- There are about 4 million enrollees with issues that are significant enough to require manual reconciliation
- HealthCare.gov and the state-based websites bear no resemblance to the grand vision that was promised
- Lax standards will lead to massive amounts of erroneous benefit payments, costing taxpayers billions of dollars
The White House and a compliant media have worked overtime to convince the public that Obamacare’s first year should now be seen as a success. But a balanced examination of what has actually happened over the past eight months points in a very different direction — to an epic failure in implementation that is still ongoing, masked in part by on-the-fly workarounds that will eventually cost taxpayers billions of dollars.
The White House likes to say that HealthCare.gov was “fixed” by December 2013, after the botched rollout in October and November, and that, in the months that have followed the supposed fix, everything has gone relatively smoothly and according to plan. Officials have repeatedly pointed to the apparent enrollment of more than 8 million people in insurance plans offered on the federal and state exchanges as evidence that the law in general, and the websites in particular, are now working just as promised.
But is that true?
Over the weekend, the Washington Post reported that there are about 1.1 to 1.5 million enrollees in Obamacare insurance who “listed incomes on their insurance applications that differ significantly — either too low or too high — from those on file with the Internal Revenue Service” and whose information conflicts with the government’s records contained in databases compiled by the IRS and the Social Security Administration. There are also about a million enrollees with discrepancies in their documentation of citizenship or legal-resident status. Together with other errors, there are about 4 million or so enrollees, out of 8 million in total, with issues that are significant enough to require manual reconciliation.
This isn’t how it is supposed to work, or what was promised. HealthCare.gov and the associated state-built exchanges were supposed to be able to cross-check self-reported income and resident information with data from governmental records, reconcile the two, and then ensure accurate, automated payments directly to the insurance plans selected by enrollees. If successful, it would have been the first of its kind: a massive federal benefit program that is administered almost entirely online, with a minimum of federal personnel inserted into the process. Other federal benefit programs with income-tested benefits, such as Social Security’s Supplemental Security Income, started years ago with paper applications and have only transitioned slowly to more automation.
It is now clear that HealthCare.gov and the state-based websites bear no resemblance to the grand vision that was promised. For many millions of enrollees, it now appears that benefit payments have been made without serious confirmation by the government of self-reported applicant information. As the Post story indicates, the massive errors in payments that the government is now making, and that it will continue to make at least through the summer, are a direct result of a dysfunctional website that still cannot perform as intended, despite the very significant taxpayer funds devoted to building it. The supposed fixes to the websites back in November and December now look not so much like fixes and more like workarounds intended to unclog the system. The website was incapable of quickly processing the complex checks necessary to ensure fully accurate payments. So, in the interest of smoothing the way for consumers, the site has essentially become a way to process benefits based on the honor system of self-reported information. It is certainly a lot easier to build a website that allows consumers to tap taxpayer funds with minimal or delayed checks on information than it is to make an online process fully secure and accurate before disbursing any payments.
The lax standards on the front end will lead, inevitably, to massive amounts of erroneous benefit payments, costing taxpayers billions of dollars. The law’s defenders will say that the inaccurate payments will work in both directions — toward over- as well as under-payments. But that’s wishful thinking and defies all prior experience, not to mention human nature. The bias in federal programs is toward overpayments. Moreover, once made, it is almost impossible to fully recover erroneously paid benefits.
More errors will probably be uncovered when the so-called back-end payments are finally reconciled later this year. Originally, the websites were supposed to allow fully automated payments from the Treasury to the insurance plans of the subsidy amounts an insurer’s enrollees were entitled to receive. But, as has been noted by many others, the “back-end” payment system still has not been built, and it won’t be before at least September of this year. So the Obama administration devised another workaround, based once again on the honor system. Insurers are submitting invoices on a monthly basis to the Treasury with estimates of the total amount of premium subsidies the insurers believe their enrollees are supposed to receive. Treasury is sending checks to the insurers based on these invoices — and nothing else. All of this will supposedly get reconciled later — but it is hard to see such a reconciliation going smoothly, or without great risk to taxpayers.
The problems are not isolated to the federal government. Four states — Maryland, Massachusetts, Nevada, and Oregon — have had such terribly dysfunctional websites that they have pulled the plug on them. All but Maryland now plan to rely on the federally built HealthCare.gov, at least for next year. (Maryland is looking to use the same system that was built for Connecticut.) Other states — Hawaii, Minnesota, and Vermont — have had similarly terrible experiences, though they haven’t abandoned their previous efforts yet. All totaled, about $1.3 billion in federal taxpayer funds have been wasted on website production in these states.
The Obama administration wants the public to ignore all this and focus instead on the supposed success of expanding insurance enrollment. But it is still far from clear that insurance coverage has been expanded appreciably. The McKinsey survey indicates that less than one-third of enrollees in the federal and state exchanges were previously uninsured. And much of the expanded enrollment in Medicaid is in states that did not adopt the Obamacare expansion (the enrollees were already eligible for Medicaid but had not bothered to sign up previously).
It’s true that Obamacare did not completely collapse in the first half of 2014. But that’s not the same thing as a success. The first year’s enrollment in Obamacare can be best understood as an exercise in doing whatever was necessary to get people on the program, no matter the consequences. And one very likely consequence is that taxpayers will end with a hefty bill for many improperly paid subsidies.
— James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.