Talking about the Emperor’s Clothes: Causes and Consequences of Healthcare.gov’s Problems

Healthcare.gov’s disastrous launch has left me, as an Obamacare supporter, feeling dismayed and even betrayed. Sure I expected problems at the start. What new IT system doesn’t have problems? And the task involved—coordinating data from the IRS, a slew of private insurers, state Medicaid programs, and so on—was known to be no small feat, much more than private e-exchanges have to do.

But after last Thursday’s Congressional testimony, we know that it’s much worse. The main contractor for the back-end said, “our portion of the contract worked as designed.” All the contractors said their job started and finished with contract specs. Whether it works with the other parts was someone else’s problem. The government, the Center for Medicare and Medicaid Services, ostensibly in charge of putting the whole thing together, did not test the whole system until two weeks before the Oct. 1 launch. Anyone (or at least anyone who ever tried to get their iTunes purchases onto a non-Apple device or vice versa) could have seen the need for that test much earlier. Such seemingly willful incompetence shocked me, because it was so unlike my own knowledge and experience of the competence of the legislation and its implementation. As I taught about the legislation last Spring, I kept being impressed that various fixes and features dealt with potential problems.

What explains the chasm between the IT and the reform design? Much alludes me, but it is clear that Obamacare’s IT had nothing like the time or talent that that the reform design had. That is bad news for the website—long term as well as short term. But it is good news for the consequences of the disastrous web site launch. As Adriana McIntyre explained, various features will protect us from death spirals and other potential disasters.

Time matters for any project. Healthcare.gov was first started Sept 2011, two years before opening. But due to political fears, many key decisions were delayed, leaving much less time. One third of the funds were dispersed in the last six months.

In contrast, the reform design had more than two decades. Obamacare has roots in Enthoven’s 1988 managed competition proposal. The 1993 Clinton reform proposal got many more working on implementation. Stuart Butler of the conservative Heritage Foundation’s 1994 proposal provided the most direct descendent. In 2007, Massachusetts implemented a similar reform, providing on the ground experience.

Talent also matters. The administration may now be claiming that they are (belatedly) putting the “best and the brightest” onto healthcare.gov. Don’t believe it: those who are truly IT’s best and brightest (and not in the sense of Halberstam’s book about Vietnam War) work at Google, Apple or start-ups where they hope to become zillionaires through IPOs.

In contrast, many of the best and brightest in health economics have worked on Obamacare, certainly when you count its two-decade plus evolution. The many from academia came from a culture of criticism and transparency that improves proposals. From personal experience, I can tell you that such people will always tell you when the emperor has no clothes. In fact, they’ll tell you, very insistently, when the two shades of blue you’re wearing don’t match.

There is a long list of other potential causes of the website problem. Lydia DePillis suggests that government purchasing approaches are disastrous for IT.

So, how will Obamacare’s design limit the bad consequences of this bad website roll out? Wasn’t everyone worried about getting people to sign up, particularly the “young invincibles” needed to stop premiums from sky-rocketing because the insurers were covering the sickest among us? Won’t this delay and the difficulty of signing up mean they never sign up? And won’t that leave us in a death spiral of ever sicker enrollees and ever higher premiums?

In fact, it was always a potential problem that the youngest and healthiest would stay out the first year, when penalties are low. That fear, among others, was the reason for two features lasting for only the first three years of Obamacare. Re-insurance means that the government insures the insurers against getting too many unexpectedly sick enrollees. Risk corridors protect insurers against both getting many the less healthy enrollees and against their own pricing mistakes. Essentially, insurers project what they expect to pay out in medical expenses in advance. If it turns out they were more than 3% off, the government will make up some of the losses or take away some of the gains. And as McIntyre notes, that program is not budget neutral: the government will pick up the tab as needed, gaining some funds from unpaid subsidies.

(By the way, don’t worry that these measures only last three years. Risk adjustment will be there permanently to take from the insurers that get the healthiest and give to the insurers that get the sickest. We want them to have incentives to be efficient and high quality, not incentives to cherry pick the healthiest.)

Some commentators see website implementation difficulties as reflecting too large inherent difficulties in a “neoliberal” approach based on choice, competition among private insurers and means-testing government benefits compared to the simplicity of government run programs with universal eligibility. Their point is not wrong, although it ignores the problems of the simpler approach. But criticizing Obamacare for not being a single payer approach doesn’t make sense. First, that was never in the cards politically. Second, our “single payer systems,” Medicaid and Medicare are increasingly less single payer-like with significant elements of choice and competition. Third, a reform like Obamacare that preserves much of what we have is hard enough. A massive transformation of almost one sixth of the economy and a matter or life and death is really hard. Any reform needs to start where we are now and change incrementally.

And what about the right wing view that this failure shows the folly of government involvement at all? The problem with that is what it always was: poor people and many sick people won’t get modern health care for expensive conditions.

Of course, Obamacare’s design cannot protect against the loss of confidence and disruption that come from a weeks of a non-working web site. The government needs to fix how it does IT. Transparency and attracting better tech people are starters. Whatever it takes to get a culture of people who tell it like it is. I don’t know how to do that, but thanks to a culture like that in health economics, and lots of time for it to play out, the consequences of the bad web site are not as bad as the have could have been.

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5 thoughts on “Talking about the Emperor’s Clothes: Causes and Consequences of Healthcare.gov’s Problems

  1. I think there is also a big problem with the way our government contracted for this projects. It seems the government still follows a cold-war model of contracting with many smaller companies for different parts of the project so as to not empower one single company with too much influence. This worked well for military contracts that could be well spec’d out. It doesn’t seem to work as well for information-technology projects where probably the most important part is to make sure that all different aspects of the system work in unison. For that, you need one company to be responsible for the integration. From what I’ve read in the news, there was no one single entity responsible for the overall integration of healthcare.gov project.

  2. It does seem like the contracting approach is very out-of-date and a terrible match for IT. But in terms of contracting out the coordianation and overall management to one company: Apparently, in defense procurement they tried to contract out the overall management but got unhappy with that, due to conflict of interest in other problems. (No longer remember which article said that…) In theory, CMS was playing that role, but not in fact, partly due to lack of knowledgable people and partly due to that not being how they work. I guess you are suggesting that they hire one company to implement everything so that they would have responsibility for it, but then they would worry about the monopoly power.

    I was impressed by Dellis article, and one quote in particular, “the Project managers need to get used to the idea of working intensely with a development team rather than asking for a specific thing and then walking away.” That seems essential no matter what they do.

    Of course, none of this is anything that I have expertise in, as I said! Focusing on what I do know: Maybe they need to have the tech equivalent of the academics who rotate through government. Google and other such companies could pay people and lend them to the government. (For the academics, the govt pays them for a year or two, not their universities, but that might be problematic for IT people.)

  3. As with all important problems, they are complex. Therefore they have countervailing pressures, inputs etc. The real question is never far “left” vs far “right” or any other dichotomy but where is the right balance. The problem with Obamacare is not this concept or that implementation but core politics of it’s enactment, totally partisan. Each side may blame the other but if it’s Obama’s legacy it is Obama’s fault. I think you are fundamentally right that this is just the beginning and things will improve. But I don’t think the political wound will not heal quickly.

  4. A great quote today on All In with Chris Hays by pundit Clay Johnson. “We didn’t revert to monarchy after we saw butterfly ballots in Florida.”

    • Great quote.

      The problem, I think, is that we had had a long time for democracy to be seen as legitimate before we had butterfly ballots in Florida. The idea that everyone should have health insurance, irrespective of what they earn, how sick they are or whether they want to, is far from universally accepted in the US. Some are satisfied with the equivalent of the (partial) monarchy we have now.

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