What Kind of Problem is the ACA Rollout for Liberalism?

By Mike Konczal |

“This massive IT launch sure came in on time, under budget, and without headaches” is a statement that nobody has ever said. But even controlling for that, Healthcare.gov looks to be having a disastrous launch.

People are naturally asking about the practical and political implications of this disaster. Is it a problem for the Affordable Care Act as a whole, with its mixture of individual mandates and risk-pooling? Is it a political disaster for President Obama and the Democrats? Does this show us major problems in the way that government procures its contractors?

These are important questions, but some are asking a bigger one: is this a problem for liberalism as a political governance project? Does this rollout failure discredit the core goals of a liberal project, including that of a mixed economy, a regulatory state, and social insurance?

Conservatives in particular think this website has broad implications for liberalism as a philosophical and political project. I think it does, but for the exact opposite reasons: it highlights the problems inherent in the move to a neoliberal form of governance and social insurance, while demonstrating the superiorities in the older, New Deal form of liberalism. This point is floating out there, and it turns out to be a major problem for conservatives as well, so let’s make it clear and explicit here.

So what has gone wrong? People are still trying to figure this out. There are the general problems of doing too much with too little time and resources and rolling out a big final product rather than smaller incremental pieces. These are things that, while problematic, don’t particularly have a political story to tell.

However, four bigger problems jump out.

The first has to do with means-testing the program. The biggest front-end problem is that users, before they can register, must “cross a busy digital junction in which data are swapped among separate computer systems built or run by contractors.”

Why is that? It is because the government needs to determine how much of a coupon it’ll write each person to go and buy private insurance. Beyond the philosophical components of means-testing (what the philosopher Jonathan Wolff calls “shameful revelations), the actual process requires substantial coordination between multiple government agencies with very different infrastructures.

As the GAO notes, “the data hub is to verify an applicant’s Social Security number with the Social Security Administration (SSA), and to access the data from the Internal Revenue Service (IRS) and the Department of Homeland Security (DHS) that are needed to assess the applicant’s income, citizenship, and immigration status. The data hub is also expected to access information from the Veterans Health Administration (VHA), Department of Defense (DOD), Office of Personnel Management (OPM), and Peace Corps to enable exchanges to determine if an applicant is eligible for insurance coverage from other federal programs that would make them ineligible for income-based financial subsidies.”

Rather than just being an example of bureaucratic infighting, each of these pieces of information is necessary to determine how aggressively the government should subsidize the private insurance individuals will buy, and the entire process will stall and fall apart if one of these checks isn’t completed quickly.

This by itself might not be a problem; however, the second issue is that the means-testing is necessary to link individuals up with individual private insurers. As the Washington Post notes, the back-end problems are in part the result of the site being “designed to draw from the offerings of private insurers, each with their own computer systems, rates and offerings.” And though this may be getting better, a serious concern has been inaccurate data being transmitted to the insurance companies. Which is to say that the emphasis on creating a digital marketplace where individuals get means-tested and can then pick and choose among insurers requires syncing on both ends, which is a difficult process.

So what? A third issue, and a major reason this is freaking people out, is that the first two problems could introduce adverse selection, as only the most needy will wait, and wait, to take advantage of the programs. As Yuval Levin has emphasized, the “danger of a rapid adverse selection spiral is much more serious than they believed possible this summer.”

And the fourth and final issue is that the federal government has had to pick up so much slack from rebelling states that didn’t want to implement health care. The state-level exchanges that were actually implemented appear to be doing okay, or at least significantly better. But the general problem is that “More than 30 states refused to set up their own exchanges, requiring the federal government to vastly expand its project in unexpected ways.”

So this tells a story. Let’s refer to these features of social insurance, which are also playing a major role in the rollout problems, as “Category A.” Now, what would the opposite of this look like? Let’s define the opposite of this as “Category B” social insurance. And let’s take these two categories and chart them out:

What we often refer to as Category A can be viewed as a “neoliberal” approach to social insurance, heavy on private provisioning and means-testing. This term often obscures more than it helps, but think of it as a plan for reworking the entire logic of government to simply act as an enabler to market activities, with perhaps some coordinated charity to individuals most in need.

This contrasts with the Category B grouping, which we associate with the New Deal and the Great Society. This approach creates a universal floor so that individuals don’t experience basic welfare goods as commodities to buy and sell themselves. This is a continuum rather than a hard line, of course, but readers will note that Social Security and Medicare are more in Category B category rather than Category A. My man Franklin Delano Roosevelt may not have known about JavaScript and agile programming, but he knew a few things about the public provisioning of social insurance, and he realized the second category, while conceptually more work for the government, can eliminate a lot of unnecessary administrative problems.

Some of the more cartoony conservatives argue that this is a failure of liberalism because it is a failure of government planning, evidently confusing the concept of economic “central planning” with “the government makes a plan to do something.”

However, the smarter conservatives who are thinking several moves ahead (e.g. Ross Douthat) understand that this failed rollout is a significant problem for conservatives. Because if all the problems are driven by means-testing, state-level decisions and privatization of social insurance, the fact that the core conservative plan for social insurance is focused like a laser beam on means-testing, block-granting and privatization is a rather large problem. As Ezra Klein notes, “Paul Ryan’s health-care plan — and his Medicare plan — would also require the government to run online insurance marketplaces.” Additionally, the Medicaid expansion is working well where it is being implemented, and the ACA is perhaps even bending the cost curve of Medicare, the two paths forward that conservatives don’t want to take.

I’ll be discussing this more, but the choice between Category A and B above will characterize much of the political debate in the next decade. It’s important we get more sophisticated analysis of what has gone wrong with the ACA rollout to better appreciate how utilizing “the market” can be far more cumbersome and inefficient than the government just doing things itself.

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Mike Konczal is a Fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. His blog, Rortybomb, was named one of the 25 Best Financial Blogs by Time magazine. Follow him on Twitter @rortybomb.