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Sunday, November 17, 2013

The limits of the reach of the law

Let us go back to the Spring of 2010 after the ACA had passed Congress and had become the law of the land the previous fall. As referenced in a previous blog linking to a particular David Cutler letter (Cutler letter), David Cutler wrote to Larry Summers and expressed the following concerns:
I am writing to relay my concern about the way the Administration is implementing the new health reform legislation. I am concerned that the personnel and processes you have in  place are not up to the task, and that health reform will be unsuccessful as a result...........My general view is that the early implementation efforts are far short of what it will take to implement reform successfully. For health reform to be successful, the relevant people need a vision about health system transformation and the managerial ability to carry out that vision. The President has sketched out such a vision. However,I do not believe the relevant members of the Administration understand the President’s vision or have the capability to carry it out.
The events since October 1 of this year provide evidence that David Cutler was spot on in his assessment. Furthermore, the most recent responses of the Obama administration underscore a crucial point. It appears to me that there is a mindset which views the public deliverables as the law, and that the product of political process, that being new law conceived, is sufficient to improve the lives of citizens. The events of the recent past should serve to dissuade anyone of that notion.

Even the most recent response to the Healthcare.gov website meltdown is illustrative of the almost delusional faith in the power of the state. Delivery of health care services involves a complex web of people, products, and services. The availability of insurance products is only one element of this matrix. Having a well functioning insurance market is an necessary but not sufficient element for health care delivery to thrive. In this limited but essential domain, there is remarkable complexity and the systems which have developed over many years are the product of evolving and adapting complex systems. For these entities to survive and thrive, they require robust IT systems, actuarial data, rules required to adjudicate claims, people management systems, marketing systems, and management know how that allow them to plan, budget, and respond to a changing and challenging business environment.

In any event, either no one understands or wants to understand that when  passing a law does not equate with making things happen. Congress can pass a law mandating that everyone should be happy but even the most delusional Pol understands that this is simply not possible. However, many legitimate desires to improve the lot of people are pushed into the political arena with the hope that near Utopian aspirations can be realized by passing a law. It is a simple and seductive concept which has ended up transferring money and power to various state capitals and most importantly Washington, DC, the latter now being the richest city in the country.

The business of Washington is government and the product for the most part is regulation and law. From the Washington insider and activist perspective, the deliverable is the law itself, not the implementation. Which again brings us back to David Cutler's prescient letter where he goes on to warn specifically:
Above the operational level, the process is also broken. The overall head of implementation inside HHS, Jeanne Lambrew, is known for her knowledge of Congress, her commitment to the poor, and her mistrust of insurance companies. She is not known for operational ability, knowledge of delivery systems, or facilitating widespread change. Thus, it is not surprising that delivery system reform, provider outreach, and exchange administration are receiving little attention. 
Not that no one else saw this happening. Scott Gottlieb wrote in Forbes in March of this year in his article titles "Who's in charge of implementing  Obamacare and why it matters (Forbes link):
I wrote more almost three years ago, in the New York Post, that many of the Obama Administration’s economic centrists were leaving the White House. Left behind were some of the most progressive staffers. They would be the ones implementing the law.
That transition now seems to be complete. The few remaining centrists thinkers inside the White House, mostly scattered across the National Economic Council and Treasury, are gone – or largely marginalized when it comes to issues around implementation. The people drafting and reviewing the regulations are mostly centered in the White House and its Domestic Policy Council — and they mostly work for Jeanne Lambrew.


It seems that many people recognized that placing someone with operational savvy in charge of ACA deployment was not a priority. Not surprising for a President who had almost no operational experience prior to ascending to the Presidency.  He then appeared to condone the purging of HHS of those with operational expertise, perhaps to maintain philosophical purity and Federal control of the products to be marketed on the exchanges.

Now that it is becoming increasingly clear that the foundation upon which the health insurance exchanges were built cannot be supported given the probable number of enrollees, the response of both Congress and the Obama administration is to rule by decree. In both case each entity is looking to change the rules precipitously without regard to the actual timetables which fall under the category of "the possible". In the case of the White house, they also appear to ignore whether their actions fall under the category of "the legal". That has not stopped them in the past, however. Why bother changing the law when one can rule by Executive decree.

I am reminded of recent events happening in Venezuela where President Maduro has decided that prices for consumer goods are too high. His response has been to decree that he will set profit limits in all sectors of the economy. Toilet paper is in short supply. They have had to deploy troops to control crowds at consumer electronics retailer Daka. Sounds like a great idea to make greed disappear by decree. Why bother with markets or rule of law or needing to cooperate with messy institutions such as elected governing bodies. They are just obstructive when good leaders are trying to get something done to help the people like getting them free stuff.

In the same sense, why bother with trying to understand how insurance markets actually work when you think you can manipulate them like a puppeteer controlling a marionette. Push for a law which is fatally flawed? No problem! Mandate others fix it by decree and them blame them for any ensuing disaster. Just ignore the inconvenient reality of state insurance commissioners, actuaries, and the planning required to make sure entities charged with paying health care bills are fiscally solvent. Such petty and boring operational details are not the stuff of genius. That should be someone else's job and it is not material which gets anyone elected for higher office.

However, it just the heart of what makes the world work. We should not take this for granted.

1 comment:

  1. It makes one wonder what Dr. Cutler, an esteemed economist at Harvard, was thinking when he became the president's point man on selling ObamaCare, knowing that the man he was working for at the time had no substantive executive experience at all. How does one delude themselves that an individual who has never had responsibility for implementing, directing or delegating the tasks necessary to manage anything could do so in an enterprise to manage one-sixth of the economy.

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