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March 03, 2014 at 09:09 AM
(Bloomberg) — When the launch of the federal Patient Protection and Affordable Care Act exchange website failed so spectacularly, the Barack Obama administration’s supporters claimed that the failure was really the fault of Republicans.
After all, Red States had mostly declined to build exchanges, forcing the federal government to do it for them.
As a result, the federal government was confronted with one of the largest information- technology projects it had ever attempted. And because the legislation had just assumed that the states would mostly build their own exchanges, using the federal government only as a fallback, the law didn’t include enough funding for the feds to tackle the job. They were forced to rely on a series of funding workarounds, piggybacking the build on existing contracts and borrowing personnel and office space from other programs. It was no wonder that the federal exchanges struggled even as state exchanges were doing fine.
In the ensuing months, however, we’ve learned that the state exchanges aren’t doing fine. Some of them, to be sure, are performing much better than the federal exchange. But the Official Blog Spouse points out that months after the federal exchange finally limped into production, about half the state- run exchanges “remain dysfunctional, disabled, or severely underperforming.” This, even though we have spent almost twice as much on building exchanges for 14 states and the District of Columbia as we did on the federal exchange, which covers the residents of the other states.
If the Red States had built their own exchanges, many of them would likely also suffer the same problems — or worse ones, given that red-state governors lacked the enthusiasm of their blue-state counterparts. Naturally, this raises some questions. What if the administration’s supporters who complained about Red-State intransigence had it backward? What if the mistake was allowing states to do a job that we should have left to the federal government?
There are some powerful arguments in favor of this proposition. Building a bespoke IT project from scratch takes a lot of planning resources and a lot of management. That kind of IT-management expertise is hard to come by in the private sector, where companies pay enormous sums for top talent; it’s very difficult at the federal level; and it may be nearly impossible for cash-strapped states, especially small states. Indeed, for small states, it arguably never made sense to even try to build an exchange, because the cost per user is so high. Hawaii has only signed up a few thousand people in its exchange after getting $205 million in federal grants.
The federal government, by contrast, only had to build most of the exchange once. To be sure, there were local systems that had to be hooked into, and that made things more complicated. But as we can see from the spectacular failure in places such as Oregon, having only one Medicaid system to deal with doesn’t necessarily mean you’ll succeed.
