HealthCare.Gov Looks Like A Bargain Compared With State Exchanges | Hacker News Reader

HealthCare.Gov Looks Like A Bargain Compared With State Exchanges

npr.org

32 pointsmarojejian52 comments

Is it just me, or does even the 'bargain' price of $647/enrollment from the federal website... seem surprisingly bizarrely high? (by an order of magnitude or more)?

But I'm not really sure exactly what to compare it to as 'typical' for website costs. Any ideas?

And of course, presumably (hopefully) the cost will continue to be amortized over the next few years -- more money will surely have to spent on it (continually), but the overall cost per enrollment should theoretically go down, as the initial work continues to be used for more and more enrollments. At least theoretically; in reality, who knows.

> But I'm not really sure exactly what to compare it to as 'typical' for website costs.

Some kind of "enterprise" sales-management or HR/benefits-management system might be a reasonable comparison. I wonder if there are published per-user or per-sale numbers on how much a system like that in use at a big organization (IBM or Boeing or Siemens or whoever) would typically cost.

It's really quite ridiculous for the linked report to use a capital:user ratio as a meaningful metric -- it's a bit like building an auto factory, building the first car, then arguing that the car cost $100m to build.

Having said that, it's obvious that some states, like Hawaii, are going to fight an uphill battle to make a cost-effective case for their revenue, while states like Oregon failed spectacularly to make good on their requirements.

OR's new CIO, Alex Pettit, just recommended killing the whole Oracle-belabored mess and moving the state onto the federal exchange. Pettit doesn't have any blood on his hands from the Cover Oregon debacle (he was hired away from OK after the exchange's failure), but it's still a gutsy move to kill it, since he's the one who has to deal with the politicians. (Plus he's not making any friends at Redwood Shores, and Oracle is going to outlast all the politicians.)

I would take away from this the lesson that the political desire to use states as "laboratories of democracy" is sometimes the completely wrong move; one critical, massive, high-risk and poorly-managed rollout was enough, thanks. Adding fifteen more projects on the HHS dime to replicate functionality (leaving aside state-level Medicaid systems) ended up driving up costs and adding more failure points to the system. Ironically, the states that were most resistant to the ACA contributed the most to federalizing healthcare enrollment, a centralization that might be politically antithetical to those politicians but that will probably save time and money in the long run.

> I would take away from this the lesson that the political desire to use states as "laboratories of democracy" is sometimes the completely wrong move;

Well, in this case, since the mandate was essentially "implement this very specific federally-mandated policy monoculture!" there's really not a lot of gain you could hope to have from the Laboratory model. If the states had the freedom to vary health care policy in meaningful ways, it would be a different matter.

Is the requirement to setup an health insurance exchange (or grant residents access to the federal exchange) a "monoculture"?

If you're informed about the situation, what parts of the state exchange requirement are "onerous" when compared with the status quo (i.e., what the insurance industry already requires)?

the political desire to use states as "laboratories of democracy" is sometimes the completely wrong move

I would upgrade 'sometimes' to 'most of the time.' There's a thin line between responsiveness and political feudalism, with the attendant corruption.

>"And of course, presumably (hopefully) the cost will continue to be amortized over the next few years -- more money will surely have to spent on it (continually), but the overall cost per enrollment should theoretically go down, as the initial work continues to be used for more and more enrollments. At least theoretically; in reality, who knows."

You'd think that.

Even if the entire population of a given state were enrolled some of these costs remain bizarrely high and highly varied.

DC: $211

Hawaii: $147

California: $28

It looks like these numbers are roughly consistent with a large, similar fixed cost spread over different population sizes.

"s it just me, or does even the 'bargain' price of $647/enrollment from the federal website... seem surprisingly bizarrely high? (by an order of magnitude or more)?"

Welcome to government contracting. The few who play the game basically get away with whatever they want. It is quite ridiculous.

The cost is only going up now that states are essentially pot committed. After the initial disastrous implementations across the board I doubt anyone is in a hurry to try that again.

I have the original CA proposal. $360,334,374.00. I’m sure there is at least another $50,000,000 in contract mods. The waste is just unreal. Creating local jobs? Not tech ones. The site was done in India.

Something like this sounds like a very good use case or AWS or another cloud service given the enrollment periods. Of course there is no profit in that. From their proposal:

“As discussed in Section 2.5.1 Hosting, we plan to implement a Private Cloud type infrastructure for CalHEERS. Why Private Cloud? Since standard cloud offerings, available from Amazon, Verizon, and a number of other service providers, offer sufficient capacity and are immediately available, they may seem like a good answer. However, standard enterprise-level cloud-based solutions currently focus on commoditized functions such as ERP, CRM and to a lesser extent HR and payroll. While SLAs are offered for security and availability, they do not meet the Exchange’s requirements for secure, SLA-based data intensive operations”.

The solution? 1,714 cores, 9,394GB of RAM, 392,327GB of Storage over 249 virtual machines. Every single piece of software is Oracle with the exception of Adobe LiveCycle.

Even with an average billing rate of $150/hr, more processing power then most Top 100 sites on the Internet…. they couldn’t keep a fail whale page online let alone any functionality.

Once it is finally somewhat usable they are treated like a raving success and awarding with… the federal contract.

Quite a business.

In other news: Dozens of insurance companies got 8.1 million signups and got the tax payer to fund the marketing campaign and the website that brought the customers to their doors. These insurance companies should be grateful but instead are being dicks about it.

The U.S. government should bill the health insurance companies for the cost of the websites.

In the insurance market, the quality of your customers matters more than the quantity. It's not like McDonald's, where every customer is profitable. So to me, it's not clear that insurance companies should always be grateful for more customers.

Exactly! The gov't is the one who is mandating people sign up. Insurance companies are providing plans through exchanges. If the people who sign up are mostly sick or old (adverse selection), then the premiums the insurers set for 2014 are going to be inadequate. Next year they'll raise them to cover the costs and insurance companies will be blamed for being "greedy".

That's what the insurance companies are afraid of.

But we already know that hasn't happened, with 28% of enrolees being the coveted 'young and healthy' demographic.

The administration's target was 38.5%! The 28% is a bit concerning since you want young people paying in but not taking much out.

[1] http://www.bloombergview.com/articles/2014-04-21/are-obamaca...

Insurance companies are fortunate to even exist under this scheme. There is certainly much I do not know about this industry, so correct me if I'm wrong, but isn't their primary function one of assessing risk? When the entire populous is forced to pay for some sort of health coverage, where does the insurance company continue to provide value?

I think the issue is that since the penalties for not signing up have been delayed, not everyone is signing up. If only the sickest ones sign up, you're in trouble!

Yeah, I realize they're having a problem with that, though I'm not sure what they expected. Young people don't exactly jump at the chance to pay for something they don't want on a deadline.

And, not just a marketing campaign, but a legal mandate for all citizens to become customers or face fines!

The insurance companies are whining because the exchanges force them to actually compete. This will put strong negative pressure on their margins. The extra volume won't come close to making up for their losses.

Before the exchanges and the standardized tiers of care, plans were very difficult for consumers to quantitatively compare. Most consumers didn't bother, so insurance companies were able to differentiate themselves with advertising and "fluff features" (easy) rather than by cutting costs and increasing efficiency (hard). Not only did consumers pay for the higher margins that came from fluff-differentiation, but they also never benefitted from competition over efficiency. The setup was good for insurance companies and bad for consumers. Now the party is over and the insurance companies are upset that their cash cow has been slaughtered.

Good riddance.

Bah. Say what you like about the old model, but you can't really call what the insurance companies have been mandated to do under the ACA "competition" -- you can barely call it insurance anymore.

Why don't you think exchanges are competitive? I put forward a detailed argument about why I think they increase competition. I'd appreciate a response in kind.

Also, why do you think "you can barely call it insurance anymore"? It used to be that insurance companies in the individual market were allowed to invent excuses to dump their expensive customers and then they were allowed to raise their prices if the customer wanted back in. Basically, the individual insurance market degraded into "pay the full price of any chronic condition you have." I wouldn't call that insurance, I'd call that pay-as-you-go-with-a-middleman. Now that they actually have to provide the "peace of mind" that they sell, I think the argument is much stronger for calling them insurance companies.

So, basically, the opposite of what you said.

You seem to imply that insurance companies dumped people after they developed an expensive condition. But that's a load of FUD, as dumping a customer like that's been illegal for decades. Which isn't to say that you could get someone else to pay for your pre-existing conditions before. That's genuinely new.

Anyway. There's no health insurance market anymore. There's a pre-paid healthcare services market which we call "insurance", with a nearly uniform price guaranteed to all (variance in prices regulated by the government), a very specific government-mandated bundle of services that it must provide, a government-mandated maximum profit margin, and a government mandate that the services be purchased.

So if that's your picture of healthy "competition" in a market... well, I guess you're entitled to that opinion but then I kinda wonder what you must think about the rest of the tech startups that get discussed around here.

What used to happen routinely is that when an insurance customer developed an expensive condition a "rescission" team would do a detailed audit of their initial application and medical history, looking for a pretext to break the contract. So if they went to the doctor prior to enrolling and complained about back pain, but didn't disclose that in their application, if that back pain could in any way be connected to their later cancer diagnosis, the contract can be voided and the insurance company could drop the customer and not pay for their treatment.

And the recission teams were even paid on commission. Top prize to the person who figures out how to dump the lady with cancer, second prize to anyone who can figure out what clauses to add to the new contracts to catch people like her in the future!

Also, don't forget the other tricks: shifting billing dates around, losing invoices in the mail, using the customer's income to calculate copays which would bankrupt them before they could afford expensive treatment... the list goes on.

EDIT: this is why I said that the insurance companies had to find an excuse to drop people, rather than just drop people. The really obvious stuff tends to be illegal.

> So if that's your picture of healthy "competition" in a market...

Regulation is not inherently the opposite of competition. Regulatory capture sucks, but so do perverse incentives. The healthcare market has a bad infestation of perverse incentives, and regulation is the only tool we have to go after them.

Well, that or universal health care: http://healthcarereform.procon.org/view.resource.php?resourc...

> I kinda wonder what you must think about the rest of the tech startups that get discussed around here.

I kinda wonder what you think about net neutrality. Good or bad?

Insurance companies are not whining; on the other hand media do on their behalf, but insurance companies basically wrote the law, so you won't see BlueCross or Athena CEO on the news anytime soon "whining" on the new law.

I disagree. Not about the fact that politicians and the media put words into the mouths of insurance companies for the purposes of political gain, but about you claim that "insurance companies basically wrote the law." I don't think they made off nearly as well as you think they did.

Also, we wouldn't expect their CEOs to make much of a stink about this, at least not publicly (perhaps I should have said "hurting" instead of "whining"). We would expect them to be busy telling investors how they plan to best take advantage of the new rules. Because that's what they're paid to do. Any CEO who says they don't know how to do this is begging to be replaced.

We'll be able to tell who was right in 3-4 years by comparing their margins (or another metric like administrative overhead) to what we see today in the individual insurance market. I would bet a sizable chunk of money that they will be much closer to the margins we see in the employer-provided insurance market today.

The insurance companies were consulted and included while the law was being drafted (over decades, because remember a lot of the groundwork was laid by the Republicans during the Clinton Administration). But it's not all rosy for them. They accepted the downside of this approach to healthcare reform because they saw potential alternatives as being much worse. A single-payer system would put the lot of them out of business, so they were willing to take some lumps to ensure that they're part of the American healthcare system moving forward.

That number seems ridiculously high, but shouldn't CPA be calculated from the money spent on "acquiring" the user, not the entire cost of starting the business?

This seems kind of a dumb analysis since you will be signing people up for years and it will only get cheaper. If it didn't get cheaper it would be scandalous. This article also seems like a win for federalism. Hawaii's exchange is really expensive. California's isn't as cheap as the Federal Government but it was way more reliable. Having alternatives lets you compare how programs are performing.

Nowhere in the article is the cost of "acquiring" a user, or CPA mentioned. This article is speaking in regards to the total cost of "signing up an enrollee". That is a fairly broad term, and could use some clarification for it to be of any real use.

Yes, the title was editorialized and we reverted it.

Submitters: As the guidelines ask, please do not rewrite a title except when it is misleading or linkbait.

Sorry! I was trying to clarify not editorialize, as writing " cost of signing up an enrollee" would have bloated the title. will not touch the titles if that's discouraged.

Being quite familiar with some of these projects I'd been saying this for quite a while. I'm glad to see that someone has come out and evidenced it.

I'd like to see what the projected ongoing costs are for enrollees that continue in the system for the next year. Surely, the cost of maintaining an enrollee is substantially lower?

so the website and organization behind it cost a small pittance. I still want to know what happened to the other forty million uninsured.

>> I still want to know what happened to the other forty million uninsured.

Forty million? It was estimated at 23 million. Here is the breakdown of uninsured from Wikipedia:

Illegal immigrants, estimated at around 8 million—or roughly a third of the 23 million projection—will be ineligible for insurance subsidies and Medicaid.[121] [126] They will also be exempt from the health insurance mandate but will remain eligible for emergency services under provisions in the 1986 Emergency Medical Treatment and Active Labor Act (EMTALA).

Citizens not enrolled in Medicaid despite being eligible.[127]

Citizens not otherwise covered and opting to pay the annual penalty instead of purchasing insurance, mostly younger and single Americans.[127]

Citizens whose insurance coverage would cost more than 8% of household income and are exempt from paying the annual penalty.[127]

Citizens who live in states that opt out of the Medicaid expansion and who qualify for neither existing Medicaid coverage nor subsidized coverage through the states' new insurance exchanges.[125]

A lot of them are being covered by their employers due to increased requirements there, and a lot of them are being covered by Medicaid because of widened eligibility there. I have no idea how close they all add up to cover everybody, but you have to look beyond the insurance exchanges to see how well the law is doing in covering the uninsured.

So basically, (at least some) states that created their own exchanges made a big mistake in doing so.

I do not see how, given that the money they used were federal. While in terms of entire country that is certainly suboptimal, it is hard to imagine how on a state level getting a grant and using it to generate local business could be bad.

Why was it ever an option for states to create their own sites? Why bother with redundancy?

Local-perspective decision-making and "50 laboratories" are usually the general line for that kind of thing, with efficiency and consistency being the arguments in favor of federal control.

Funnily enough, the states with Republican governors which usually push the local line didn't build their own exchanges, while the states with Democratic governors who are usually friendlier to federal control tended to build one. Politics.

To get the legislation passed, basically. It was a nod to states rights issues.

1. Because federalism and states-rights are considered by many Americans to be an important check/balance and 2. because the redundant work created by "upholding that philosophy" is an exploitable opportunity for those in power.

#1 = political capital #2 = $$$

What's not to love (if you're a politician)?

> Why was it ever an option for states to create their own sites?

Because the plans (as necessary because while the feds set some national standards, they have not displaced the states role as insurance regulators) are state-specific, and the exchange is supposed to provide gateways to both the state-specific insurance plans and the state-specific (and state-operated) Medicaid plans, and because it can also serve additional, related, state-specific functions.

The option to fallback to a federally-facilitate marketplace (which, even if it is a shared website for many states, is still state specific) was originally envisioned as the least preferred option for a state exchange.

Some failed and some did well. Connecticut did such a good job that other states (Maryland) are buying it. http://www.npr.org/blogs/health/2014/02/27/283526215/connect...

Kentucky created their own exchange and have been the poster child for ACA success as a result. It is super ironic given how anti-democratic / anti-obama the state is (I'm from KY, but live in Chicago):

http://www.thedailybeast.com/articles/2013/10/17/obamacare-i...

Why didn't they just create a standardized open source tool? Why have 50 separate efforts?

Who is "they?" Most of the people in charge of crafting and passing the ACA barely have an understanding of where software comes from, much less anything resembling a best practice for crafting it.

Does anyone have (finally?) a good explanation as of why a Canadian company was given the task to create the hc website? Especially since they screwed up in the UK so bad they been basically barred from Gov. contracts?

For the record, I don't think this is a good way to judge value (at this point, certainly). But it does seem more odd to argue the program had a good ROI based on such a cost.

CPA is ~meaningless when the 'acquisition' is mandated by law. It's not like there is any competitive "choice" here. this is simply y taxes spent divided by x people impacted by the law (who have complied). This is basically asking what is the "cost of user aquisition" for an IRS audit.

[edit: CPA reference was deleted by mods> https://news.ycombinator.com/item?id=7716613 . NB: The "cost of signing up an enrollee" is logically consistent with the context; whereas "user acquisition cost" is really out of place in the context of compelled behaviour (ie, individual mandate).]

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