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- Dec 28, 2012
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by Peter Suderman Reason.com
Obamacare is coming undone. You can see it happening day by day, provision by provision, as the administration postpones or scales back key parts of the law, and other signs continue to suggest that the law as written simply wont work.
Last Tuesday, in what was apparently intended to be a pre-July 4 holiday news dump, the administration made the embarrassing announcement that it would delay by a year the health laws requirement that employers with 50 or more workers offer health coverage or pay a penalty. The administration also said it would delay the laws reporting requirements for employers who offer health coverage.
That raised a major operational question about the laws health insurance exchanges. How would those exchanges be able to determine whether someone applying for subsidies to buy individual coverage on an exchange already had access to employer coverage? The law says that people whose employers provide coverage arent allowed to get subsidies.
Late on Friday, we get another news dumpand an answer. The 16 exchanges run by states wont have to verify an individuals health insurance status at all. Nor will the state-run exchanges have to verify an individuals income level.
Instead, theyll rely on self-reported information. And then subsidies will be available to anyone who simply attests that they do not get qualifying, affordable health insurance from work, and that their household income is low enough to be eligible for subsidies.
As Ben Domenech writes in this mornings Transom, what this means is that the most significant entitlement increase since the Great Society will be operating on the honor system. And as Yuval Levin says, it may turn out to be an open invitation to fraud. Even if outright fraud does not become a major issue, the combination of the delays may increase the cost of the law relative to what it would have been: No employer penalty, and no health status or income verification, means that more people will end up on the exchanges, receiving subsidies. And more subsidies means a more expensive law. The deficit reduction it was supposed to have achieved, already significantly reduced, is almost certainly reduced furtherand perhaps gone entirely.
The delays also constitute an admission that the administration simply could not make the laws verification technologythe infrastructure that is arguably the core functionality for the exchangeswork properly before the October 2013 launch of the exchanges. Doing so, according to the rule issued by the Department of Health and Human Services last Friday, would involve a large amount of systems development on both the state and federal side, which cannot occur in time for October 1, 2013.
The postponements were unexpectedeven, apparently, to the officials running the exchanges at the state level. But trouble with the verification technology should not have come as a surprise. Obamacare's critics have warned about the potential difficulties practically since the law was passed. In my October 2010 feature on implementating the law, for example, I noted that fast, accurate income verification presents a particularly serious difficulty, and spoke to several health policy experts who warned of difficulties ahead. Nor were critics the only ones seeing trouble. Its been clear from the reporting for over a year now that officials in charge of implementing the law were having serious problems making the exchange technology work. By the time that the official in charge of the exchange technology told insurers that he was pretty nervous and had resorted to working to make sure its not a third-world experience, it was pretty clear that the project was a mess.
The delays arent only recent sign that Obamacare is struggling.
Just a few days before the employer mandate was postponed, Bloomberg News reported that a third of the hospitals involved in a high-level test of the laws most vaunted health care savings programsits Accountable Care Organization (ACO) programare threatening to cease participation. The 16 hospitals were part of the ACO pioneer program, which was intended to show off how some of the laws most ambitious health care payment reforms would work. Right now, however, it looks suspiciously like they arent.
The same goes for a lot of Obamacare. Earlier this year, officials in charge of the law delayed the essential functionality of the laws small business exchanges. The laws early retirement program ran out of money and shut down early. The laws high-risk pool program signed up far fewer people than anyone predictedand yet, thanks to unexpectedly high per-beneficiary costsstill had to cut payments to providers and cease enrollment in order to stay afloat. The availability of national health plans that were supposed to be part of the exchanges is in doubt, probably because of insurer reticence. Large swaths of rural, low-income Mississipi may end up with no insurers at all to choose from in the exchange. Officials in states that are building their own exchanges continue to say they are struggling to meet deadlines. The list goes on.
None of this means that Obamacare will collapse under its own weight. The most likely scenario at this point (though not the only one) is that the exchanges will still open on time, enrolling all who claim eligibility in subsidies. But the laws rocky implementation continues to reveal the significant flaws in both the laws legislative design and management. Theres still much thats unclear about the inner workings of the exchange-creation process, but the fact that the administration is jettisoning key provisions this late in the implementation calendar suggests that it is not going well, and it is reasonable to suspect that the bad news for the law will continue. The big question, then, is which piece of the law will come undone next?
Obamacare is coming undone. You can see it happening day by day, provision by provision, as the administration postpones or scales back key parts of the law, and other signs continue to suggest that the law as written simply wont work.
Last Tuesday, in what was apparently intended to be a pre-July 4 holiday news dump, the administration made the embarrassing announcement that it would delay by a year the health laws requirement that employers with 50 or more workers offer health coverage or pay a penalty. The administration also said it would delay the laws reporting requirements for employers who offer health coverage.
That raised a major operational question about the laws health insurance exchanges. How would those exchanges be able to determine whether someone applying for subsidies to buy individual coverage on an exchange already had access to employer coverage? The law says that people whose employers provide coverage arent allowed to get subsidies.
Late on Friday, we get another news dumpand an answer. The 16 exchanges run by states wont have to verify an individuals health insurance status at all. Nor will the state-run exchanges have to verify an individuals income level.
Instead, theyll rely on self-reported information. And then subsidies will be available to anyone who simply attests that they do not get qualifying, affordable health insurance from work, and that their household income is low enough to be eligible for subsidies.
As Ben Domenech writes in this mornings Transom, what this means is that the most significant entitlement increase since the Great Society will be operating on the honor system. And as Yuval Levin says, it may turn out to be an open invitation to fraud. Even if outright fraud does not become a major issue, the combination of the delays may increase the cost of the law relative to what it would have been: No employer penalty, and no health status or income verification, means that more people will end up on the exchanges, receiving subsidies. And more subsidies means a more expensive law. The deficit reduction it was supposed to have achieved, already significantly reduced, is almost certainly reduced furtherand perhaps gone entirely.
The delays also constitute an admission that the administration simply could not make the laws verification technologythe infrastructure that is arguably the core functionality for the exchangeswork properly before the October 2013 launch of the exchanges. Doing so, according to the rule issued by the Department of Health and Human Services last Friday, would involve a large amount of systems development on both the state and federal side, which cannot occur in time for October 1, 2013.
The postponements were unexpectedeven, apparently, to the officials running the exchanges at the state level. But trouble with the verification technology should not have come as a surprise. Obamacare's critics have warned about the potential difficulties practically since the law was passed. In my October 2010 feature on implementating the law, for example, I noted that fast, accurate income verification presents a particularly serious difficulty, and spoke to several health policy experts who warned of difficulties ahead. Nor were critics the only ones seeing trouble. Its been clear from the reporting for over a year now that officials in charge of implementing the law were having serious problems making the exchange technology work. By the time that the official in charge of the exchange technology told insurers that he was pretty nervous and had resorted to working to make sure its not a third-world experience, it was pretty clear that the project was a mess.
The delays arent only recent sign that Obamacare is struggling.
Just a few days before the employer mandate was postponed, Bloomberg News reported that a third of the hospitals involved in a high-level test of the laws most vaunted health care savings programsits Accountable Care Organization (ACO) programare threatening to cease participation. The 16 hospitals were part of the ACO pioneer program, which was intended to show off how some of the laws most ambitious health care payment reforms would work. Right now, however, it looks suspiciously like they arent.
The same goes for a lot of Obamacare. Earlier this year, officials in charge of the law delayed the essential functionality of the laws small business exchanges. The laws early retirement program ran out of money and shut down early. The laws high-risk pool program signed up far fewer people than anyone predictedand yet, thanks to unexpectedly high per-beneficiary costsstill had to cut payments to providers and cease enrollment in order to stay afloat. The availability of national health plans that were supposed to be part of the exchanges is in doubt, probably because of insurer reticence. Large swaths of rural, low-income Mississipi may end up with no insurers at all to choose from in the exchange. Officials in states that are building their own exchanges continue to say they are struggling to meet deadlines. The list goes on.
None of this means that Obamacare will collapse under its own weight. The most likely scenario at this point (though not the only one) is that the exchanges will still open on time, enrolling all who claim eligibility in subsidies. But the laws rocky implementation continues to reveal the significant flaws in both the laws legislative design and management. Theres still much thats unclear about the inner workings of the exchange-creation process, but the fact that the administration is jettisoning key provisions this late in the implementation calendar suggests that it is not going well, and it is reasonable to suspect that the bad news for the law will continue. The big question, then, is which piece of the law will come undone next?
