Mission Accomplished: Obamacare is Not "A Third World Experience"

We begin today by checking our premises: In order to imagine something working forever, it must begin to work in the first place.

As the shutdown loomed on Monday we wondered what the future holds for the Affordable Care Act.

Senate Majority Leader Harry Reid is on the record saying, “What we’ve done with Obamacare is a step in the right direction, but we’re far from having something that’s going to work forever.”

The law takes full effect Jan. 1, 2014. So far large employers have been exempted for one year. Small employers have had their enrollment delayed by one month. For everyone else, the online exchanges launched yesterday.

As soon as the ribbon was cut, crashes, very long load times and problems logging in to the exchanges defined the day.

[Cue sad trombone sound effect]

There are two explanations for this. One, that these bugs are to be expected, smoothly ironed out and never sweated over again. Or, the law was passed with too lofty expectations which now have to be played down as logistical problems compound.

“It’s only prudent to not assume everything is going to work perfectly on day one,” predicted, Obama’s health insurance czar, Gary Cohen, back in April. After yesterday, we give props to Cohen for having the foresight to hedge his bets. Even still, something tells us it will turn out to be the understatement of the decade.

“The time for debating about the size of text on the screen, or the color, or is it a world-class user experience — that’s what we used to talk about two years ago,” said Cohen’s colleague, Harry Chao. “Now the philosophy is: ‘Let’s just make sure it’s not a third-world experience.’”

There are a lot of opportunities for good, low-cost health care in the Third World. But we’re sure Mr. Chao was imagining something along these lines (in which case, he couldn’t set the bar much lower)…

Mission Accomplished: Obamacare Isn’t This…

In recent months, implementing Obamacare has been hairier than its proponents seemed to realize. The biggest delay so far was the employer mandate. That’s been pushed back one year, adding $10 billion to the program’s price tag.

The White House or the Department of Health and Human Services haven’t released the number of enrolled since yesterday. But they have been emphasizing that the process is open until March 31, 2014. By then, the kinks will be dealt with we’re told.

But the online exchanges themselves are the life force of Obamacare. There will be consequences to winging it. What’s so hard about rolling out these exchanges anyways?

Here’s the organizational chart. Just follow the arrow… errr…

How Obamacare avoided a “third-world experience”: A complex flow chart

OK. We’ll be honest… We don’t have a clue what’s going on in that chart.

What we do know is that green box labeled “Federal Data Services HUB” is the communication hub we discussed in these pages before. That’s the central point that trafficks people’s enrollment information between the agencies that administer the law like the IRS, Treasury, Social Security Administration.

It was supposed to be ready by Sept. 4… and was pushed back to Sept. 30. They seemed to just squeak it in one day before the online exchanges launched. A functioning hub is crucial so agencies can verify if individuals are eligible for the subsidies they’re claiming.

Those subsidies include the refundable tax credits for the poor. Those subsidies are capped at an income equal to 400% of the federal poverty level. If a household’s income is just $1 higher than that, they don’t get a subsidy. Depending on age and things like whether or not the enrollees smoke — that $1 in extra income could increase the household’s premium payments by as much as $9,355. If you also started smoking, your premium could go up even more.

But don’t worry. The government has a solution for Obamacare’s back-end problems. They’re simply waiving the verification process for claimed subsidies until the kinks are ironed out. It’s called “the honor system” — because that works so well on college campuses.

We’ve said it once, and we’ll say it again. If we didn’t know any better, we’d think the government built the damn thing to fail. Heck, the transcript from Harry Reid’s above-mentioned interview bluntly blurts out as much. The interview asked him if Obamacare was a stepping stone to a single-payer system.

Reid’s answer? “Yes, yes. Absolutely, yes.”

Regards,

Addison Wiggin
for The Daily Reckoning

Ed. Note: The government shutdown continues… Surprise! We’re still here! Birds still fly, politicians still lie, and the earth still spins on its axis. But the future is still a mystery. What will the markets make of an extended shutdown? Where should investors put their money? Who will benefit most, if at all, from the prolonged antics of childish politicians? We explained all of that, and offered readers a specific place to put their money, in today’s Daily Reckoning email edition. If you didn’t receive it, you only got half the story. Sign up for The Daily Reckoning right here, for FREE, and never miss another opportunity to profit.