Peter Suderman (Mr. Megan McArdle) reviews the worst case, hard landing scenario for the PPACA:
Over the weekend, several reports suggested that, despite continued assurances that Healthcare.gov, the problem-plagued online insurance enrollment portal run by the federal government, would be running smoothly for most users by the end of the month, it increasingly looks likely that the deadline will be missed.
Insurance industry consultant Robert Laszewski, who, thanks to his contacts with his insurers, has been a critical and frequently prophetic source of information about the law’s rollout, opened a blog post this weekend with the following assessment: “It is now becoming clear that the Obama administration will not have Health.care.gov fixed by December 1 so hundreds of thousands, or perhaps millions, of people will be able to smoothly enroll by January 1.†Laszewski says that months, not weeks, of work remain.
The dates he lists are important, and not only because of the administration’s self-imposed deadline of November 30. Anyone who wants to purchase insurance that kicks in at the beginning of next year must complete enrollment by December 15. If the system isn’t working smoothly at least a couple weeks prior to that rapidly approaching date, then large numbers of people simply won’t have a chance to sign up.
The quick summary is that millions of people would lose their healthcare insurance and suffer a discontinuity of insurance of unknown duration. The Obama Administration would have caused it and there would be nothing they could do about it.
He does propose one interesting stop-gap solution:
So the insurers have suggested a temporary measure: Let the insurers estimate the subsidies on their own. Any estimates that are too low would be reimbursable, and any estimates that are too high, the insurers would get to keep. In other words, the federal government, backed by taxpayers, would be on the hook for their bad estimates.
He thinks that’s pretty unlikely and I do, too.
His worst case scenario reminds me of the scene in Crocodile Dundee in which Mick, visiting New York, is confronted by a mugger armed with a switchblade knife:
Sue Charlton: [guardedly] Mick, give him your wallet.
Michael J. “Crocodile” Dundee: [amused] What for?
Sue Charlton: [cautiously] He’s got a knife.
Michael J. “Crocodile” Dundee: [chuckles] That’s not a knife.
[he pulls out a large bowie knife]
Michael J. “Crocodile” Dundee: THAT’s a knife.
What Mr. Suderman describes is no worst case scenario. IMO the worst case scenario is the above plus the contingency that most of the hardy few successfully enrolling for healthcare insurance under the exchanges are either a) Medicaid enrollees who qualified under the pre-PPACA rules or b) old and sick with pre-existing conditions.
The former condition would impose an intolerable fiscal strain on state governments. Medicaid enrollees who qualified for Medicaid under the pre-PPACA rules but for some reason weren’t enrolled in Medicaid don’t qualify for reimbursement by the federal government. Their entire tabs would be picked up by the states, many of which, like Illinois, are already teetering on the brink of fiscal disaster with no clear way to save themselves.
The latter condition would induce what’s been known as the “death spiral” in which insurers raise their rates and the PPACA’s costs soar in deadly embrace.
And that doesn’t even take what could happen in the group insurance market into account. We could be seeing millions of people formerly covered by their employers thrown into the exchanges.
I’m not predicting any of these scenarios. We’ll know in due course. All could be roses and lollipops.
Somewhere here is an argument for mixed-economy approaches to public policy, where the government imposes standards on business and then the private sector implements. The insurance companies are ready to go, the government-run aspects are a mess. There is really not a good Plan B, if a coverage gap emerges.
Private insurance is in flight, heading towards its planned location and the government may not have a connecting flight available at arrival. The government cannot order the private jets to fly to the next location; perhaps it can bribe them, but the private jet might not have enough fuel or have other long-term plans.
The government hired a private entity to set up the exchanges. The ACA is basically a plan to expand Medicaid (by the accounts I have seen that part is working well) and provide subsidies to private insurers. There are obvious, I think, ways this could have worked better. If the individual states had all set up their own exchanges, it should have worked better. We could have also required that all plans be pretty much the same and all insurers follow the same rules, then just had a single federal exchange site. This mix of allowing, encouraging actually, states to maintain their own insurance rules as much as possible has made things much more complicated. Still might have worked if the states, which understand their own rules best, had set up their own exchanges.
Steve
I still think the D.C. court case, seeking to eliminate the subsidies for purchasing healthcare insurance, is a big shoe that might still drop. The court denied the motion to dismiss for want of standing, but still wants the issue to be examined more extensively at the summary judgment stage. The issues the Court wants briefed in order to decide the case:
http://scholar.google.com/scholar_case?case=6622070872348198559&hl=en&as_sdt=6&as_vis=1&oi=scholarr
(1) through (4) are procedural issues that could result in a ruling for the government, even if government is wrong in its interpretation of the law. Item (5) is the substantive issue.
@steve, the Illinois (Democratic) governor said that it was better to have the feds set up the exchange because the feds have better technical capabilities.
Oregon’s exchange is still not on-line, apparently because the system does not accurately calculate the federal tax credits. A truly state-based system would not have tied Oregon’s hands like that, but subsidized whatever program Oregon desired that met federal approval.
@steve
… If the individual states had all set up their own exchanges, it should have worked better. …
Now it is the state’s fault. Why not just blame George W. Bush?
It is long overdue for President Obama to put on his “big boy pants” and man up. This is his turd, and apparently, his shit does stink.
If the individual states had all set up their own exchanges, it should have worked better.
Take it a step back, Steve. If the PPACA had been constructed bi-laterally, with bi-partisan votes passing it, individual states may have voluntarily been eager to participate in it’s implementation. From the get go, though, the government penned the HC reform around ‘force’ and ‘coercion.’ The fact that Robert’s gave them a helping hand in it’s passage, by his last minute interpretation of it’s penalty being a ‘tax’ rather than a fee, was mitigated somewhat by Robert’s allowing the states to determine whether or not they wanted the medicaid expansion part of it — a sweet and sour kind of constitutional rendering, for sure.
Now you seem to be indicting the ‘choice’ part, left up to the states, in spinning the PPACA’s difficulties back onto the them, instead of having these intrinsic flaws being owned by the government who forced it’s plan onto people, in the first place! That seems not only ideological myopic but flavored with sour grapes as well.