Obamacare is proving just how super-efficient our federal government can be

Throughout the Obamacare debate — which ended just over three years ago — we heard a lot of talk about how the federal government was so much more efficient at delivering health insurance than private firms are. This argument required a willing suspension of disbelief for anyone who has ever even heard of the federal government, much less its innumerable examples of wasteful spending. But that’s what we were told.

And I was reminded of that line of argument when I read this blog post by health-insurance expert Bob Laszewski about the mounting costs of building the health-insurance exchanges that will be central to delivering Obamacare beginning next year.

In California alone, Laszewski reports, federal grants for building an exchange already total $910 million. In New York, it’s $340 million just for establishing an enrollment and eligibility process. All told, this year the feds have awarded $3.3 billion in grants to build and market exchanges — and that doesn’t include several states, including Georgia, in which the federal government will be building the exchanges because the states declined to do so.

But that $3.3 billion must be super-efficient compared to what a private firm would do. Right? Right??

Laszewski says it ain’t so:

For some additional perspective I took a look at what it cost to launch the private insurance marketing site, Esurance. That company sells not only health insurance but also things like homeowners and auto insurance across the country. When I put my zip code into their system along with my age, they offered me 87 different health plans from all the big players in my area. Now granted, the new health insurance exchanges are more complex because they have to interface with Medicaid and the IRS as well as calculate subsidies. But the order of magnitude difference in what it cost to launch Esurance compared to the California exchange is pretty big.

Privately funded Esurance began its multi-product national web business in 1998 with an initial $5.5 million round of venture fund investment in 1999 and a second round of $34 million a few months later. … Even doubling these investments for inflation still leaves quite a gap.

And doubling the investments for inflation actually overstates things: According to the Consumer Price Index, spending $39.5 million in 1999 would be more like $53.8 million today. Or, if you prefer, it would equal 1.6 percent of what the federal government has committed to replicating essentially what Esurance has already created (albeit somewhat more complicated than Esurance, for the reasons Laszewski outlined above).

Excuse me: That’s the super-duper-efficient federal government.

– By Kyle Wingfield

339 comments Add your comment

Numbers-R-US

March 26th, 2013
5:56 am

Just be thankful that the DoD was not tasked with creating the exchange. Aside from that, your apples to oranges comparison is of what value beyond that of a cheap cut of red meat?

Techfan

March 26th, 2013
5:57 am

Enter your comments here

USC

March 26th, 2013
6:11 am

Nobody has more money to lose because of the Affordable Care Act (ACA) than private insurance. Why is it that the only industrialized country in the world does not have a single payer healthcare system, spends twice as much on healthcare, and has shorter survivals? Currently, in a mixed system of private and public insurances many are left uncovered, (approximately 30 million), and, as stated, the expenditure is twice as much. The ACA is gradually being implemented with coverage required for dependent children up to age 26 (adding 3 million to the insured roles) and preventive care without co-pay or deductible (105 million served to date). The embarrassment of refusal to insure those with a known condition or removing newly diagnosed patients from the roles based on a technicality is now illegal. Although previously 50 percent of the private health insurance premiums were given to the insurance company executives as salaries, this is now reduced to 20-25 percent. In 2012, private insurers were required to reimburse insured families $1.1 billion ($151 per family) because of excess charges. Although Republicans and Health Insurance companies have predicted an increase in premiums, the premium increase in 2012 was 30 percent lower than in 2010. Patients with Medicare Part D prescription coverage have now saved $6.1 billion as the “doughnut hole” is gradually being eliminated. After a federal investigation and the removal of several private insurance C.E.O.s (e.g., AETNA, WELLPOINT) Medicare Part C (Medicare Advantage) overbilling by private insurance companies has been eliminated, premiums have fallen 10 percent, and enrollment has risen 28 percent. Penalties for poor performance have reduced Medicare readmission from 19 percent over the past 5 years to 17.8 percent in the last half of 2012. The current debate centers on the Medicaid Expansion available in the ACA which is a state elective. This program would increase coverage to millions (1.9 million in Georgia, specifically children of working poor) and would initially be paid 100 percent by federal funds. It would also eliminate the requirement for health insurance coverage or fines to be paid by certain small businesses. Kyle, I am sure you have no interest in whether Georgia’s children receive adequate healthcare or not, but because you are interested in nickels and dimes – bottom line – profit goes to the individual and some corporations (now holding at least $4.75 trillion in cash, will have to divest some. Gee, this is really painful, but I bet you are glad to pay twice as much in taxes in Georgia for Medicaid (the federal tax which Deal is refusing to accept in return) and the Bed Tax for inferior Georgia Medicaid coverage. We do need some Arithmetic skills here, don’t we and maybe a little compassion? Embarrassing.

Stephenson Billings

March 26th, 2013
6:23 am

Imagine how efficient and cost-effective a gov’t run (ie, single payer) system would be….

/sarcasm

DeborahinAthens

March 26th, 2013
6:31 am

USC WELL SAID! But you are wasting your breath. The Republicans (and many Democrats) have been bought and paid for by the “Medical Industrial Complex”. The insurance bozos are the reason we ended up with Frankenhealthcare instead of the single payer plan we need. I hope that, eventually we will get that. Besides this, we need to figure out why our healthcare costs so much compared to other industrialized countries. Contrary to what the Repugs keep repeating, we do not have the best healthcare in the world. If you are wealthy and healthy it is a great system. If you are lower middle class, poor, and sick, it is awful.

Stephenson Billings

March 26th, 2013
6:31 am

Three Years Later, Obamacare Is Even Less Popular

“In 2010, the Democrats rammed Obamacare through Congress in open defiance of public opinion, and an incensed citizenry responded by giving Republicans their biggest gains in the House of Representatives since before World War II. Now, coinciding with tomorrow’s 3-year anniversary of President Obama’s signing Obamacare into law, new polling suggests that his namesake is now even less popular than it was at the time of its passage.

According to the Kaiser Health Tracking Poll for March, only 18 percent of Republicans, 31 percent of independents, and 58 percent of members of Obama’s own party, have a favorable opinion of Obamacare. Overall, Kaiser’s polling indicates that only 37 percent of Americans like Obamacare — down 9 points from Kaiser’s tally in the month immediately following Obamacare’s passage. ”

http://www.weeklystandard.com/blogs/three-years-later-obamacare-even-less-popular_708813.html

Stephenson Billings

March 26th, 2013
6:33 am

” If you are wealthy and healthy it is a great system. If you are lower middle class, poor, and sick, it is awful.”

Sounds a lot like the NHS to me…..

Joel Edge

March 26th, 2013
6:37 am

Anyone that thinks the government can deliver health care should be forced to go to the VA for treatment for about three years. I say three years, because it will take that long to get anything accomplished. Nothing against the good folks at the VA. Very nice people, just not very efficient.

Thomas Heyward Jr

March 26th, 2013
6:38 am

So how come Wingfeild’s beloved Republicans haven’t defunded it?

Aesop's Fables and other Lib Economic Theories

March 26th, 2013
6:41 am

If you are lower middle class, poor, and sick, it is awful.

They are the only ones with government insurance now, so I guess it’s gonna be awful for the rest of us.

And even worse for them.

Name one thing the governments good at.

Thomas Heyward Jr

March 26th, 2013
6:54 am

Before complaining about ObamaCare…….Kyle should first contemplate his proclvity for repeatingly voting every two or four years for Republicans and expecting a different result.
.
There’s a word for that.

Stephenson Billings

March 26th, 2013
6:56 am

“So how come Wingfeild’s beloved Republicans haven’t defunded it?”

I believe there are currently 2 Senate bills going through that are starting to defund it piece by piece as well as some budget proposals in the House that defund it…..

Stephenson Billings

March 26th, 2013
6:57 am

“There’s a word for that.”

I can say the same thing about minorities and the poor who vote for Democrats every year and expect different results (for them).

GB101

March 26th, 2013
7:03 am

USC

Your post contains a great deal of misinformation.

First, what you refer to as “shorter survivals” I take to be life expectancy. Attributing the US life expectancy, low relative to other western industrial nations, to our lack of a government run, single payer system is superficial and incorrect. There are many factors that affect life expectancy.

Second, nothing remotely like 50% of premium revenue have gone executives’ salaries. The industry’s loss ratios are probably in the 75% range, give or take, and only a small fraction of the rest goes to executive salaries. The companies also have to pay rent and related overhead, buy computers, pay for claims processing, pay taxes, etc. etc. etc.

Three, the “embarrassment of refusal” to insure people with pre-existing conditions is a lot like not selling fire insurance to people whose houses are on fire or insuring the lives of dead people. The guaranteed issue requirement in Obamacare has created an unsustainable system, and everybody knows it.

Aesop's Fables and other Lib Economic Theories

March 26th, 2013
7:12 am

obozocare does have a gift for the Republicans built into it, it goes into effect ten months before the 2014 mid term elections.

Even the low infos will be enraged and head hunting every dummycrat they can find.

Our nation will then begin the rebuilding process, ridding us of this monstrosity and the real recovery will commence.

Jefferson

March 26th, 2013
7:23 am

Love it or leave it, get involved or cry with you thumb up your er eye I guess,

Ronnie Raygun

March 26th, 2013
7:32 am

What was the GOP plan again? It was Obamacare.

L'il Aynie

March 26th, 2013
7:45 am

You are all mixed up on this one, Kyle! Bad terminology leads to false conclusions.

Health insurers and health insurance exchanges do not provide any health care, only health care providers like doctors, clinics, and hospitals do that. The health insurers write insurance policies for enrollees, verify coverage, and process medical claims from health care providers. Typically, private health insurers skim off 12-15% of the premiums for themselves (administrative costs, etc.) and pass on what’s left to the actual health care providers. Medicare imposes only a 6-7% administrative burden on health care.

Private health insurers currently don’t compete for customers in a free market. You can’t walk into an insurance office and buy the coverage you want, and you won’t get competitive bids for your health insurance business. They do compete, sort of, and in some states, in managing the employee health insurance for large companies.

The health insurance exchanges provide a forum for competition between private health care insurers for your health care business. Competition, in a free and open market, is believed by many to result in lower prices and better service. Since health care insurance, competitive or not, is superfluous to health care, it is total inefficiency as far as actual health care is concerned.

Overall, private health insurance and insurance exchanges are administrative burdens on health care for Americans, since they consume a large portion of health care costs yet provide no health care. To make health care more efficient, we would have to marginalize private health care insurance in favor of a Medicare-like arrangement in which insurance companies process medical claims under competitively-bid contracts to Medicare.

Insurance companies are efficient at menial clerical tasks like medical claims processing because they use low-cost, temporary labor . Insurance companies are not efficient at health care insurance because they are not disciplined by competition and cost concerns; private health care insurance is more a racket than a business.

To make health care more efficient, we would marginalize private health insurance, not spend money on trying to make it competitive or efficient. Then, we could start to make health care more efficient by encouraging the use of primary care physicians to coordinate patient medical services, insisting on more intensive use (longer hours of operation) for expensive electronic diagnostic equipment like MRIs and CTs, negotiating drug prices with the manufacturers, etc.

TiredOfIt

March 26th, 2013
7:49 am

Lower the age for Medicare to 0 and we are done.

JKL2

March 26th, 2013
7:52 am

USC- Why is it that the only industrialized country in the world does not have a single payer healthcare system, spends twice as much on healthcare, and has shorter survivals?

Wouldn’t have anything to do with us being the fattest, laziest country in the history of man would it? Miracle doctors can only do so much when treating steaming piles of liberals.

JKL2

March 26th, 2013
7:55 am

-Kyle

Don’t forget that $340 million went to the lostest rated company in the state. Not sure how she got the contract…

http://bighealthreport.com/7196/obama-friend-receives-340-million-to-run-obamacare-exchanges/

JKL2

March 26th, 2013
7:56 am

-lowest

(it’s early)

Del

March 26th, 2013
7:57 am

“Your post contains a great deal of misinformation”

That’s not his/her original opinion. It’s a cut & paste opinion from another source. You can spot them every time and it’s the only way that most libs can appear intelligent.

JKL2

March 26th, 2013
7:59 am

deb- Contrary to what the Repugs keep repeating, we do not have the best healthcare in the world.

Is that why people come here from all over the world? Because we’re overpriced and crappy?

Del

March 26th, 2013
8:12 am

Is that why people come here from all over the world? Because we’re overpriced and crappy

Shhhhh, you’ll upset them…they’re minds have been controlled to believe that through a huge centralized federal government all things are possible.

Thomas Heyward Jr

March 26th, 2013
8:14 am

Ronnie Raygun

March 26th, 2013
7:32 am

What was the GOP plan again? It was Obamacare.
—————————————————————————–
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lol but………you lie.
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It was RomneyCare.
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lol

Thomas Heyward Jr

March 26th, 2013
8:17 am

Stephenson Billings

March 26th, 2013
6:56 am

“So how come Wingfeild’s beloved Republicans haven’t defunded it?”

I believe there are currently 2 Senate bills going through that are starting to defund it piece by piece as well as some budget proposals in the House that defund it…..
————————————————————————————————————————–
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And those Senate/House bills will keep you voting Republican…………………expecting a different result.
.
lol

bluecoat

March 26th, 2013
8:18 am

Name one thing the Gov. good at——-winning Presidential elections.And legislature forcing the PO to deliver mail 6 days per wk.

stevie ray

March 26th, 2013
8:20 am

Thomas Heyward Jr

March 26th, 2013
6:54 am

It seems you have not the capabilities to add any value to the feal topic here which is an efficiency opinion on the state of this legislation. Instead, you attack individuals with childish commentary. Is thinking of new ways to say GOP sucks your morning mantra?

Such comments are as useful as a turd in a punchbowl..

bluecoat

March 26th, 2013
8:25 am

Yep these DR’s should wait until the steam is gone,along with the sheen,then treat the dull pile of cons.

stevie ray

March 26th, 2013
8:28 am

KYLE

All the actuarial reports I have peered indicate that not only is the model flawed in terms of the delivery of care (isn’t that the prime objective?) but zero savings will be wrung from the system. As is this will be another unfunded trillions of dollars liability established as and working as the ponzi schemes anathema to these social remedies.

The young with low risk get to pay the highest premium to finance the subsidized cost of others. Since insurers can’t rate on medical history and traditional variables, the pre-existing costs (I’m for some form of pre-existing cover FYI) is not workable as the total success of the financing of this turd rest on those with the best health…when that explodes, expect to see another by line on your paycheck next to SS and Medicare/Medicaid..

The delivery of care will be the demise. Existing shortage of internal med docs will explode..especially those accepting medicare and medicaid.. those who need care the most will continue to be the ones encountering the most obstructions..

stevie ray

March 26th, 2013
8:31 am

bluecoat

March 26th, 2013
8:18 am

Wasting our money? Raising money for re-elections? Putting politicians priorities ahead of us?

There are a variety of things our government does well!

stevie ray

March 26th, 2013
8:33 am

KYLE

This is the new trend…already exceeded budget a year in advance! Political math.

http://www.ajc.com/news/news/national-govt-politics/fayette-mans-hopes-for-health-coverage-on-hold/nWsqX/

Aser706

March 26th, 2013
8:36 am

Another I Told You So….

This is not news to those who take it upon themselves to be informed.

Henne

March 26th, 2013
8:40 am

Also, the fed propaganda machine says Medicare is delivered with 2 percent overhead. No. They count only one department’s expenses, not the many others that part of the work is farmed out to, including the IRS.

L'il Aynie

March 26th, 2013
8:41 am

JKL2 . . . people come to Britain, France, and Germany, even to Czech Republic, India, and Brazil for medical treatment.

For sure, if you are rich and don’t need health insurance you can come to America and get excellent, high-priced treatment at one of the few renowned American clinics and hospitals.

But, if you are an American citizen with a middle-class income you are not likely to enjoy world-class medical services under your over-priced health insurance plan, if you have one. But, you are certain to be buried under the senseless bureaucracy, red tape, and paper associated with US private and public health insurance. The senseless bureaucracy and paperwork also saps the time and energy of the health care providers.

Countries like Britain provide hassle-free, consistent, effective health care that results in longer life, and better health at any age. And, those people have never been denied necessary treatment or drugs, worried about their health care, filled out a health insurance application, received a claims statement, or paid a medical bill. They pay for their health care through their taxes, which is much more efficient than a burdensome system of health care insurance involving billing and claims.

Tiberius - pulling the tail of the left AND right when needed

March 26th, 2013
8:54 am

“Countries like Britain provide hassle-free, consistent, effective health care that results in longer life, and better health at any age.”

Grossly mistaken. Aynie, you rely (as many of your lib brethren do), on cold statistics which are skewed with data on longevity not associated with health care, and without lifestyle context.

In short, you rely on lies to make your case.

Cherokee

March 26th, 2013
8:58 am

Stevie Ray I’ll direct this to you – I usually disagree with you but unlike most of the trolls on here, you can make an intelligent reasoned comment.

If the medical care delivery systems in the UK, or Canada, or any other industrialized country in the world, are so awful, then why do the people in those democracies put up with them? What you don’t see is citizens of those places saying – ‘hey, I think we want to follow the example of those Americans, that’s the ticket!’

Aynie is correct – hopefully this will lead to single payer, which will result in lower costs and better outcomes.

Tiberius - pulling the tail of the left AND right when needed

March 26th, 2013
9:02 am

“If the medical care delivery systems in the UK, or Canada, or any other industrialized country in the world, are so awful, then why do the people in those democracies put up with them?”

Because they have been indoctrinated to believe that the state is responsible for their health and well-being, and they are not operating under our Constitution.

Any more questions?

Aesop's Fables and other Lib Economic Theories

March 26th, 2013
9:04 am

JKL2 . . . people come to Britain, France, and Germany, even to Czech Republic, India, and Brazil for medical treatment.

http://static1.grsites.com/archive/sounds/comic/comic002.wav

indigo

March 26th, 2013
9:09 am

Every other industrialized Western country manages to have Govt. universal healthcare.

Is there some reason our Govt. is just to inefficient to do it?

Cherokee

March 26th, 2013
9:10 am

Our constitution? The one that directs Congress to make laws for the welfare of the nation? That consitituion?

Maybe you ought to read it sometime.

indigo

March 26th, 2013
9:10 am

Tiberius – 9:02

You left out one thing. They don’t want to die because they can’t afford a doctor.

stevie ray

March 26th, 2013
9:11 am

Cherokee

March 26th, 2013
8:58 am

All folks in the US deserve healthcare, particularly of the preventative nature. Marrying two enemies as bedmates is first problem…both of which are known for material waste. Adding the feds idiotocy to existing maze of insurance structural issues will lead to the opposite outcome needed.

Forgetting the financing (alone and of itself suggests we have learned nothing from our financial mistakes of the past) service delivery will be a disaster for everyone. The stress on existing capacity to accomodate current demand is already stretched….as millions are added who we know need hundreds of thousand of dollars per of expense immediately, the impact on supply is worrisome to say the least..

IMO either single payor or residual market program vis a vis flood, workers compensation or auto schemes need be vetted…the latter of which are proven successful but we know not the financial burden on premium taxes to finance such….state to state basis..

Of course the political noise is likely the worst issue..

Tiberius - pulling the tail of the left AND right when needed

March 26th, 2013
9:15 am

“Our constitution? The one that directs Congress to make laws for the welfare of the nation? That consitituion?

Maybe you ought to read it sometime.”

You mean the Constitution that says “To promote the General Welfare”, not “PROVIDE” for welfare, Cherokee?

THAT Constitution?

Read it. More importantly, understand it. Including the English language you don’t understand.

Back to grade school for you, sonny.

stevie ray

March 26th, 2013
9:15 am

indigo

March 26th, 2013
9:09 am

I think that is the best approach but as mentioned by prior poster, our system is a very old dog…teaching new tricks is difficult enough much less done with political motives at top of agenda, incompetent financial leadership, and an already slowing supply of providers..

Phased in approach but another ponzi deal is nuts…..Heck I’m worried stiff about the amount of Medicaid/Medicare and SS taxes my kids will pay to support the rest of us…can you imagine the burden of heathcare tax on top if this?

Numbers-R-US

March 26th, 2013
9:20 am

Apparently Republicans would rather die from an illness that they cannot afford to treat out of pocket than be saddled with health insurance.

stevie ray

March 26th, 2013
9:20 am

indigo

March 26th, 2013
9:10 am

Since the leading culprit of deaths related to lack of healthcare evolve from lack of family doctor and preventative health, this is most critical for upcoming generation.

Regarding the constitution, I think Nancy Pelosi put it best when she said we’d have to wait til this 4000 page bill passes to know what is in it…nothing else needs be said. A majority of folks, likely growing, want nothing to do with this particular approach despite most also feeling that everyone deserves healthcare….go figure.

JohnnyReb

March 26th, 2013
9:21 am

Obamacare was/is crooked from the start. It was passed under Reconciliation with not one Republican vote – several senators were bought-off with pork. Unions and other favored Obama campaign contributors were given waivers. Enrolling with pre-existing conditions was stopped.

Everyday you here of how much more the program itself costs, plus how it is driving up insurance cost. There is a bill making its way through congress to remove the tax on medical equipment. And, it has been brought to light that Obamacare taxes you when you sell your house – BTW, that is a tax on assests, not interest or capital gains income.

Only the blindly stupid believe we can give medical care/insurance to millions without costs going up.

But what is more amazing is that poll after poll showed huge majorities against Obamacare, yet Obama was voted in again.

Bottom line, we are in big trouble.

mbtc

March 26th, 2013
9:22 am

Republicans are running scared that this policy, which takes effect in a few short months, will prove successful. We shall soon see who’s right in this debate, and the voters can indeed reward those who are. Personally I don’t believe a word coming from the scare-mongering right. Let’s let the facts speak. If I were betting, I’d drop a few on Sebielius and competant government, over the lying front groups for big insurance.