No Hope Left for Obamacare’s Website, Techies Say.

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No Hope Left for Obamacare’s Website, Techies Say

Flickr/DolanH/The Fiscal Times

 

The Fiscal Times

November 13, 2013

Nearly a month and a half into the dismal Obamacare rollout, Center for Medicare and Medicaid Services communications director Julie Bataille told reporters on Tuesday that CMS has begun emailing at least 275,000 people who had gotten “stuck” attempting to create accounts on the glitch-ridden HealthCare.gov, asking them to come back to the site and “try again.”

Bataille refused to say whether all 275,000 people would be able to use the exchange at the same time without crashing the system. Instead, she dodged specifics about the progress programmers have been making on the website’s repair efforts and how CMS would be able to meet its Nov. 30 deadline — the day the Obama administration has promised to have the site up and running “smoothly for the vast majority of users.”

“The system is getting better each week,” Bataille said. She didn’t specify whether the website would be completely fixed and glitch-free, though. Instead, she pointed to other ways consumers could sign up for insurance through the exchanges “whether that is via direct enrollment with insurance companies to meet the pent up consumer demand or … calling the call centers or enrolling in person.”

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The Obama administration’s repeated refusal to provide specifics on when the site would actually be functioning after the end-of-November deadline is not surprising given the wide-ranging technological and operational problems with the site.


It’s even more discouraging since less than 50,000 people have signed up for health insurance through the federal exchange, according to unofficial estimates reported by the Wall Street Journal.

And it doesn’t appear to be getting better.

According to tech experts, the sorry state of the current website does little to inspire confidence that it can be fixed and functional in less than three weeks.

“When I visited HealthCare.gov on October 1, that was the worst piece of software I’ve ever experienced in my life,” said Luke Chung, founder and CEO of the software company FMS. “It had nothing to do with too many users. It couldn’t serve one user.”

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According to Sumit Nijhawan, CEO of Infogix, a data security firm working with private insurers, even if the White House can fix the problems associated with the site, they’re going to find new ones immediately. Nijhawan also warned that the systems that allow CMS and health insurance companies to exchange information are nowhere close to being ready, meaning tech problems could last years.

 

“What we’ve seen so far is the first set of problems that come up,” he said. “Then you have the next set of problems. It’s one set of issues leading into another.”

Nijhawan, whose firm is working to verify information submitted by users, said that they’re receiving volumes of bad information, to which he attributed one of three factors:

  • Human error, meaning the user entered incorrect information or made a mistake using the web interface. However, Nijhawan didn’t blame the user for these mistakes. “It’s not that someone mistakenly puts in wrong information. These guys haven’t bought insurance before and they don’t understand what the terminology is,” he said. “It’s quite possible they enter wrong info because they don’t understand.”
  • Data access errors related to the federal hub. In these cases, the hub provides incorrect information from one of the host of federal agencies it’s pulling from. “There’s a lot of data for the first time flying around across different firewalls. The potential for doing something wrong is really high,” he said.
  • Technical issues related to the construction of the website.

Chung, who is testifying in front of the House Oversight committee today, said these technical issues are the most frustrating.

 

“I have contended all along that this is not that difficult of a project,” he said. “It doesn’t provide health care, it doesn’t even provide insurance. It’s just a form to apply for a subsidy to get health insurance. It’s automating a paper form. It shouldn’t be that hard.”

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“Technically, this is not that difficult,” Chung added. “It shouldn’t cost more than $10 million. And it should be something that can be done in a couple of months.”

According to both Chung and Nijhawan, even if the White House can build a functional website by the end of the month, new problems would appear almost immediately.

“The idea that it would be perfect is never. All systems are never perfect. It’s never perfectly secure or functioning,” Chung said. “If you discovered hundreds of bugs on the initial launch, there are hundreds more or multiples of that that haven’t been discovered yet.”

Nijhawan also touched on a problem that has yet to be widely addressed. He said the exchanges that are expected to allow insurance companies to share information with the federal government are not close to being ready. Without this information, CMS would not know who enrolled in the plans.

“As soon as these enrollment issues get ironed out either by December or March, you have other issues relating to the back end, where there’s a lot of reconciliation that needs to be done between health care and CMS,” Nijhawan said.

When asked why these exchanges weren’t completed before the rollout, he said, “They were trying to desperately get ready for the rollout.”

IN OTHER NEWS:

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Every one of us knows America needs revival.  But what would that look like?  America has changed so much that it is no longer possible to give the usual answers to that question.  Here is a conference that combines 4 voices that will give a face, a definition and substance to revival in our nation.

The Conference is called R.I.O.T. an acronym for REVIVAL IN OUR TIME.  It begins this Thursday night November 14th at 7 PM appropriately at the American Revival Center in Martinez,  California.

Who is this conference for?  It is for every any pastor, evangelist, leader or concerned believer who is contending for a moral awakening in the United States.

Why should I attend? You should attend because you will not find a more deliberate attempt to understand and release revival anywhere.  You should attend because the very atmosphere of the RIOT itself will burn out doubt fear and confusion about revival.  You should attend because of the voices that are coming together to speak at the RIOT.

JUST LOOK AT THE SPEAKERS:

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Evangelist Mario Murillo: will host the conference and minister in every session.  Mario has seen true revivals in the most unlikely places in America.  His book Reaching Critical Mass  has been required reading in over 50 schools, colleges and universities including the Bethel School of Supernatural Ministry.

Richard Summerlin Thursday night November 14th at 7PM and Friday November 15th at Noon.

Not far from the scene where Trayvon Martin was killed God is growing a multiracial miracle in an airplane hangar. Richard Summerlin is building the next generation of revival congregations in America.  Thousands have been swept up into the Kingdom of Christ

Richard was a bounty hunter who went after dangerous felons and then became an expert alligator wrestler until he decided to blend his skills and become a pastor.  God has graced Richard with a wisdom and leadership mantle way beyond his young age.  There is no doubt that his preaching and miracle ministry will be an explosive encounter for leaders and all believers.

Sean Smith Friday Night November 15th 7PM

Sean Smith was just a boy when his father was murdered in inner city Oakland California.  Out of the ashes of unimaginable despair and pain God raised up a unique voice to this generation. It began when heaven deposited fire in his soul while he was a student at the University of the Pacific.  This fire turned his pain into the fuel for excellence. Just two years after his total transformation through Christ at the University of the Pacific he led a student movement.

Then the Holy Spirit promoted Sean Smith to full time crusade ministry. He became a global voice and a supernatural gift that devastates the powers of darkness.  He has written several books including the groundbreaking volume I Am Your Sign.

On Friday night at R.I.O.T Sean Smith will bring a word from the Lord that is best described by his mission statement: CARE: Captivate for Christ the hearts of a generation; Activate the army of God to fulfill its destiny; Reach out to and reap lost souls; and Equip the body of Christ to meet the challenge of the Great Commission.

Winkie Pratney Saturday November 16th at Noon and again at 6PM.

After more than three million miles of global travel and sometimes speaking to more than half-a-million annually, Winkie has wide experience in motivating leaders, ministers, educators and young people. Winkie is a mavin, a researcher and public communicator with ability to take existing ideas, break them down to simpler forms and make them practical and freely available to others.

Winkie is considered the greatest living authority on revival. A featured speaker at major conferences, conventions, festivals and other gatherings, his “scholarship on fire” approach has impacted multitudes around the globe, and resulted in the creation or formation of new works to effectively reach, encourage and train young people.

There is no charge for the conference.  Childcare is provided in each session.  There is no doubt that this conference will take revival from the theoretical and the mystical and make it more real than you ever imagined.  See you at the RIOT!

RIOT INSERT FOR BLOG

Has a man ever delivered a baby?’

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Here is a report of how it is going so far at the Sebelius hearing

Ellmers: ‘…has a man ever delivered a baby?’

Sebelius had a sharp exchange with Rep. Renee Ellmers (R-N.C.), who asked if it was true that under the Affordable Care Act, men would have to buy maternity coverage?

“This is why premiums are going up, because we are forcing people to buy coverage they will never need,” Ellmers said.

Sebelius responded that insurance policies cover many things people may never need, and that many of these men may need such coverage for their spouses.

“To your knowledge, has a man ever delivered a baby?” Ellmers asked before the chairman cut her off because she had run out of time.

 

Hearing may continue for a while

In an indication that the hearing may go on for a while longer, Chairman Fred Upton (R-Mich.) told Sebelius that he was going to try to get her out of there by 12:30 p.m. Chuckles arose from the room.

“Is that a joke?” Sebelius said.

Sandhya Somashekhar
12:20 PM

Gardner to Sebelius: ‘Why aren’t you losing your insurance?’

Rep. Cory Gardner (R-Colo.) told Sebelius that he and his family buy their health insurance on the private market, and like other people in his boat, got a notice saying his plan was being discontinued this year. He said he chose to reject his congressional insurance to be more like people in his district.

“Why aren’t you losing your insurance?” he demanded of Sebelius. “Why won’t you go into this exchange?”

Sebelius responded that she is not eligible, because people who get affordable coverage through their employer may not apply through the marketplace.

“I would urge you to be like the American people,” he said, before asking for a waiver from the health-care law for his Colorado district.

Gardner also referenced this ad from Colorado.

Sandhya Somashekhar
12:14 PM

We’re off to see the wizard…

Several members of the Energy and Commerce Committee compared the launch of Obamacare to the classic movie “The Wizard of Oz.”

“There is a famous movie called the ‘Wizard of Oz,’ and in the ‘Wizard of Oz’ there is a great line,” said Rep. Joe Barton, (R-Tex.). “Dorothy at some point in the movie turns to her little dog Toto and says, ‘Toto, we’re not in Kansas anymore.’”

“Well, Madam Secretary, while you’re from Kansas, we’re not in Kansas anymore. Some might say that we are actually in the ‘Wizard of Oz’ land given the parallel universes we appear to be habitating.”

Sebelius did not seem amused by the Kansas reference.

Rep. Mike Pompeo (R-Kansas), Rep. Frank Pallone (D-N.J.) and  Rep.  Greg Harper (R-Miss.) also made references to the “Wizard of Oz.”

Pompeo said that when the characters in the “Wizard” got to the end of the yellow brick road, “at the end of the day, and they pulled back the curtain,” what they found wasn’t any different than something they already had.

Vincent Bzdek
12:06 PM

Sebelius: Obama not responsible for botched Obamacare rollout

(AP Photo/ Evan Vucci)

Secretary of Health and Human Services Kathleen Sebelius said Wednesday that President Obama is not responsible for the botched rollout of his signature health care law.

“No, sir,” Sebelius said when asked directly whether Obama is responsible at a House hearing.

Instead, Sebelius pointed to the department she leads, HHS.

“We are responsible for the rollout,” she said.

Noonan: ObamaCare Takes On Water.

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ObamaCare Takes On Water.

By Peggy Noonan

We should not lose The Headline in the day-to-day headlines. This is big history, not small. The ObamaCare rollout is a disaster for the White House, not a problem or a challenge or an embarrassment, not a gaffe or a bad few weeks. It is a political disaster, and the only question is whether it is partially recoverable, meaning the system can be made to work in a generally satisfactory way in the next few weeks. But—it has to be repeated—they had 3½ years after passage of the Affordable Care Act to make the program into something the American people could register for and feel they were benefiting from. Three and a half years! They had a long-declared start date: It would all go live Oct. 1, 2013, and everyone in the government, every contractor and consultant, knew it. The president put the meaning of his presidency into the program—it informally carries his name, it is his brand. It was unveiled with great fanfare, and it didn’t work. For almost anybody. Crashed systems, frozen screens, phone registration that prompted you back to the site that sent you to the 800 number, like a high-tech Möbius strip.

All this from the world’s greatest, most technologically sophisticated nation, the one that invented the computer and the Internet. And from a government that is able to demand and channel a great deal of the people’s wealth.

So you’d think it would sort of work. And it didn’t. Which is a disaster.

Even though it’s huge, and those who are reporting the story every day are, by and large, seasoned and have seen a few things, no one seems to know how it will end. Because it’s new territory. Does anyone believe the whole technological side can be fixed quickly? No. The president may eventually accept a brief delay in implementation—it is almost unbelievable that he will not—but does anyone think that the economics of the ACA, the content as set out and expressed on the sites, will flow smoothly, coherently, and fully satisfy the objectives of expanding health-insurance coverage while lowering its cost? You might believe that, but early reports of sticker shock, high deductibles and cancelled coverage are not promising. Does anyone think the president will back off and delay the program for enough time not only to get the technological side going but seriously improve the economics? No. So we’re not only in the middle of a political disaster, we’re in the middle of a mystery. What happens if this whole thing continues not to work? What do we do then?

It hardly matters if anyone is fired. That’s the fifth paragraph in the Wikipedia history, or the 10th. Yes, a firing would be good democratic form, and it would acknowledge the idea of accountability—someone or some persons failed on a historic level and were removed. It would take some heat off the White House—”Look, we’re doing something!”—so it’s surprising they haven’t done it and odd the Republicans are clamoring for it. But who would want to be the new HHS secretary? Who would take that job?

 

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Martin Kozlowski

It was Bill Daley—accomplished political player, former commerce secretary and, most killingly, former chief of staff of President Obama, who Thursday, on “CBS This Morning,” admitted the scale of the problem. Asked whether Kathleen Sebelius should be fired, he said: “To me that’s kind of like firing Captain Smith on the Titanic after it hit the iceberg.”

The Titanic. Some will see his comments as disloyal. Actually they were candid and realistic. Although in fairness, the Titanic at least had three good days, and Edward Smith chose to go down with the ship.

He didn’t deny the waters were icy; he failed to slow his ship, failed to show heightened concern. Mrs. Sebelius did not show overwhelming confidence in the days before the debut—there was no “God himself couldn’t sink this program.” She repeated her lines in a way that seemed almost furtive, appearing not confident but confused, and almost guiltily stubborn. Her message was almost always the same: There are no icebergs ahead.

Norman Ornstein in National Journal this week reminds us of Democratic Sen. Max Baucus’s iceberg warning—actually “train wreck”—at a hearing six months ago, in April. He warned implementation of ObamaCare could be a disaster. He told Mrs. Sebelius: “I understand you’ve hired a contractor. I’m just worried that that’s going to be money down the drain because contractors like to make money more than they like to do anything else. That’s their job.” A lot of agencies are involved, he said, people are going to get confused, more simplicity is needed.

He was right. I happened to reread his warning while the House Energy and Commerce Committee questioned the four major contractors on the ObamaCare sites. The most pertinent query came from Rep. Marsha Blackburn, who asked the contractors to put on paper, and under oath, exactly how much money they had made from the federal government so far, and exactly how much they stand to make now, as they fix the sites, and in the future.

There are more questions on the failure to launch. Did Mrs. Sebelius and her top staffers know that the system was not ready and likely to fail? If they knew, did they not tell the White House? If they didn’t know, how did it happen that they didn’t? If the White House knew of the likelihood of a coming failure, why did they go full steam ahead? And if they didn’t know, why?

Was there some degree of fabulism, or magical thinking, or reliance on blind luck within the White House and the greater administration? Many important people in the administration, and those contracting with it from the outside, would have had to ignore various signs of a coming failure. Did some of them know or have reason to know problems were both present and coming, and mislead or fail to inform their peers or superiors?

And there is the enduring mystery of why the president, who in his career has attempted to persuade the American people to have greater faith in and reliance on the federal government’s ability to help, continues to go forward with an astounding lack of interest in the reputation of government.

He talks but he doesn’t implement, never makes it work. He allows the IRS under his watch to be humiliated by scandal, waste, ill judgements prompted by ideological assumptions. He allows his signature program, the one that will make his name in the history books, to debut in failure. In response he says bland, rounded words that leave you wondering what just got said.

We’re all reading of Jack Kennedy. He stayed up nights with self-recrimination after failure. “How could I have been so stupid?” he asked about the Bay of Pigs. A foreseeable mistake and he’d blown it, listened to the wrong people, made the wrong judgments. That man suffered over his missteps. He worried about his reputation, and the reputation of his government, and of America.

It is disorienting to not see this in a president. It is another thing about this story that feels not only historic, but historically strange.

OBAMA WILL BE FORCED TO DELAY OBAMACARE.

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First the news from NBC.

Brian Williams opened NBC Nightly News Wednesday evening with the breaking news that the Obama Administration is planning to move the deadline for individuals to sign up for health care as part of the Affordable Care Act up to six weeks due to ongoing problems with the HealthCare.govwebsite.

NBC News reporter Tom Costello delivered the details to Williams. “The White House tells NBC News it plans to move the deadline for individuals to be required to buy health insurance by as much as six weeks,” Costello said. “As the law stands now, to avoid a tax penalty the uninsured need to start the process by February 15th. With this change the administration is trying to allow people to start the enrollment process by March 31st to avoid any financial penalty.”

Costello added that the work to fix the website problems is a “top priority” for the White House. The news comes one day before congressional hearings into what went wrong with the website are set to begin.

According to NBC, the lead federal contractor CGI “will testify that the website passed eight technical reviews prior to going live on October 1st, but also that a late government decision to require customers to register their personal information before they could check insurance prices contributed to the glitches.”

Mario’s note:NBC is only telling you a half truth. 

Democratic Senators are jumping ship because it is now certain that Obamacare will sink their reelection.   They are going to join Marco Rubio who is introducing a bill Thursday to delay all of Obamacare indefinitely.   Obama will not be able to stop this nor will Obama risk vetoing a totally bipartisan bill because it will cost him a massive loss of support from his own party.

Democrats know that the public is not thinking about Ted Cruz, The Tea Party or Conservatives.  Millions have had their health insurance cancelled, everyone will see their insurance rates jump and the website for Obamacare cost 620 million dollars and the site was only able to sign up 51,000 people in 7 days!

Consumer Reports: ‘Stay Away From HealthCare.gov’.

Consumer Reports: ‘Stay Away From HealthCare.gov’

By Alec Torres   October 21, 2013 9:56 AM

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Consumer Reports, which publishes reviews of consumer products and services,advised its readers to avoid the federal health-care exchange “for at least another month if you can.” “Hopefully that will be long enough for its software vendors to clean up the mess they’ve made,” the magazine said, having tested the site themselves over the course of the past three weeks.

Noting that only 271,000 of the 9.47 million people who tried signing up in the first week managed to create an account, Consumer Reports then provided a few tips to those attempting to slog through the application process. From attempting successive logins because “error messages . . . may not always match reality” to checking one’s inbox frequently because missing an e-mail a user will be timed out of the site and forced to start from square one, none of the suggestions guaranteed success.

The magazine has also released a string of scathing reviews. On October 1, the day the Obamacare exchanges went online, the magazine told people to be patient: “Don’t worry if you can’t sign up today or even within the next couple of weeks.” A week into enrollment, they urged again to “wait a couple weeks and hope that the site irons out its many problems” because the HealthCare.gov is “barely operational.”

As the editors continued to review the website over the next few days, they only had one positive statement: “On the plus side,” they noted, “consumers coming to HealthCare.gov are no longer stopped cold by an error message or a screen saying they’ve been put in a waiting line.”

Now three weeks into the exchanges, having offered reviews and advice, Consumer Reports said that “if all [these suggestions] are too much to absorb, follow our previous advice: Stay away from Healthcare.gov,” at least for the time being.

 

A Bad Law gets worse: Obamacare woes widen as insurers get wrong data.

Obamacare woes widen as insurers get wrong data.

By Christopher Weaver and Louise Radnofsky

Insurers say the federal health-care marketplace is generating flawed data that is straining their ability to handle even the trickle of enrollees who have gotten through so far, in a sign that technological problems extend further than the website traffic and software issues already identified.

 


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Emerging errors include duplicate enrollments, spouses reported as children, missing data fields and suspect eligibility determinations, say executives at more than a dozen health plans. Blue Cross & Blue Shield of Nebraska said it had to hire temporary workers to contact new customers directly to resolve inaccuracies in submissions. Medical Mutual of Ohio said one customer had successfully signed up for three of its plans.

The flaws could do lasting damage to the law if customers are deterred from signing up or mistakenly believe they have obtained coverage.

“The longer this takes to resolve . . . the harder it will be to get people to [come back and] sign up,” said Aetna Inc. AET -2.87%  Chief Executive Mark Bertolini. “It’s not off to a great start,” he said, though he believes the marketplaces are “here to stay.”

 

 Timothy W. Martin and Joel Schectman contributed to this report.

No, Obamacare Is Not A Good Deal For Young People In The Long Run, Not Even Close

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No, Obamacare Is Not A Good Deal For Young People In The Long Run, Not Even Close

Chris ConoverChris Conover, Contributor
A Picture of an Staples, Inc. easy buttonA Picture of an Staples, Inc. easy button (Photo credit: Wikipedia)

Progressives are becoming increasingly concerned at the prospect of millions of uninsured young people deciding to push the easy button next year by simply paying a very small fine[1]rather than obtain health coverage. Consequently, they have turned to a new argument to get those under 30 to act against their self interest by signing up for the Exchanges. Now we are being told that Obamacare will be a good deal for young people in the long run since whatever short-term losses they incur in the form of higher premiums will be more than made up later when they are older and get to pay lower premiums than they would in today’s market.

But those making these arguments haven’t offered any analysis to back up their claims. The conceptual point evidently is supposed to be intuitively obvious. As Ezra Klein puts it:

Young people grow old. Healthy people get sick. Rich people become poor. The people overpaying to keep costs low today are the people underpaying 10 or 20 years from now.

As a health policy skeptic, I know that lots of intuitive ideas—such as thatprevention saves money—turn out to be false upon closer examination. So when I did some actual analysis of this latest idea, it did not surprise me to learn that this claim is dead wrong.  Once the time value of money is taken into account, the average young person will be worse off under Obamacare even if they live long enough to be a near-elderly person who pays premiums that are well below actuarially fair rates.

In the short run, millions of young will be better off without Obamacare

recent study by the National Center for Public Policy Research shows that:

  • About 3.7 million of those ages 18-34 will be at least $500 better off if they forgo insurance and pay the penalty.
  • More than 3 million will be $1,000 better off if they go the same route.

Consequently, many more will opt to pay the extremely modest tax rather than fork over many thousands of dollars to purchase coverage that became substantially more expensive for young people thanks to the misguided pricing rules imposed by Obamacare. The risk that the law will fail in an “adverse selection death spiral” thus has gotten much larger. This claim is not in dispute. Instead, progressives argue it is too narrow. If only young people would consider the long run—when they too are old—they would discover that enrolling in Obamacare is in their self-interest.

But in the long run, the story is the same

It is relatively straightforward to test this claim empirically. My purpose is not to compare today’s premiums with those that will exist under Obamacare, since at least part of the expected increase in premiums is related to filling in purported gaps in coverage, such as eliminating lifetime limits and providing preventive health services without any cost-sharing. I don’t want to cloud the discussion with claims that these added benefits are somehow “worth” the higher premiums. Instead, I want to focus on the claim that the “pay me now, we’ll pay you later” adjusted community rating structure under Obamacare actually is a good deal when considered on a lifetime basis.

My strong preference for health reform—shared by highly reputable health economists such as Mark Pauly and Patricia Danzon at Wharton School, several others at Harvard (Amitabh Chandra, Michael E. Chernew, Anupam B. Jena Stanford (Jay Bhattacharya), University of Chicago (Anup Malani, Tomas J. Philipson) and University of Southern California (Dana Goldman, Darius Lakdawalla)[3]—is that health insurers be allowed to price risk. Community rating can be shown (both theoretically and empirically) to be both inefficient and unfair. It is inefficient because it encourages low risk individuals (think young people) to remain uninsured rather than over-pay for health insurance. It is unfair because it ends up transferring resources from healthy poor people to unhealthy wealthy people. But this unfairness aspect might be undercut considerably if it turned out that from a lifetime perspective, young people who overpaid when young were more than compensated by their future savings from community rating once they got old.

So I first created a set of experience-rated premiums for every single year of age between 18-64).[2] I then calculated the present value of these premiums over a lifetime—which in this case meant ages 18-64 since even under Obamacare, people are assumed to enroll in Medicare at age 65. I examined 4 different groups of young adults (age 18, 22, 25, and 30) using different discount rates. I then created a parallel set of premiums that were constrained to meet the Obamacare modified community rating rules, namely, that the premiums for the oldest plan members can be no more than 3 times as high as the premiums for the youngest members. If the present value of the Obamacare premiums is lower than the comparable figure for experience-rated premiums, then one could reasonably say that the intuition of Obamacare enthusiasts is correct: young people are better off under Obamacare since they ultimately will save enough on their premiums in old age to offset whatever “excess” premiums they are forced to pay in their young adult years. But as you can plainly see, for most age categories and most discount rates, the reverse is true. The lifetime cost of Obamacare is higher than under market-driven premium rates.

The only instance in which Obamacare is consistently a better deal is using a 0% discount rate. But a 0% discount rate implies that young people are indifferent about getting $1,000 today or $1,000 50 years from now. I challenge readers to find just one person who, when confronted with such a choice, would choose to take the payment 50 years from now instead of today. Most people—young or old—are not that patient. They would far prefer to have money today than to receive the comparable amount far in the future. Which is why banks, corporations and the U.S. government have to pay interest to people in order to induce them to put their money into bonds rather than spend it. Interest rates simply represent the time value of money. In a present value calculation, the discount rate is what is used to a future dollar into an amount comparable in value to today’s dollars.

Individuals Generally Have a High Rate of Time Preference (They Are Impatient). Many economists think U.S. society has a long-run discount rate (i.e., social rate of time preference) of 3% since that figure is comparable to the inflation-adjusted rate of return on long-term U.S. Treasury bills. But individual rates of time preference typically are much higher than societal rates, with double-digit rates not being at all uncommon in the vast literature that has sought to estimate their size.[4] This makes sense because, for example, the U.S. government presumably has a lifespan longer than that of individuals. If someone is uncertain about living long enough to get their money back in 40 years, they will generally expect to be paid a higher interest rate than if survival were a certainty. Thus, from the standpoint of the average young adult adversely affected by Obamacare, I would argue that the figures using a 10% discount rate come much closer to the truth than do the figures using a 3% rate. And you can see from the chart that using that 10% rate, Obamacare is not a good lifetime deal even for people as old as 30 [and if I had used a much higher discount rate of say, 17%, Obamacare would turn out to be an even worse deal for young people]. For 18 year olds, Obamacare essentially is imposing a tax of 18.3% on the premiums they would otherwise pay under the more market-oriented reforms favored by many conservatives and Republicans.

These estimates are very conservative

I cannot emphasize enough how conservative my estimates are. I have ONLY accounted for for the “pure” effects of modified community rating–i.e., the fact that young people on average pay higher premiums while older people pay lower premiums. In calculating the increase in premiums required for young people to make this transfer work (i.e., for the number of extra premium dollars needed among young people as a group to exactly balance the amount of premium reductions given to older people) I have taken into account the first order impacts on how many people will demand health insurance (i.e., fewer young people and more older people will sign up for coverage under modified community rating than if insurers been allowed to fully price risk the way they do in auto, life and homeowners insurance). This meant I had to adjust the rates for the young even higher in order to provide enough additional premium reductions to finance the additional number of older people in the pool. However, I did NOT account for adverse selection at all: that is, I assumed that average spending by year of age among pool members remained the same. In reality, it would be the healthy young who would be most likely to drop out as premiums for that age group rose and the unhealthy old who would be most likely to join as premiums for that age group fell.

In short, I have bent over backwards to prove the claim of progressives andstill found their hypothesis wanting. If I were an actuary capable of incorporating the adverse selection effects, the increase in lifetime premiums for the average young person would be considerably higher than shown in my chart.  This is why the various estimates of rate shock estimated by Avik Roy (64-146% in California, for example) and others provide a much more accurate depiction of the premium increase for 18 year olds, for example, than the 35.4% figure I derived from my more limited calculations.[5]

What’s so bad about modified community rating?

Modified community rating essentially is an excise tax on people who buy health insurance. Those who choose to go bare avoid the tax entirely, but for those who do buy coverage, the tax is highly discriminatory, imposing the highest burdens on those who are young. Can anyone name another tax that works this way? Imagine a state that tried to impose a sales tax in this fashion, where everyone would have to show an ID card and the amount of tax charged to 18 year olds would be 18% while those age 30 would only have to pay 5% and seniors would get a rebate!)[5]  How kooky is that?  If we as a society have decided that some group needs help in paying for their health insurance, shouldn’t we make those subsidies visible for all to see instead of burying them in someone’s health insurance bill? Moreover, shouldn’t we be relying on taxes that are visible and fairly distributed rather than using “taxation by regulation” of health insurance? If older people need subsidies, why should young people (who are far from being the wealthiest in society) be disproportionately burdened with bankrolling what should be a social responsibility?

People rationalize modified community rating on grounds that what goes around comes around. “Don’t worry kid. Someday you too will be old enough to enjoy premiums subsidized by youngsters your age. It all works out in the wash.”  But it is now plainly evident that for typical young adults who have very reasonable time preferences, it does not all work out in the wash after all.Obamacare is a bad deal, plain and simple.

Instead of spending millions of hundreds of millions of taxpayer dollars to bankroll vacuous appeals (“make you feel like a winner.“ Seriously?) and trot out sports stars and Hollywood celebrities to fast-talk young people into signing up for Obamacare, how about instead using that money to educate them about the truth of how the health law treats them as a cash cow for older folks? Sadly, this administration can’t handle the truth since they know that once  young people wake up and smell the coffee, it’s game over for Obamacare. Far better to stay the course with a mad scramble to put the law into place even though a) the bureaucrats responsible for implementing it arebegging for more time; and b) haste will greatly inflate the risks of privacy violations on a wide scale.

At the risk of sounding like a broken record, is this really the best we can do? Perhaps we owe it to young adults to delay the entire law for a year so we can straighten out some of these problems. At minimum, it would give them an extra year to save up for the rate shock they will face on Day One of the exchanges.  If young people knew as much about Obamacare’s adverse impact on them as they know about how to work their cell phones, this law would be in deep doo-doo. Sadly, this is the very demographic that is most ignorantabout the freight train headed their way. Until and unless these same young adults get educated on the facts quickly and start urging their members of Congress for a one year delay, that train may be headed for a wreck.