What caused the Obamacare fiasco?

November 19, 2013

The problem-plagued rollout of the health care law has been a disaster for Barack Obama--but Gary Lapon explains why millions of people will face much worse.

THE INTRODUCTION of the new health insurance system established by Barack Obama's Affordable Care Act (ACA) has been a technical--and political--disaster.

But the problems aren't confined to crashing websites, and they won't be solved by Obama's promises that the enrollment process will be fixed before the end-of-year deadline for the uninsured to sign up for health plans on the ACA's "insurance exchanges."

Even if the glitches are ironed out, millions of people will face a choice that's no choice at all: Spend thousands of dollars each year on health insurance plans that, because of high deductibles and co-pays, will be even more expensive to use if they do get sick--or pay a fine with their taxes while they remain uninsured.

The fiasco of the Obamacare rollout is a direct consequence of a byzantine law that was bent and twisted to fit the needs of the health care industry, at the expense of tens of millions of people who will find themselves paying even more for even less health care than now.

President Obama apologizes for the bungled rollout of the Affordable Care Act

AFTER WEEKS of reports that HealthCare.gov, the federal insurance marketplace where the uninsured are supposed to sign up for coverage, was plagued by problems, Health and Human Services Secretary Kathleen Sebelius announced last week that fewer than 27,000 people had signed up on the federal exchange in the month of October. An additional 80,000 enrolled via the state exchanges.

As NBC News reported, "The White House had hoped half a million people would have signed up in the first month [HealthCare.gov] was active. The Congressional Budget Office had projected that 7 million people would sign up for private health insurance on the exchange and that another 9 million would get Medicaid coverage" by the end of the open enrollment period on March 31, 2014.

Adding in the 400,000 who signed up for Medicaid in October, the total number of uninsured covered in the first month of the Obamacare rollout is just 3 percent of the total predicted to gain coverage by the end of the enrollment period, and about 1 percent of the nearly 50 million people without health insurance in the U.S.

Meanwhile, millions of people--over 5 million so far, by some estimates--have received cancellation letters from their current insurers announcing that their health plans will no longer be effective as of January 1, because they don't meet the requirements of the ACA. The paltry enrollment numbers prove that only a fraction of those whose policies are going to be cancelled have been able to sign up for new plans via the exchange--meaning they face a gap in health coverage if the exchange system doesn't start working more effectively.

According to ACA supporters, many of those whose plans are being canceled will qualify for subsidies and therefore will pay less, if and when they can sign up on the exchanges. But as the investigative journalists at ProPublica showed, others face higher premiums for coverage that is inferior to their current plans.

The cancellation letters were a further embarrassment to Obama, who sold his health care proposal with the repeated promise that "if you like your insurance, you can keep it. Period." According to reports, the administration expected these cancellations--yet Obama continued to claim otherwise.

As a consequence, Obama's popularity has sank to the lowest point of his time in office--he has a 39 percent approval rating, compared to 54 percent who disapprove of the job he is doing. The same Quinnipiac poll showed a further decline in support for the ACA: "[O]nly 19 percent [say] they believe the quality of their health care will improve in the next year. Forty-three percent say it will get worse."

Facing pressure from Republicans and a revolt inside his own party, Obama held a press conference last week, in which he apologized for the HealthCare.gov problems and announced that the administration would allow insurance companies to continue to offer plans to current customers through 2014, even if they don't meet minimum standards under the ACA.

This announcement held down defections of House Democrats in support of a Republican-sponsored bill allowing insurers to continue to sell non-compliant plans--but nearly 40 Democrats voted in favor of the bill the day after Obama's press conference.

Obama's concession, however, doesn't guarantee that insurers won't rescind the cancellations. According to the Atlantic, Obama's measure allows, but doesn't require, companies to continue to offer existing plans. It does require insurers "to tell their customers 1) what the new plans cover that their old plans don't, and 2) that these new plans might actually be cheaper for them. In other words, the administration is trying to get the insurance companies to tell people what they would find on HealthCare.gov if it worked."

ACCORDING TO Sebelius, HealthCare.gov should be working well by the end of this month--at which point one-third of the time available for people to sign up will have elapsed. But it's unclear whether the technical issues will be resolved by then. An analysis sponsored by CNN found that the site is "getting better, but it looks like there's still a lot to do," said Media Temple President Russ Reeder.

So far, the administration has spent $175 million on federal contracts to develop HealthCare.gov. Incredibly, the companies contracted to create the HealthCare.gov marketplace testified before Congress that "end-to-end testing was conducted only in the final weeks before the site went live, and no senior executive at the Center for Medicare and Medicaid Services was designated as the point person for integrating the various components of the system."

Still, as incompetent as it has made them look, it may be better for Obama if the problems with the ACA rollout are chalked up to technical issues. That's better than admitting the deeper problems with the health care law itself.

The Obama administration and congressional Democrats began developing health care legislation determined to bring the medical-pharmaceutical-insurance complex "to the table"--and then made one concession after another to keep them there. The ACA contains some long-awaited regulations on the insurance industry, such as a ban on using "pre-existing conditions" to deny coverage and requirements that plans cover preventative health care.

But the law leaves the main problems of the current system intact because it preserves the place of private profit in a corrupted and wasteful system--instead of making quality, universal care the priority.

Thus, the technical issues are directly connected to the complexity of the system created by the ACA. Different types, levels and costs of coverage are available, and they vary depending on income and what state the customer lives in.

Residents of 36 states must rely on the federal HealthCare.gov site, while the rest have state-level exchanges. Once enrolled, people can choose between different levels of coverage--from Bronze plans, with the lowest premiums, but highest out-of-pocket costs, through Silver and Gold, to Platinum plans, with the highest premiums, but lowest costs if and when policy holders use their insurance. Not only that, but many exchanges include multiple insurance companies, selling multiple versions of plans at each of the four coverage levels.

This creates the illusion of choice, with a bewildering multiplicity of options--but all within a relatively narrow framework that shifts the burden of health care costs more and more onto individuals.

In the future, the "Cadillac tax" on expensive health insurance plans offered through employers will place downward pressure on the quality of existing coverage, particularly for union workers who have bargained for the best coverage over the years. The tax will create incentives for employers to shift more costs onto workers.

For right now, though, another complicating factor is the subsidies for purchasing coverage, which the government offers to individuals earning between 100 percent and 400 percent of the federal poverty line, with amounts varying again by state. These subsidies, which the Congressional Budget Office estimates will total over $1 trillion in the next 10 years, will help make plans on the insurance exchange more affordable--but the money will go straight into the pockets of private insurance companies, which is probably while the stock prices for these companies are up.

Last year's U.S. Supreme Court decision on the ACA allows states to opt out of one important aspect of the law--an expansion of the government-run Medicaid health care program to cover individuals and families just over the poverty line. Fully one-half of U.S. states, led by Republicans, are refusing to accept additional Medicaid funds for the expanded coverage. This will leave even more people--those with fewer means to start with--to negotiate the complicated exchange process.

Managing all of the different options requires the online marketplace to interface with the computer systems of multiple health insurance companies, as well as several government agencies. The system must validate users' information by cross-referencing data entered on the site with records at government agencies, determine the eligibility for Medicaid and/or subsidies, and transmit that information to insurance companies to ensure that enrollment is completed successfully.

Some insurance companies, ever on the lookout for a way to make even more money, have allegedly attempted to take advantage of the confusion caused by the ACA to trick customers into paying more for plans when they might qualify for better, cheaper plans in the federal exchange. According to CNN, the state of Kentucky has fined leading insurer Humana for sending illegal letters saying that "customers had to choose one of two options within 30 days: Either legally extend their current policy through next year or choose a new, more expensive policy that complies with Obamacare. The letter never mentioned buying insurance through the new exchange."

Still, the $60,000 fine won't make a dent in Humana's profits, which totaled some $1.4 billion in 2012. Humana has been sanctioned in other states as well, but without penalties that make it costlier to break the law than comply with it, it should be expected that insurers will continue to make the logical business decision to maximize profits by skirting the law.


Compare the complexity, confusion and opportunities for insurance company scamming under the ACA to a single-payer system, such as Canada's, where everyone in each province qualifies for government-provided health insurance. Instead of multiple tiers of insurance plans with varying levels of costs, coverage is the same for residents within each province--though those who aren't citizens or legal residents are unjustly excluded.

While universal coverage is available for medical care, the system is not pure "single-payer"--a majority of Canadians buy supplemental insurance for dental, vision, pharmaceuticals and other elements of coverage.

Still, the relative simplicity of this system means that not only is the proportion of the uninsured reduced far lower than the best estimates under the ACA, but there are immense savings on administrative costs. More of health care workers' time can be spent caring for patients instead of dealing with the paperwork associated with determining insurance status and billing multiple insurers.

According to a survey published in Health Affairs two years ago:

[T]he administrative costs of and time spent interacting with multiple payers in the United States far exceeded time spent and costs in Canada with its single-payer system. Physician practices in the United States spent $82,975 per physician per year while Canadian practices spent $22,205 (financials were adjusted for purchasing power). Nursing staff at physician practices in the United States spent 20.6 hours per physician interacting with health plans while their Canadian counterparts spent 2.5. Clerical staff in the United States spent 53.1 hours compared to Canadian clerical staff's 15.9.

A pure single-payer system would save even more time and money. Medicare, which is essentially federal single-payer health insurance system for seniors and the disabled, spends less than 1 percent on administrative costs compared to the major health insurer Aetna, which spends 29 percent, as Time magazine explained in a report earlier this year.

The U.S. continues to spend more than any other country in the world on health care, yet lacks universal health coverage and has poorer outcomes than most advanced industrialized nations.

Despite all its problems, the ACA will, in fact, reduce the numbers of uninsured in the U.S. But it doesn't address the many other aspects of the system that lead to these higher health care costs and poorer outcomes. Instead, Obamacare preserves the role of for-profit insurance companies whose existence is the source of many of these problems.

Fixing the bugs in the ACA won't fix the need for a movement for truly universal health care.

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