Obama’s Command Economy—Incompetent at Every Level

Obama’s Command Economy—Incompetent at Every Level


Prepare yourselves for a shock –- federal government bureaucracies produce incompetence. These days, the evidence of this is almost impossible to ignore, whether it’s the Department of Veterans Affairs and its wait-list fraud, or the IRS and its epidemic of hard drive failures that was curiously confined to those targeting conservative groups seeking tax-exempt status. One would be hard put to find evidence of government-produced excellence at any level, and most of us would be satisfied to discover a modicum of competence.

In this case, though, the government itself has confirmed its own bureaucratic incompetence. The Government Accountability Office has concluded its investigation into the debacle of HHS’ federal exchange for health insurance, Healthcare.gov, and the overall rollout of Obamacare last October. No one will faint from shock to learn that the GAO’s independent review confirms that management failures and a lack of accountability led to the disastrous rollout of the central marketplace to service the command economy created by the Affordable Care Act.

Related: Obamacare Fraud Control Found Severely Lacking

Perhaps, though, we should be a little surprised. Web portals for purchasing health insurance have been around for years; the insurance companies themselves use them to make individual plan sales in some states. The Center for Medicare and Medicaid Services (CMS), the HHS subsidiary in charge of Healthcare.gov, operates a very similar system for its Medicare Advantage program.

HHS and CMS had a three-and-a-half-year head start on the rollout after the ACA passed Congress in March 2010 to build the exchange, as did those states that wanted to set up their own exchanges. The Obama administration had every opportunity, and certainly plenty of money, to get this done right.

The report’s findings show how it all went wrong. Despite having more than three years of lead time, CMS never developed “a coherent plan” for its contractors. Instead, the contractors involved in the project ended up responding to ad hoc instruction and requests. This alone cost the project “tens of millions of dollars,” according to the GAO, as contractors had to bounce between shifting priorities.

Related: Obamacare OKs Fake Accounts and Fake Promises

This alone should give taxpayers pause. A project should have at its start a well-constructed plan to achieve its particular mission. That’s true on a project of any significant scope, and particularly true when the stakes were as large as they were with Obamacare, which had already suffered from deep public distrust in the federal oversight of health insurance and its mandates.

After taking a political beating over the passage of the ACA (the Obama administration lost the House and some ground in the Senate) one would have presumed that the incentive to ace the launch and build goodwill for the program at the rollout would have pushed noses to the grindstone to get it right. Instead, the GAO’s findings strongly suggest that no one at CMS or HHS understood the necessity of organization, or didn’t care enough about it to plan for success.

Or, for that matter, to follow up to see that it did succeed. Even for the work that CMS did assign to contractors, the agency failed to check whether the contractors actually did the work, and did it according to spec. Granted, the lack of clear instruction may have made quality control a difficult task, but that again reflects on the management rather than the contractors. 

Related: Appeals Court Strikes Down Federal Exchange Subsidies for Obamacare

According to the GAO, CMS rarely bothered to try. Instead, they spent taxpayer dollars on contract work they didn’t bother to check, and then when the rollout failed, they demanded more funding to fix the problems they didn’t bother to find when it mattered.

By the way, the contracts offered were open-ended, according to the GAO, rather than fixed-cost for specific tasks. That meant that no one had an incentive to ensure that the work got accomplished properly – not the contractors, who got paid for whatever whim CMS demanded they follow at any time, and very clearly not the bureaucrats in charge of the project.

Until now, the issue of incompetence focused far more on the scope of Obamacare. Critics charged that the government could not possibly run a command economy in the health-insurance industry in the manner Obamacare promised, as the tailoring of product to individual need would make such top-down control impossible. This week, we saw another example of this in the rising concern over the auto-renewal of Obamacare policies that will take place in the fall for 2015.

The Associated Press reports that the need to recalculate income levels and average policy costs for the purpose of assigning subsidies will leave many taxpayers on the hook for a big tax bite, thanks to overpayments to insurers for their coverage.

Related: Obamacare Insurers Hit High-Cost Patients with High Drug Prices

Auto-renewals of policies were supposed to simplify matters by alleviating the need to re-enroll through the exchanges each year, but it now appears that consumers put themselves at risk either way.  “The subsidy scheme created by Congress to keep premiums affordable has so many moving parts that it's turning out to be difficult for the government to administer,” the AP reported in a line that could have come directly out of F.A. Hayek’s The Road to Serfdom, distilling one of the original conceptual criticisms of the ACA from the beginning.

The GAO report shows a more basic problem with government-run command economies. The massive expansion of bureaucracies needed to handle all of these moving parts, even inadequately, disperses accountability and responsibility so far and wide as to make both evaporate altogether.

We have seen the same happen at the VA, the IRS, and even the State Department in its handling of the Benghazi consulate. There are no other options for diplomacy or tax collection other than a government monopoly, but that’s not true for health insurance to veterans or Americans on the whole. 

The VA scandal and this GAO report shows why top-down control should be limited to those functions that strictly relate to governance – and why we should leave everything else to the private sector with government as a disinterested regulator.

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