WSJ: Yep, the feds are totally unprepared to launch ObamaCare exchanges

posted at 1:01 pm on November 28, 2012 by Mary Katharine Ham

The blaming of governors for not implementing ObamaCare is in hyperdrive for a reason— the federal government and liberals backing ObamaCare overestimated the government’s ability to build a system of the complexity and technological intricacy necessary to pull this off. They counted on states to do some heavy lifting (with a hefty price tag) to make this happen, yet have given them very little regulatory guidance and passed the bill in a way least likely to engender cooperation.

The current rumpus is over ObamaCare’s “exchanges,” the bureaucracies that will regulate the design and sale of insurance and where 30 million people (and likely far more) will sign up for subsidized coverage. States were supposed to tell the Health and Human Services Department if they were going to set up and run an exchange by October, but HHS delayed the deadline to November, and then again at the 11th hour to December.

Sixteen states have already said they won’t participate. Another 11 are undecided, while only 17 have committed to doing the work on their own. Six have opted for a “hybrid” federal-state model. That means HHS will probably be responsible for fallback federal exchanges in full or in part in as many as 25 or 30 states.

While there’s certainly a political component to declining to shoulder this burden for the feds, there are very serious questions about whether the states can accomplish this task by October, when exchanges are to open for enrollment, and whether it will work at all. Why would governors put themselves on the financial and political hook for this experiment?

The opposition isn’t so much political as practical. Or rather, the vast logistical and technical undertaking to build an exchange helps explain why so many Governors resisted ObamaCare in the first place.

States have regulated the small business and individual insurance markets for decades (some well, others less so). Now they’re supposed to toss everything out for a complex Washington rewrite, which is still being rewritten. The exchanges will also help enforce the individual mandate and premium increases. They’ll also have to spend a ton of money. Ohio estimates it will cost $63 million to set up an exchange and $43 million to run annually, based on a KPMG study.

Most spending will go to information technology, in an era when many states still run Medicaid using paper forms and pneumatic tubes. These systems are supposed to allow consumers to review health plans online (or in person and by mail and fax), pick one and then ping HHS and the Internal Revenue Service to determine who is eligible for what subsidies. Private businesses spend years developing and refining such consumer software. States need to fund call centers to field queries and even hire “navigators” to actively encourage people to enroll.

I wrote a long piece about the technical obstacles of creating exchanges over Thanksgiving week, which echoes all of these concerns. Note that the administration just put forth a proposed rule for what exchange plans must cover last week, 32 months after the bill passed. The administration held off on regulations for political reasons of their own— they knew they’d lay bare ObamaCare’s broken promises:

Supporters are also worrying over the realization that running exchanges for dozens of states may be a technical heavy lift that’s just not possible. ObamaCare gave states the option to let the federal government set up an exchange for them, and though many states have worked without regulatory certainty to create those exchanges, noticeably absent is any hint of a federal exchange and what it would look like. There’s a reason for that, as the New York Times reported in August:

The markets, known as exchanges, are a centerpiece of President Obama’s health care law, and running them will be a herculean task that federal officials never expected to perform.

When Congress passed legislation to expand coverage two years ago, Mr. Obama and lawmakers assumed that every state would set up its own exchange, a place where people could shop for insurance and get subsidies to help defray the cost.

Oops. Who could have anticipated that in a diverse country where more than 50 percent still oppose the massive federal overhaul of health care passed against the will of the people through a special legislative process with absolutely no bipartisan support, with its costs and requirements systematically hidden or avoided for 32 months, that some states wouldn’t jump in with both feet? This also sets up a constitutional fight over whether the federal government can even offer subsidies through its own exchange (the law only establishes subsidies through state-based exchanges, not the federal one). Luckily, in the world of an ObamaCare supporter, all of the mistakes made in drafting the law or overestimating the ability of the federal government to implement it can be laid at the feet of Republican governors, not you know, the people who drafted the law.

But let’s say every single state was willing to build an exchange. These state exchanges, as the Washington Post notes, are often described as a Travelocity site for health care, but that oversimplifies the matter. If all states needed to do was build a decent website— well, I might still be skeptical, but there’d be a chance. Once again, though, states are missing an important puzzle piece which is the responsibility of— wait for it— the federal government:

A state can’t figure out how much an individual earns on its own. For that, it needs to ping a federal data hub that does not yet exist.

The federal government recently contracted with the healthcare IT firm QSSI to build that data hub, and they plan to make it available to both the exchanges that states run and those that the federal government sets up. It will determine whether individuals are eligible for Medicaid, subsidies or no benefit at all.

The challenge here is for states, which may have complex Medicaid rules or old computer systems, to actually plug into the federal hub.

“In many states, the Medicaid system is the best technology that the 1980s could offer,” says Bruce Caswell, who runs the health-services segment of Maximus, a firm that works on large government data systems. “As a consequence, they might have brittle interface capabilities.”

Some free-market health care experts anticipated HHS Secretary Kathleen Sebelius would debut a fully formed federal exchange days after the election, imperfect but ready for imposition on any state that deigned to decline making their own exchanges. When Sebelius pushed back state deadlines for announcing their exchange plans, that was the tell that the administration may be as far from prepared as some of the states they’re scapegoating.

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