The White House Admits Obamacare’s Implementation Has Failed

Published July 8, 2013

Consumer Power Report #380

I hope you will forgive me for assuming the Obama administration was merely bumping its normal Friday news dump forward to before the Independence Day holiday, with the announcement it would effectively delay the employer mandate’s implementation for a year. My thoughts on that decision are here. And you can read Avik Roy’s here.

Of course, the much bigger news, and far more devastating to any remaining claims that Obamacare is being properly implemented, was buried on Friday: the news that the most significant entitlement increase since the Great Society will be operating on the honor system. Sarah Kliff and Sandhya Somashekhar report:

The Obama administration announced Friday that it would significantly scale back the health law’s requirements that new insurance marketplaces verify consumers’ income and health insurance status. Instead, the federal government will rely more heavily on consumers’ self-reported information until 2015, when it plans to have stronger verification systems in place …

After encountering “legislative and operational barriers,” the federal government will not require the District and the 16 states that are running their own marketplaces to verify a consumer’s statement that they do not receive health insurance from their employer … The federal government will, however, conduct an audit for the states where it is managing the new insurance Web portal. The rule also scaled back states’ responsibilities to double-check the income levels that consumers report, which determine any tax subsidy they receive.

Note the fun quote from Timothy Jost about how this is all totally cool. Subsidize first, ask questions later.

“We have concluded that the … proposed rule is not feasible for implementation for the first year of operations,” say the Centers for Medicare and Medicaid Services. “The exchange may accept the applicant’s attestation regarding enrollment in an eligible employer-sponsored plan … without further verification, instead of following the procedure in §155.320(d)(3)(iii).”

And it’s not just there. The feds will also allow people to gain means-tested subsidized coverage on the exchanges without having to … test their means. “For income verification, for the first year of operations, we are providing Exchanges with temporarily expanded discretion to accept an attestation of projected annual household income without further verification.”

So now we finally have the answer we’ve been waiting for about the failed implementation of the massive data verification system they have been building to serve the exchange model: never mind. The government’s inability to build a system that interfaces with states and takes the necessary steps to check for eligibility has led the Obama administration to just throw in the towel for at least the first year. And this serves its aims in multiple ways: first, it makes it much easier to sign as many people up as possible to avoid rate shock, which is what the administration is worried about; second, it means the administration’s allies can target their sign-up efforts on the 16 states where no verification is necessary; and third, it creates as significant a subsidy constituency as possible prior to the problems we’re likely to see during rollout.

Of course, the incentives it creates are completely warped. A modest lie about your income can push people who would’ve been on Medicaid, most of whom don’t file tax returns, to the far more generous exchange subsidies. The resemblance to the “Liar’s Loans” approach to the housing market collapse is uncanny.

Never mind that CBO never scored an “honor system” version of Obamacare, or that the authority for such a step is dubious at best. House Republicans are certainly going to come back into town yelling to high heaven that the delays of the employer mandate and any eligibility checks amounts to a remarkable rejection of the rule of law. And many Democrats are quietly admitting this implementation effort has turned into a giant failure. But I see no incentive on the Obama administration’s part to go along with efforts to delay the law for a year, even though such a step would be more responsible.

If the Obama team can get away with picking and choosing what parts get implemented and when, flaunting the law to satisfy their electoral aims, why not do it? Who cares if it explodes so many of the promises made during the law’s passage? (Of course, don’t think too hard about what the press would be saying if a Romney administration was undertaking similar steps.)

Josh Kraushaar argues that Obama’s facing a crisis of competence. But who cares about competence so long as the lights go on for the one major domestic policy of Obama’s tenure? Give me implementation, or give me death.

— Benjamin Domenech


State officials who decided against implementing an exchange – you chose wisely.

Facing tight deadlines and daunting workloads, states across the country are scaling back ambitions for implementing the Affordable Care Act.

At a monthly board meeting of Connecticut’s health insurance exchange, members of the standing-room-only crowd got a reminder that they, too, were behind schedule. The insurance marketplace they were working on nights and weekends won’t be completely ready on time.

“It is highly complex, it’s unprecedented and it’s not going to be smooth,” Kevin Counihan, chief executive of the state’s exchange, Access Health CT, told the group.

That’s why Connecticut – like other states across the country – has lowered the bar, doing what it can in the time it has left before the health-care law’s major programs are launched Oct. 1.

Although the states are promising to provide new marketplaces for individuals to compare and buy health insurance plans, the Web portals will be a bare-bones version of what was initially envisioned.

And then there are the federal setbacks. The Obama administration has put off significant aspects of the health-care overhaul as it races to finish provisions that will give Americans more insurance options and provide many with financial assistance to buy coverage. On Tuesday, the White House announced a decision to delay the “employer mandate,” a requirement that employers with 50 or more workers provide coverage.

“In 2011, there was this ‘we’re going to save the world’ mentality,” said Rebecca Pearce, executive director of the Maryland Health Benefit Exchange. “In 2013, it focuses more on how do we deliver on the requirements of the law.”

The District of Columbia and 15 states – including Connecticut – are building their own marketplaces. Those jurisdictions, among the Affordable Care Act’s most ardent supporters, took on the responsibility of building Web portals that are at the heart of the federal health-care overhaul. Most states, eschewing the heavy workload, left the task to the federal government …

In Connecticut, Counihan and his colleagues decided in January to delay about 30 percent of the Web portal functions they had hoped to have ready by October.

Across the country, other states report similar problems.

In Oregon, officials decided to delay a feature that would allow consumers to customize searches for rating the coverage provided by insurers. And a feature for insurance brokers to track the consumers they enroll will wait for two to four months.

How will brokers keep track of potentially thousands of customers in the interim? Cover Oregon’s executive director, Rocky King, suggested that they might use “index cards.”

SOURCE: Washington Post


Fewer than half of the uninsured may end up getting covered:

The big expansion of health insurance envisioned under the 2010 Affordable Care Act is now looking less sweeping.

The latest indication that the coverage net won’t be as wide as initially expected came this week when the Obama administration delayed for a year a requirement that larger employers offer health insurance to workers or pay a penalty. The move means businesses with 50 or more employees that don’t currently offer coverage – such as some retailers and restaurants – can continue on that track without penalty until 2015.

While the unexpected move received attention, it is at least the third time that a development since the law’s passage has potentially limited the expansion of insurance.

The two earlier snags involve Medicaid, a federal-state program for the poor, and the new health-insurance exchanges where individuals can buy coverage. The law was supposed to expand Medicaid to include more of the poorest Americans, but a Supreme Court ruling last year allowed states to opt out of that expansion; at least half are poised to do so.

At the same time, analysts warn that hiccups are possible in implementing the exchanges after more than 30 states refused to set up their own versions, forcing the federal government to operate them on states’ behalf.

“You’ve got three body blows toward expansion of coverage,” said Paul Keckley, executive director of the Deloitte Center for Health Solutions, a research unit of Deloitte LLP. “It’s three punches in a row.”

The law was designed to extend insurance to most of the 50 million Americans who lack coverage. But when the main features of the law go live Jan. 1, the share of those people set to remain uninsured is bigger than the proportion set to gain coverage. That raises the prospect of a long battle to make the law work as its supporters intended, and the likelihood that opponents will dismiss it as a costly failure.

The nonpartisan Congressional Budget Office projected soon after the law passed that it would reduce the number of uninsured to 23 million people in 2019, from about 50 million people now. In an updated projection earlier this year, the economists estimated around 30 million people would still be without coverage that year. The office has yet to revise its estimates in the wake of this week’s announcement.

More on the employer mandate delay from the Wall Street Journal, American Action Forum, and Avik Roy.

SOURCE: Wall Street Journal


Another delay, until at least next year.

National health insurance plans aimed at giving consumers more choice might be unavailable in some states next year, leaving residents with fewer options and potentially higher premiums.

Such “multi-state” plans were included in the federal health law to boost competition among insurers, particularly in states with few carriers. They were also seen as a consolation to supporters of the failed effort to require a government-run “public option.”

Debate continues about whether the plans would fulfill those aims, but the bigger question now is which states will have them in October, when new online marketplaces begin selling insurance to individuals and offering federal tax credits to help cover the cost of premiums to those who qualify.

The law requires at least two national plans in every state within four years, overseen by the federal Office of Personnel Management (OPM), which will negotiate rates and contracts. The law says at least one of the multi-state insurers must be a nonprofit, and at least one must not offer abortion services.

OPM has declined to name the insurers or states under consideration, but the White House says there will be national plans in at least 31 states.

Blue Cross Blue Shield plans are expected to be one of the multi-state plans, raising questions about whether that will really result in greater competition since they are already in every state and dominate some individual markets.

Arkansas Insurance Commissioner Jay Bradford said Blue Cross Blue Shield will offer a multi-state policy in his state, which has a local Blues plan with 70 percent market share.

Bradford said he does not know whether the national and state plans will differ in price or benefits since filings aren’t due until the end of June.

“It will be better for competition if they are somewhat different,” he said, adding that he has also heard his state may get a second national option.

Blues plans have submitted their intent to offer a national plan that would be in 31 states next year, said Alissa Fox, the association’s senior vice president for policy. Those include New Mexico, Michigan, Kansas and Arkansas, according to public filings.

Even if the Blues are approved in those states, that may still leave 19 states potentially without any national plan.

SOURCE: Kaiser Health News


This is odd:

Racing to meet an October deadline, Obama administration officials said Thursday that they had awarded a contract worth as much as $1.2 billion to a British company to help them sift applications for health insurance and tax credits under the new health care law.

The company, Serco, has extensive experience as a government contractor with the Defense Department and intelligence agencies, and it also manages air traffic control towers in 11 states and reviews visa applications for the State Department. But it has little experience with the Department of Health and Human Services or the insurance marketplaces, known as exchanges, where individuals and small businesses are supposed to be able to shop for insurance.

Serco will help the Obama administration and states determine who is eligible for insurance subsidies, in the form of tax credits, and who might qualify for Medicaid. Tasks include “intake, routing, review and troubleshooting of applications,” according to the contract.

“This is a huge undertaking,” said Alan Hill, a spokesman for Serco’s American unit, in Reston, Va. “We have some tight deadlines to meet.”

The exchanges are supposed to be in operation in every state by Oct. 1. Under the contract, Mr. Hill said, Serco and its subcontractors will immediately begin hiring 1,500 people.

SOURCE: New York Times


The FDA’s move was released in a government agenda of new rules being considered by federal agencies. The agenda said the revisions to FDA rules would “create parity” between makers of brand-name drugs and generic versions in their ability to change drug labels.

FDA spokeswoman Sandy Walsh confirmed the planned rule change but said it was too early to know precisely how the rule would be worded.

“We think this is a great first step toward making generic drugs safer by addressing generic-drug labeling,” said Sarah Rooney of the American Association for Justice, a group that represents plaintiffs’ lawyers. She said the change would make makers of generic and brand-name drugs “equally responsible” for drug safety.

Critics of the high court’s decisions had said they created a situation in which people could sue a brand-name drug maker over an alleged label flaw but not a generic-drug maker even if the two drugs were chemically identical.

Sen. Patrick Leahy hailed the FDA move. “A consumer should not have her rights foreclosed simply because she takes the generic version of a prescription drug,” the Democrat from Vermont said. “I welcome this first step by the Food and Drug Administration to address this troubling inconsistency in the law.”

The Generic Pharmaceutical Association reserved comment until it learned more about the FDA’s plans.

SOURCE: Wall Street Journal