Oct. 23 (Bloomberg) -- The flip side of the conservative desire to believe Obamacare’s problems are much worse than they actually are is the liberal desire to believe they’re much less severe than they actually are. One refrain that’s become particularly popular, perhaps because President Barack Obama uses it, is “Obamacare is more than just a website.”
This has the advantage of being true: The Patient Protection and Affordable Care Act is a vast and complex effort that includes drastic changes to how health care is delivered, a huge expansion of Medicaid (welcome, Ohio!), and an array of regulations meant to protect consumers from the worst predations of insurers.
But Obamacare’s website is much more crucial to the law’s success than the website for your average government program. Just ask the Obama administration.
With my colleague Sarah Kliff, I spent much of May and June doing exactly that. What we wanted to know -- and asked repeatedly -- was how administration officials defined success. Here is what we learned: “To the White House, the difference between success and failure is straightforward: They need to entice a sufficient number of young and healthy adults into the new insurance marketplaces that open Oct. 1.”
Another way of saying “the new insurance marketplaces” is “HealthCare.gov,” at least for the 34 states that didn’t build their own exchanges. The federal website is the crucial link between the government, consumers and insurance companies -- and the administration, at least back in June, believed its success would drive everything from public perceptions of the law to the Medicaid expansion.
It’s worth unpacking that a bit.
There are two parts to Obamacare’s expansion of health insurance: the Medicaid expansion and the health insurance exchanges. The White House didn’t worry too much about the operational challenge of expanding Medicaid. That’s something the government already knew how to do. The problem there was political. A lot of red states were flatly refusing to participate, which meant millions of low-income people who needed health insurance and were eligible for it under the law weren’t going to get it.
The White House didn’t believe those red states could hold out very long: The Medicaid deal was simply too good. The federal government pays 100 percent of the costs for the first three years and 90 percent thereafter. Refusing free federal dollars is hard for even the most hard-core ideologue, which is why conservative governors in Arizona and Ohio battled their Republican legislatures to sign their states up.
Administration officials figured that if, after two years, Obamacare was deemed a success, then the political obstruction would fade and the rest of the red states would sign up. But for Obamacare to succeed, the insurance exchanges -- the law’s most visible, ambitious and far-reaching innovation -- would have to work, which is why the White House health-reform team spent pretty much all of its time focused on their prospects.
Two components would determine success: technology and turnout. No one thought building the website for the state and federal insurance exchanges would be an easy job. It required integrating the computer systems of the Internal Revenue Service, the Social Security Administration, state Medicaid systems, the Department of Homeland Security, insurers and more.
Those systems had to talk to one another, because shopping for insurance isn’t like shopping for a book on Amazon.com. That’s a simple transaction: You buy the book and Amazon sends it to you. The exchanges aren’t simple. The system must access far-flung pockets of government data to verify your identity, eligibility and whether you qualify for a subsidy. Then the system needs to alert the appropriate insurance company to what plan you’ve purchased and how the company will be paid. And it needs to accomplish all this simply and speedily enough to retain the customer’s attention through the end of the process.
As difficult as the technical challenge was, the White House always believed that functioning exchanges were a necessary but insufficient condition for success. The other essential element is turnout. The Obama administration needs to attract enough young, healthy people to Obamacare to balance the costs of older, sicker subscribers and keep insurance premiums low. Assuming the exchanges attract 7 million enrollees in the first year, as the Congressional Budget Office projects, about 2.7 million must be young and healthy in order to make the financing work.
The White House always maintained that if enough young, healthy people bought insurance on the exchanges, the rest of Obamacare would succeed. By contrast, if the exchanges are overloaded with older, less healthy enrollees, then they could enter the dreaded “insurance death spiral,” as increasing prices drive out younger, healthier people, leading to even higher prices and still lower enrollment.
The Obama health-care team conducted detailed market research on the “young-and-healthies.” They modeled where they lived. They figured out which television channels they watched and which social networks they used. They learned who their important validators were. (“No surprise,” said David Simas, the White House’s deputy senior adviser for communications and strategy: “It’s Mom.”) Administration officials focused on the young and healthy in the belief they didn’t need to worry about the old and sick. Their calculation was simple: The more people needed health insurance, the more determined they would be to get it.
That’s why the problems at HealthCare.gov matter for the long term: They’re obstructing efforts to get younger, healthier people to sign up. Older, sicker folks will reload the Web page until they get through, or they’ll sign up over the phone. But the White House expected that young folks, by and large, wouldn’t tolerate a lot of hassle. A sophisticated campaign was required to get young people to HealthCare.gov. Once there, a frictionless Web experience was necessary -- the White House wanted it to last less than 10 minutes -- to encourage them to purchase health insurance.
Instead, the Web experience, for most people, is all friction right now. In meetings with reporters -- and on the front page of HealthCare.gov -- the White House is talking up the ease of using the phone rather than the website. That’s a detour that almost certainly leads to a disastrous demographic imbalance in the exchanges.
It may not even be a detour that works. “Telling people to call the 1-800 number isn’t any good either,” said Robert Laszewski, president of Health Policy and Strategy Associates. “The government has to transmit the enrollment information over the computer system to the insurer anyway.”
The White House has time to right the ship. But not much. Health-care experts suggest the website needs to be running smoothly by Thanksgiving at the latest. And even then, it’s possible that the initial disruption will have produced a slightly worse risk pool in year one, leading to slightly higher premiums in year two.
If technical difficulties continue beyond that and rising prices create broad anger in year two, then not only will the federal exchanges be in trouble, but it’s also much less likely that Republican governors will agree to expand Medicaid anytime soon.
That’s why HealthCare.gov isn’t just a website. It’s essential to Obamacare’s success.
(Ezra Klein is a Bloomberg View columnist.)
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