Asymmetrical Information - Megan McArdle

02.01.13

Administration Extends Obamacare Deadline Yet Again

Are the exchanges actually going to be ready to go on January 1st of next year?

Under the new healthcare law, the Secretary of Health and Human Services is supposed to certify whether states are prepared to run an independent exchange by January 1st, 2013.  Problem: more than half the states in the country didn't even apply to run their own exchanged.  So HHS moved the deadline from November 16th of last year to December 14th.  And then again, when states still declined to apply.  Now states have until February 15th to decide whether they want to run an exchange, or have the federal government step in and do it for them.  

This cannot possibly be a good sign for HHS.  For starters, even with an "out of the box" implementation, it takes time to get a large software project up and running from the minute the money men say "go".  With a hard deadline of January 1st, 2014 when everyone is supposed to be able to buy insurance on the exchanges, we're already well past the period where I would have expected to start the main build phase of a big job involving sensitive income and health data for millions of people.  Some companies I've worked with wouldn't roll out a new desktop package on this kind of schedule.

Of course, it's been a long time since I was in the IT consulting business, and perhaps build cycles have gotten a lot faster.  HHS insists that they are going to have all 50 exchanges up on time, and why would they make such a bold claim if it wasn't true?  Announcing that they're shifting back the exchange deadline now would be a minor news item about bureaucratic priorities; delaying it in October will be a front page bombshell.  

But they can't delay forever.  At some point--some point very soon, I think--it will simply no longer be possible to get a state-based federal exchange up and running in the required time.  It's not clear to me why HHS is running the risk of a major, catastrophically embarassing delay, rather than simply acknowledging that they're probably going to be running exchanges in at least half the states, and moving forward accordingly.  So far I have three possible theories, all of them unsatisfactory:

1.  HHS has a crackerjack squad of IT Ninjas who can parachute into a state on March 1st and deliver a fully working data application, securely integrated with local agencies, insurance companies, and the IRS, less than nine months later.  

2.  It will be less complicated than I think to build this system, or it does not require nearly as much procurement or integration with local agencies and companies, so that functionally you can just stamp out 25 or 30 identical copies of the exchange in very little time.

3.  HHS has wildly underestimated what is involved and is going to badly slip its deadline in the desperate hope of coaxing a few more states on board, most of whom would anyway badly slip the deadline.  

As I say, I don't find any of these entirely convincing.  But one of them must be true.