, say they fall within a niche that makes the Affordable Care Act more of a burden than a blessing. Now, they say, they’ll be paying nearly $8,000 more per year for medical care after being denied coverage through Obamacare.

The family in question is the Daverts – husband and wife Ken and Melissa and their 15-year-old twins Austin and Michaela. The twins and their mother are afflicted with osteogensis imperfecta, a disease that makes their bones extremely fragile. They are also highly susceptible to lung infections. Ken Davert has cerebral palsy.

Ken and Melissa “Missy” Davert receive their income from Social Security disability payments and have health insurance through Medicare, but that plan does not cover their children. Until recently, the children were covered by a private Blue Cross plan. They remain covered by a supplemental plan through the Michigan Department of Community Health’s Children’s Special Health Care Services, which only assists in matters directly linked to their bone disease.

“We received a letter from Blue Cross maybe four months ago stating that their plan was going to be canceled due to new requirements of Obamacare,” said Missy Davert, adding that the letter did not state what about the Affordable Care Act requirements necessitated her children be dropped from their plan. “I can imagine they didn’t fit criteria of the new plan. There were some particular benefits the new act didn’t cover.”

The Times was unable to reach a spokesperson for Blue Cross/Blue Shield to explain why the Affordable Care Act might cause the company to cancel the Daverts twins’ insurance.

The Daverts then applied for coverage for their twins through the federal government’s plan. The first time they did so, their application was lost after they sent it and the second time, they were denied. They then filed a written appeal in mid January, which could take up to 90 days for a response.

“What we did in the meantime, because their insurance was ending Dec. 31, we had to go out and buy a separate plan directly through Blue Cross/Blue Shield,” Missy Davert said. “The president had come on TV and said, ‘If you like your plan, you can keep your plan, we won’t require you to get marketplace insurance for another year.’ But Blue Cross/Blue Shield would not continue their plan, despite what the president said.”

SOURCE: The Bay City Times


Two provisions in lengthy proposed regulations published by the Centers for Medicare and Medicaid Services in the Federal Register on January 10 would deprive seniors of vital drugs and make it more difficult for them to see their doctors.

These provisions should be changed before the regulations become final. Comments are due by March 7.

The proposed regulations limit the drugs covered under Medicare’s Part D, the prescription drug component of the program, beginning in 2015.

Now Part D plans have to include drugs within six drug classes, namely antineoplastics, anticonvulsants, antiretrovirals, antipsychotics, antidepressants, and immunosuppressants. CMS is proposing no longer to require all drugs from the antidepressant and immunosuppressant drug classes to be covered by Part D.

Seniors would no longer necessarily have access to insurance for these drugs, with serious consequences. Depression is the most frequent mental health problem in the elderly, and lack of treatment can lead suicide. Depressed patients can cause difficulties for family members and caregivers.

Immunosuppressant drugs are used in the case of a transplant, to prevent the body from rejecting a transplanted organ. Cutting back on these drugs means that transplants would be more risky and less successful. This would decrease life expectancy of seniors.

CMS calculates that the savings from disallowing these drugs would be $720 million over the five-year period 2015 to 2019. That is $144 million a year, two tenths of one percent of the $677 billion in net Medicare outlays in 2019. In comparison, spending on HIV/AIDS remains untouched, at almost $30 billion in 2014.

Reducing access to major classes of drugs that were required from the beginning of the Part D program would cut Medicare costs by shortening seniors’ lives, but it is not the direction in which our society wants to go. Congress should demand a true cost-benefit analysis of trimming antidepressant and immunosuppressant drugs, including a calculation of the value of lives that could have been saved with the drugs.

SOURCE: RealClearMarkets


Unlike the intuitive ease of touch-based smartphones and tablets, electronic medical records are generally antiquated programs that are cumbersome to use. Providers often spend more time checking boxes with a mouse to satisfy onerous billing and administrative requirements that do little to help patients.

For instance, it takes me more than 50 mouse clicks, all while scrolling through dozens of screens, to document a straightforward office visit for a sinus infection. Refilling a single prescription electronically, which I do over a hundred times a day, takes more than 10 clicks.

In fact, more time in front of computers means less time for patients.

An American Journal of Emergency Medicine study found that emergency physicians spent 43% of their time entering data into a computer, compared with only 28% of their time spent talking to patients. During a typical 10-hour shift, a doctor would click a mouse almost 4,000 times.

Doctors in training have it worse. Researchers at Johns Hopkins University School of Medicine found that medical interns spent 12% of their time talking to patients, or about eight minutes a day per patient, but more than 40% of their time on a computer filling out electronic paperwork.

Such hurried interactions not only impede medical education for trainees, but also have real world consequences, such as diminishing patient satisfaction and increasing the rate of medication prescriptions.

And what about the promised cost savings?

Such assertions were largely based on a 2005 Rand Corp. analysis, which predicted that electronic records would save $81 billion annually. Last year, Rand backtracked, saying those numbers were overstated.