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Implementation Hiccups for Obamacare

Tevi Troy

On May 27, Health and Human Services Secretary Kathleen Sebelius called a press conference to declare victory in the implementation of President Obama’s massive health-care plan. She told reporters that “two months in, it’s clear we’re heading in the right direction.” Yet it is far from clear that her statement reflects the reality of what’s going on.

The implementation of the 2,400-page Affordable Care Act is an immensely complicated undertaking. It has a host of deadlines spread over years, with rules for every business and citizen in America, and it creates more than 100 new offices and agencies—all of which will have an impact on whether the new law works or not.

Despite Sebelius’s comments, all has not gone smoothly thus far: Sebelius herself acknowledged that she expects “twists and turns and bumps along the way.” But these initial bumps raise the important question of whether HHS has the capacity to get the implementation process done.

Sebelius evidently shares these concerns. She has repeatedly stressed that HHS is not alone in this endeavor, and that others must play a role, such as “the Departments of Treasury, Labor, and Justice, the Small Business Administration.” At the same time, however, she acknowledged what everyone knows—that HHS, Washington’s largest domestic agency, is taking the lead. As a result, the successes or failures of the implementation effort are on her shoulders. As someone familiar with the implementation of the Medicare Modernization Act of 2003—from both the White House and the HHS perspective—I know that managing implementation demands three key factors: timelines, staffing, and communications. Policy aside—and I was a vocal critic of the Obama bill—the question of whether the bill will work depends on those factors. And so far, there are already significant concerns in each of these necessary areas.

As required by the legislation, Sebelius and her team need to have ready in short order a host of new regulations that will have enormous implications for the insurance industry. One key regulation is the medical-loss-ratio requirement, which says that insurers must spend 80 or 85 percent of their revenues—depending on the type of plan—on medical care. According to the new law, HHS must consult with the National Association of Insurance Commissioners by December 31 on the definitions that will determine the shape of the new requirement. NAIC was gearing up to make that deadline when Sebelius sent a letter in mid-April telling them that HHS expected NAIC’s input by June 1. Unsurprisingly, NAIC told HHS that it wouldn’t be able to meet the early deadline, explaining that in order to make sure that “all views are heard and considered, and everyone has time to review proposals under consideration, the NAIC is using a very transparent, but time consuming, process.” NAIC wisely did not provide a new target date in the letter, although a spokesperson has suggested July 1.

This is only one deadline, of course, but HHS has also missed an April 23 deadline under which the department was required to lay out the new authorities that were granted to the secretary under the law. The need to produce this list was the result of an amendment by Sen. Judd Gregg (R., N.H.) to the health bill, and was a difficult assignment. Instead of meeting the deadline, though, the secretary just relisted the bill’s table of contents, evidently believing that this was sufficient to fulfill the requirement.

In another troubling development, Politico reports that HHS has also missed the new law’s target date for establishing task forces on breast cancer and on health care in Alaska. Again, missing a deadline in and of itself is not disastrous; it happens from time to time in government work. In this case, however, CDC spokeswoman Rhonda Smith admitted to Politico that “right now, we have not made any steps to implement” the act. CDC later amended Smith’s statement to say that some preliminary work had been done, but the initial comments indicate that the agency is not close to hitting their mark. Overall, a recent piece by The Daily Caller’s Jonathan Strong counts four missed deadlines thus far, although not yet on any of the major regulations.

In the area of staffing, HHS is likely to need hundreds of new employees to staff the new Office of Consumer Information and Insurance Oversight, which will be responsible for meeting the private-insurance aspects of the law. Sebelius recently stated that she will be “relying heavily” on current HHS staffers from other parts of the department to work on the implementation. She will have to, since new government hiring is a lengthy and arduous process, and also one fraught with risk—a bad hire is nearly impossible to fire once civil-service protections kick in.

But relying on existing employees has its challenges as well. The staff at the Centers for Medicare and Medicaid Services (CMS), on whom Sebelius is reportedly relying in this project, may be the best people in government to work on it, but the universe of government employees is a narrow one. The need to pick from within this narrow universe to get workers on board more quickly means that HHS is not necessarily hiring the best people for the work in question.

The most difficult of the three areas to manage is communications. While this is not a legal requirement, HHS’s ability to show that it is on top of the process could ease some of the concerns that Americans have with the ambitious new legislation. After Medicare Part D became law under President Bush, HHS Secretary Michael Leavitt went on a bus tour with other senior HHS officials to explain the new benefit and what it meant to seniors. He also worked to make sure that brochures and websites were written in a way that ordinary Americans could understand, and not in bureaucratese. The bus tour and other outreach efforts continued long after the new Part D plans went into effect, to make sure that seniors were signing up for the plans and understood what their options were.

Sebelius is clearly aware of the communications challenge, which is one of the reasons why she held the recent press conference. But it is also possible that HHS has been a little too gung-ho on this front. CMS recently sent out a mailer to Medicare beneficiaries, touting the benefits of the new bill, that appeared to contradict some statements made by the nonpartisan office of the chief actuary at CMS. According to the Washington Examiner, the brochures indicate that “the guaranteed Medicare benefits you currently receive will remain the same.” The CMS actuary, however, warned that upcoming Medicare cuts could reduce providers’ revenues, “possibly jeopardizing access” to care. A second questionable claim in the brochure is in the area of supposed “improvements to Medicare Advantage.” As anyone who followed the bill’s path through Congress knows, President Obama was a frequent critic of Medicare Advantage, and the law provides for $130 billion in cuts to this program.

CMS will have two important reports coming out in the months ahead — the already-delayed Medicare Trustees Report, in June, and October’s Medicare Handbook. Republican lawmakers who objected to the mailer will be on alert to make sure that these two new documents correspond to the chief actuary’s more sober assessments.

Yet each day that passes brings difficult, disruptive deadlines nearer, and it is not clear that HHS has the horsepower to get the job done. One obvious deficiency is the fact that 18 months into the administration, HHS still lacks a confirmed head of CMS and a general counsel, two key actors in the implementation process. While the administration has nominated Dr. Donald Berwick for CMS, it made the pick after the bill passed, guaranteeing that there would be no confirmed CMS administrator at the start of the implementation process.

Even with these two officials in place, it would require tremendous amounts of work to align government bureaucracies with incentives to accountability, flexibility, and success. But it can be done (for good or ill). As noted above, Secretary Leavitt immersed himself in the process of Part D reform, ensuring that all the key areas were on track. He often trekked up to CMS offices in Baltimore on weekends to address new challenges and deadlines—surprising long-time career officials, many of whom had never seen an HHS secretary before, and certainly not on a Saturday.

The Part D implementation, however, was “just” a reform to Medicare—a huge program, but for the most part limited to the universe of seniors. The Obama plan is supposed to overhaul our entire health system, and on a very tight timeframe. Based on what we have seen thus far, it seems that the compressed implementation window is going to lead to missed deadlines and more confusion. A poorly executed implementation could exacerbate whatever damage the bill would have caused on its own.

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