Adding Up The Obamacare Tab

When the Affordable Care Act was passed, its drafters contemplated that states would design their own health care exchanges, with the federal healthcare.gov website serving as a kind of backstop.  That turned out to be a miscalculation.  More than 60 percent of the states — 36 out of 50 — elected not to create their own health care exchanges.

At the time, some critics argued that the decisions of states with Republican governors to refrain from building their own websites was politically motivated.  In retrospect, however, the decisions to eschew developing state-specific health care exchanges seem more like a wise recognition of the limitations of state capabilities, because the experiences of states that did attempt their own websites have been decidedly mixed.

Six of the 14 states that chose to create their own exchanges — Masschusetts, Oregon, Nevada, Maryland, Minnesota, and Hawaii — have had severe functionality problems and have become tremendous cash drains and political albatrosses.  In Massachusetts, Oregon, Nevada, and Maryland alone, the federal government has paid at least $474 million to support the establishment of non-functional exchanges, and that cost total seems certain to increase significantly.  In those states, Democratic politicians are blaming the website contractors and threatening litigation, and Republicans are saying that the states never should have attempted to build the exchanges in the first place.

Obamacare has become such a political football that every fact and development gets spun to death — but if we can’t learn from the current reality, and recognize that mistakes were made in the legislation and its conception, then we are just compounding our problems.  In all, the Kaiser Family Foundation estimates that about $5 billion in federal funds that have been shelled out to states to allow them to assess whether to create state-specific exchanges and then, in some cases, to support their creation.  That’s an enormous sum of money, and it is becoming clear that a significant part of it has been wasted.  Whatever happens with Obamacare, let’s at least hope that in the future we refrain from enacting statutes that require states to develop large-scale, complicated technological systems, on their own, with the federal government picking up the tab.  As the mounting Obamacare costs demonstrate, that approach is fraught with peril.