Posted by: AtlasMD

May 15, 2014

Obamacare Exchanges Burn Taxpayer Dollars By The Truckload

Remember Cash for Clunkers? That program gave car buyers rebates of up to $4,500 if they traded in less fuel-efficient vehicles for new vehicles with better gas mileage.

But because a lot of the vehicles eligible for the rebate would have sold anyway, taxpayers ended up paying about $24,000 per additional car sale that these incentives produced.

And it looks like Obamacare is in a fierce race to beat Cash for Clunkers to become the poster child for mismanagement of federal taxpayer resources:

  • In the first open enrollment period, the State of Hawaii spent nearly $25,000 in federal funds per enrollee who signed up for coverage on its Obamacare Exchange.
  • For every dollar in premiums for Exchange-provided coverage, federal taxpayers paid 94 cents in various subsidies to either enroll people or encourage them to purchase coverage on the Exchange.
  • Premiums on the Exchanges would have more than doubled in 10 states had the federal amounts used to set up the Exchanges been incorporated into premiums rather than paid separately by taxpayers.

So what’s the jury have to say?

Jay Angoff, a former Obama administration official who played an important role in Obamacare’s rollout in its early years, drew 3 conclusions from his compilation of federal administrative costs:

  • Because the federal Exchange costs so much less per-enrollee than the state Exchanges, the more states in which the federal Exchange operates, the more money taxpayers save.
  • For the same reason, state officials refusing to establish their own Exchanges appear to have unwittingly contributed to the efficient implementation of the Exchange in their states.
  • Much of the money going to state-run Exchanges wasn’t well-spent. HHS may want to focus less on making additional Exchange grants to states, instead continuing to upgrade the federal Exchange — these will continue to operate in the large majority of states — because they provide substantially greater value to taxpayers than do the state-run Exchanges.

The implication of the first bullet point is that the most efficient/least costly approach would be a single national Exchange run by Uncle Sam.

Wait, what? If Ayn Rand heard that there would be more than hell to pay.

Yes, there may be some small economies of scale in Exchange operations (just as there are among health insurers). But that doesn’t mean a monopoly Exchange operator is the most efficient or least costly approach. It’s the same reason it wouldn’t make sense to have a single monopoly insurance provider.

Competition matters and state-level innovation works best when we let let the laboratories of democracy learn from one another (as Maryland is learning from Connecticut’s much more successful Exchange).

Read the complete post on Forbes Apothecary