Is Healthcare.gov The Problem Or Is There A Bigger Problem?

Yesterday's Washington Post carried a long article "Healthcare.gov: How political fear was pitted against technical needs" laying out how the battle over how to handle the implementation of Obamacare was won by the existing HHS bureaucracy and the President's political team who opposed Treasury, OMB and outside health experts who wanted someone with business, technology and insurance experience to oversee a focused effort.  That "victory" ultimately led to the fiasco of Healthcare.gov but THC believes the story has implications for the fate of Obamacare as a whole.

The article keys off a May 2010 memo written by David Cutler, an outside healthcare expert who supported Obamacare, and sent to Larry Summers.  As Cutler states in the article “They were running the biggest start-up in the world, and they didn’t have anyone who had run a start-up, or even run a business”.  Cutler's memo is worth reading in whole but it is basically Management 101 advice as well as a scathing personal indictment of the capabilities of the HHS bureaucrats placed in charge of the project.

An excerpt:

I am writing to relay my concern about the way the Administration is implementing the new health reform legislation. I am concerned that the personnel and processes you have in  place are not up to the task, and that health reform will be unsuccessful as a result . . .

You should also note that while this memo is my own, the views are widely shared, including by many members of your administration (whose names I will omit but who are sufficiently nervous to urge me to write), as well as by knowledgeable outsiders such as Mark McClellan (former CMS administrator) and Henry Aaron (Brookings). Indeed, I have been at a conference on health reform the past two days, and have found not a single person who disagrees with the urgent need for action . . .

When a corporation needs to move in a new direction, it sets up a new structure to focus on where it needs to go. You can’t change the culture by piling new responsibilities onto a  broken system. I believe you need to follow this model. 

This advice was rejected by the President with the now-visible consequences but while the Post concentrates on the technical issues around Healthcare.gov the concerns raised by Cutler's memo are broader, raising questions not only about the further implementation of the law but, by implication, about the very premises upon which it was structured.

The success of the Affordable Care Act (ACA) rests upon the ability of HHS, IRS and other agencies to promulgate over 1,000 regulations that can mesh together seamlessly and be modified as needed in our dynamic society to reflect a constant stream of new data, human behaviors, medical research and technological innovation to meet the expressed goals of the law - reducing premiums, providing better health outcomes and reducing the number of uninsured while at the same time guaranteeing that if you like your health plan you can keep it and if you like your doctors you can keep them (OOPS - guess that guarantee part already expired!). 

As such it is very different from a relatively simple program like Social Security, which was enacted with a 12 page bill compared to the 2,0000+ page ACA behemoth.  If Social Security was like the ACA it would have a convoluted set of regulatory rules over what you could spend Social Security money on and then payments would be made directly by the government to say, your grocery store, along with restrictions on what the grocer could charge.  And there would be a list of ten items you would be required to purchase with your Social Security.   Instead, the ACA is a top-down structure requiring the perfect regulators to make the perfect decisions in order to deliver the promised results but it's been entrusted to the people who gave us Healthcare.gov.

If you read Cutler's memo and/or have had any experience with the regulatory mechanisms of our government would you want to place a bet (or the health of your family) on that scenario being successfully implemented? . . . I thought you'd say that (and you are not alone, see, for instance, the recent Rasmussen poll reporting that 37% of Americans think zombies would do a better job than the Federal government in running the country, with another 26% being undecided - personally, having seen Shaun Of The Dead, THC is in the undecided category, although it should be noted that Rasmussen also reports that "Americans who expect a zombie apocalypse express a lot less confidence in the federal government").  

But the biggest problem of all is the flawed structure of the law.  The key statement from Cutler's memo is:

"When a corporation needs to move in a new direction, it sets up a new structure to focus on where it needs to go. You can’t change the culture by piling new responsibilities onto a broken system."

That is precisely what the Affordable Care Act does and is why it will fail in its goal of improving healthcare and lowering costs as David Goldhill compellingly argues in his new book Catastrophic Care.  Goldhill is an executive and describes himself as a Democrat who was mobilized into studying the healthcare system through the incident that gives the book its subtitle "How American Health Care Killed My Father" (though by expanding the web of those dependent on government subsidies it may be able to maintain itself politically for awhile).  By building on the existing tax treatment for insurance and the flawed structures of Medicare and Medicaid, the Affordable Care Act will accentuate, not solve, the existing problems.  THC will be soon do a post outlining Goldhill's argument in more detail.

Much of what is happening right now is predictable; HHS in its 2010 regulations both predicted it and made sure through the tightening grandfather requirements that it would happen (as CNN reports this was known at the time; in 2010, Senate Democrats unanimously vote rejected a Republican bill to block implementation of the HHS restrictions).  And the issue is bigger than the 5% of individual policyholders who are being hit in the first wave.  The grandfather restrictions apply to all policies including small business and employer policies and all will be impacted over the next 18 months.  In the preamble to its 2010 regulations HHS estimated that more than 50% of all policies in the US will lose grandfather status and, as you are reading in the media and many of you, including THC, know from friends and families policies are being cancelled and alternatives cost more with more restricted access to doctors.  The HMO is back, except it is being run by the government and the people David Cutler complains about in his memo!

To add insult to injury we also hear the President and his supporters saying the cancellations are due to "bad apple" insurers and "stupid" consumers.  This is a lie (for additional lies read this or you can hear the official Administration explanation here) .  For instance, a policy can have all required coverage and its premium be stable but if the deductible structure changed in any amount since 2010 it is nonconforming.  Or, as some policyholders have found out, the policy can be completely conforming except it does not have, for instance, maternity coverage.  It's irrelevant that they are a 55 year old single male, their policy is still cancelled.

THC's sister is one of those people.  She has been notified that the small business plan her family has now  will be cancelled when it is up for renewal in early 2014.  She has been purchasing on the small business market for many years and is extremely knowledgeable about how to evaluate medical coverage and cost aspects of competing plans and she was very happy with her current plan.  Having heard her discuss health insurance issues on many occasions THC is confident she is much more competent to evaluate and purchase health insurance than Barack Obama, Harry Reid or Nancy Pelosi, all of whom managed to exempt themselves from the requirements of the Affordable Care Act. 

THC believes that this is likely to be the Democrat's "Best And Brightest" moment on domestic policy just as Vietnam was for them on foreign policy.  Which, if it happens, will still leave us with the challenge of figuring out a better solution.