ObamaCare's Black Box: Why the exchanges are worse than even the critics imagined

Click here to read this editorial from the 10-17-13 WSJ. Excerpts:

"Now that traffic has abated, HHS concedes there were built-in information technology and structural defects. Some of Healthcare.gov's automatic operations mimic hacker denial-of-service attacks meant to disable a site."

"Consumers must set up a complex account with sensitive personal information like Social Security numbers before they are allowed to browse health plans. The government wants to show consumers only their net out-of-pocket premiums minus subsidies, not the true underlying cost of insurance."

"HHS continues to claim that the exchanges are all about competition—they're even trying to rebrand them as "marketplaces." But real marketplaces are transparent and let consumers know what they get for what price. ObamaCare's exchanges are intended to obscure price and service options."

"HHS still refuses to disclose how much taxpayers shelled out for this exchange lemon. The money came from several ObamaCare, general HHS and Medicare accounts and flowed to more than 50 outside vendors, with several no-bid contracts awarded outside the normal procurement process."

"...the HHS-run exchanges are designed to make daily reports, seven days a week.

These reports are known in industry jargon as 834 transactions and they may represent the most serious ObamaCare breakdown. Insurers and the exchanges are supposed to swap electronic files every 24 hours that track the policies consumers select and their subsidies and check their lists against each other. The problem is that the exchanges rarely generate accurate 834s.

Our sources in the insurance industry explain that the 834s so far are often corrupted or in the wrong syntax, and therefore unusable unless processed by hand. In other cases the exchanges spit out multiple 834s enrolling and unenrolling the same user and don't come with time stamps that would allow the insurer to identify the most recent version.

The upshot is that the exchanges, the insurers and the consumers will often have different records on file."

Why Government Tech Is So Poor

Click here to read this article from the 10-17-13 WSJ by Farhad Manjoo. The subtitle was "Fixing Procurement Process Is Key to Preventing Blunders Like Healthcare.gov." Excerpts:

"Apple spent about $150 million developing the iPhone. The health-insurance exchange—which, let's remember, is merely a website meant to connect citizens to insurance companies, something quite a bit less complex than Apple's groundbreaking miniature computer—so far has cost at least $360 million, and possibly as much as $600 million.

So how can the government spend so much more on technology and not get anywhere near equal results?"

"When Apple royally screws up, the world doesn't cut it any "slack""

"In consumer tech, performance matters. When things go wrong, customers balk, investors flee, and heads roll. In the government, despite several attempts at reform, few of these consequences seem to apply."

"Healthcare.gov—which has been described as a failure by many experts, including supporters of the health law—is only the latest in a series of faulty, overpriced governmental tech..."

"we could remake the nation's IT infrastructure using off-the-shelf hardware and software and the best tech practices employed by the world's most admired tech companies."

" two important factors stand out, experts say. The first is personnel—like many government IT projects, this was implemented by people who don't understand IT."

"outdated regulations and arbitrary-seeming requirements. For instance, your technology must be Y2K-compliant just to get in the door. The process locks out all but a tiny handful of full-time contractors—companies who also happen to be big federal lobbyists"

"The government should strive to buy tech like the rest of the world does, opening itself up to vastly more vendors, and aligning price with performance. Logistically, none of the steps he outlines would be very difficult to accomplish. It would just require a full-court press from political leaders to make it happen."

Health Website Woes Widen as Insurers Get Wrong Data

Click here to read this article from the 10-18-13 WSJ. Excerpt:

"Insurers say the federal health-care marketplace is generating flawed data that is straining their ability to handle even the trickle of enrollees who have gotten through so far, in a sign that technological problems extend further than the website traffic and software issues already identified.

Emerging errors include duplicate enrollments, spouses reported as children, missing data fields and suspect eligibility determinations, say executives at more than a dozen health plans. Blue Cross & Blue Shield of Nebraska said it had to hire temporary workers to contact new customers directly to resolve inaccuracies in submissions. Medical Mutual of Ohio said one customer had successfully signed up for three of its plans."

Can Unemployment Insurance Keep Unemployment Rates High?

See The Wages of Unemployment: A new study shows how jobless insurance increased joblessness, an editorial from the WSJ, 10-18-13. Excerpts:

"A striking new study from the National Bureau of Economic Research concludes this is a mistake. Longer-term unemployment insurance, rather than supporting a recovery, likely makes unemployment persist.

"Most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility""

"...they were able to compare results in counties that adjoin but that sit in separate states."

"Places with more unemployment generosity remained worse off than those with less. Unemployment, the economists write, "rises dramatically in the border counties belonging to the states that expanded unemployment benefit duration" compared to the counties next door. The benefit extensions can explain "most of the persistently high unemployment after the Great Recession.""

"The real problem is job creation. There isn't enough of it, and so unemployment gets stuck at a high level. What brings unemployment down is not mainly the effort made by people to find jobs; instead, it's the incentive employers have to create jobs. Long-term unemployment benefits deter that job creation.

The reason is that extended unemployment benefits create upward pressure on wages. The higher wage level reduces the employer's potential profits on any new job created, so naturally they don't create them. With fewer jobs available, the number of unemployed who land a job also stays low. High unemployment persists."

Obamacare Website Costly And Poorly Designed

See The $634 MILLION dollar Obamacare website “needs a COMPLETE overhaul” from the Right Scoop which links to a CBS News report.

"This is a pretty blistering report by CBS News on the rollout of Obamacare via the HHS website that cost $634 million to build. CBS News not only says it was ‘nothing short of disastrous’, but interviewed a computer database software expert who said he would be embarrassed had his company rolled out something like this. He said it’s not demand that’s killing the website, but rather it wasn’t designed well and looks like it wasn’t even beta tested. He said the website needs a complete overhaul. Great, how much more will that cost us?"

See also Glitchy Healthcare.gov cost taxpayers more than $634 million to buildfrom the Daily Caller. Excerpts:

"With critics panning the Obamacare exchange website Healthcare.gov for its myriad technological problems, a tech news site has surfaced with a dollar estimate for what the glitchy website actually cost taxpayers.

According to Digital Trends, CGI Federal received $634,320,919 to construct Healthcare.gov — or more than the amount spent building Linkedin ($200 million) and Spotify ($288 million) combined.

The site also cost more than it took to initially create Facebook, Twitter, and Instagram, according to the report."

"The expense appears even larger when compared with the amount the company was originally slated to receive, as in 2011 CGI Federal was contracted to build the site for about $93 million.

This news comes as Fox News reports that officials in the White House might have known prior to the launch that the site was not ready and the government still has not released information on how many people have successfully enrolled in the federal exchanges.

Thursday, an Associated Press-GFK poll revealed that seven percent of Americans reported that somebody in their household has tried to sign up for the exchange, however among those who experimented with the exchanges, just 10 percent of those who attempted to sign up were able to buy health insurance.

According to the AP, about 75 percent of Americans polled said they experienced problems trying to sign up."

Jacob Sullum On How And Why The War On Drugs Has Failed

Hat tip: Mark Perry

"The authors of a study in the online medical journal BMJ Open, led by Dan Werb of the Urban Health Research Initiative, found that heroin purity in the United States rose 60% from 2000 to 2007 (most recent year available) while heroin prices in Europe fell by 74%. This is what success looks like in the war on drugs.

“With few exceptions and despite increasing investments in enforcement-based supply reduction efforts aimed at disrupting global drug supply,” Werb and his colleagues write, “illegal drug prices have generally decreased while drug purity has generally increased since 1990. These findings suggest that expanding efforts at controlling the global illegal drug market through law enforcement are failing.” That’s because supply reduction tactics such as ripping up poppies, spraying coca crops, and intercepting marijuana shipments are doomed to fail by the economics of the black market.

Prohibition plants the seeds of its own defeat by enabling traffickers to earn a premium for undertaking the special risks involved in supplying an illegal product. That means they are highly motivated to find ways around whatever roadblocks the government throws up between them and their customers. Given all the places where drugs can be produced and all the ways they can be transported to people who want them, the idea that the government could “cut off the flow” if only it made a more determined effort is a fantasy. As critics of prohibition often point out, the government cannot keep drugs out of correctional facilities, so even turning the entire country into a prison camp would not do the trick. The most that drug warriors can hope to accomplish is to impose costs on traffickers that are high enough to raise retail prices, thereby discouraging consumption."

Disability Is Growing Very Fast And Might Be Hard To Stop

See Fun Facts on Disability Insurance by Bryan Caplan, economics professor at George Mason University. The CPI was up only 23% from 2001-2010. The SSDI was up 125%. The CPI increased 2.35% compounded annually while SSDI increased 9.45%. It increased at 4 times the rate of inflation.

Now Caplan's post

"The new Cato Policy Analysis on Social Security Disability Insurance is full of fun facts. (footnotes omitted)

The U.S. disability rate fell 25% between 1977 and 1987, then more than doubled.  The staunchest health care skeptics should be baffled.  Unless, of course, the availability of free money makes people sick to their stomachs...



Getting on disability is pretty easy if you game the system:

Applicants who are denied benefits can appeal. Indeed, the appeals process has four levels, and at each level the individual receives another chance to convince a government official or judge to grant benefits. Thus, individuals with questionable claims of disability have up to five tries at receiving benefits and they just have to succeed once.

The process can be very cumbersome and costly. A rejected applicant can first ask the SSA for a "reconsideration" of his or her claim from a different group of SSA officials. If rejected again, the applicant can request a hearing before an ALJ. These hearings do not include a government representative to question the claim on behalf of taxpayers. Meanwhile, the SSDI applicant in the great majority of cases uses the services of lawyers working on a contingency fee basis. It is a process slanted in favor of program expansion and higher spending.

If the ALJ denies the claim, the quest for federal benefits is still not over. The SSDI applicant can request a review from the Social Security Appeals Council. If the council either denies the claim or decides against reviewing it, the applicant can then file a lawsuit in a federal district court. In 2011 over 14,000 new civil actions were filed.68 In 2010 there were 2.9 million total applications for SSDI benefits. Only 35 percent were awarded benefits. However, that figure includes applicants who were denied for technical reasons or where a final decision was still pending. The overall allowance rate based on medical decisions was 55 percent. For medical decisions made at the hearings level or higher, the allowance rate was 76 percent.

Officials have enormous discretion.  Most succumb to the natural human temptation to show pity at the taxpayers' expense:

One result of judges trying to expeditiously complete case loads is high approval rates of about 60 percent on average. In 2011, 130 ALJs awarded benefits in 85 percent or more of the cases heard. A judge in West Virginia awarded benefits in all but four of the 1,284 cases he tried in 2010.100 Overall, the Wall Street Journal found that in 2011, 1,334 judges made more awards than denials, while only 439 judges had the ratio the other way around.

An anecdote that redeems anecdotal evidence:

A single judge in Pennsylvania, for example, overruled the SSA on 2,285 benefit applications in a four-year period--applications that the SSA had declined. That single judge's actions have cost taxpayers more than $2 billion.

For practical purposes, the officially disabled can collect for life:

The SSA conducts periodic reviews to determine if a beneficiary is still disabled. The frequency of the reviews depends on how long an individual's condition is expected to last. In 2011, only 3.6 percent of workers on SSDI had their benefits terminated because of medical improvement. Almost 90 percent of people had their benefits stopped because they either died or reached retirement age. The data thus indicate that once workers get on the disability rolls, they rarely leave and go back to work.

The main thing I learned, though, was that both Carter and Reagan managed to get the disability problem under control despite populist pressures.  If you assume the decline was simply cyclical, note the straight-line rise since 1987.  Democracy makes drastic rollback unlikely, but marginal reform has happened before - and can happen again."