Monday, November 11, 2013

America - Now with More Hope and Change.

How bad could this trainwreck be?

Just how bad could this get? Well, here’s one scenario, maybe not the most likely, but possible: The exchanges aren’t ready by Dec. 1. In fact, they continue to experience problems in January and February. The administration’s poll numbers continue to plummet, and the reputation of the exchanges is such that come spring, young people don’t bother to sign up -- or are afraid to hand over their personal data to such a buggy system. The insurance pool is much smaller, older and sicker than expected, which is to say, much more expensive than expected. The administration comes up with small emergency patches, like allowing people to keep their old policies for a few more months. But that makes the pool of people insured through the exchanges even older and sicker than it otherwise would be.

Meanwhile, sometime between March and June, the other shoe drops: People who bought exchange policies realize that the restricted networks insurers created to keep the premium costs low cut out the best hospitals and doctors. A newly insured child with cancer cannot get into a top pediatric hospital because her insurance has zero coverage for out-of-network emergency care. Tearful Mom goes on the evening news and says that she thought when they went on Obamacare, that meant they were safe, and why can’t I take my baby to Philadelphia Children’s Hospital, Mr. President? That particular story will be fixed, through some combination of private charity, insurer PR sensitivity and government intervention. But there will be more of these cases that don’t make the papers. The folks who had no insurance and are now on Medicaid may be quite glad of their insurance, but those people don’t vote in large numbers. The middle-class voters who thought they were getting much more out of this law are disenchanted, maybe angry.

By June, insurers are filing their rate increases for next year. But there are already lawsuits being filed over the limited networks and rumblings about legal remedies in the legislature. They are paying out much more in claims for each customer than they expected when they set rates, and while the “risk corridor” reinsurance provisions mitigate some of their losses, they do not turn losses into profits. And public anger over all the downsides of the law -- the policy cancellations, the malfunctioning exchanges, the extremely narrow provider networks -- makes it look very likely that Democrats are going to lose the Senate in 2014. The law now seems to be in danger -- not in danger of outright repeal, but in danger of death from a thousand cuts, as legislators roll back anything that’s unpopular -- like, say, the individual mandate.
In a more auspicious political climate, insurers might well say, “Hey, we had a rough start, but we want to get market share, and we certainly don’t want to face the wrath of insurance commissioners and the Department of Health and Human Services, so let’s eat the losses of last year and come in with some modest rate increases for 2015.” But with the law looking shaky, they are no longer so sure that they want to take that risk. When they start filing rate increases, they are huge -- well into the double digits. Regulators and HHS fight back as hard as they can, but they cannot just order insurers to sell at a loss. Democrats lose the Senate in 2014, and even fewer people buy insurance for 2015.

What does the administration have in its pocket to prevent that scenario? Well, there’s the obvious: Fix the website. And I’m sure that they’re working on that as hard as they can. But as I pointed out at the beginning of October, malfunctioning IT projects aren’t susceptible to good old-fashioned remedies like “hard work” or “staffing up.” There is a limit to how hard your people can work, particularly if they are doing cognitive work rather than, say, mechanically swapping floppy disks in and out of servers (the jobs I used to reserve for 2 a.m. when I had to work crazy hours). After 10 or 12 or 16 hours, your productivity falls so dramatically that you’re better off going home and sleeping -- particularly if you have to do this for more than a couple of nights.
Well, we really can't blame him.

It is, after all, his first real job.

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