Are We Splintering the U.S. Healthcare System?

The fear that a two-tier healthcare exchange system would morph out of the disorganization wrought by Obamacare’s rollout is taking shape.

As Dustin Volz puts it, “The federally run exchanges are at a near-standstill thanks to a website so buggy that Jon Stewart christened it a “dot-turd,” while a handful of state exchanges are beating their enrollment goals handily. And barring a rapid turnaround in the federal exchanges’ fortunes, the splintering of America’s health-care system is underway.”

“The two-tier exchange system currently taking shape is all the more problematic because it creates a law in which the distribution of carrots is uneven while the presence of sticks—a system of mandates and penalties essential to making the law work—is universal.”

The good news: “As the law moves forward, many experts see reason to believe that the gap will eventually shrink.”

The bad news: “But between now and then, the political calculus is disastrous for Democrats.”

Banks Threaten to Charge Depositors if Fed Turns Rates Negative

As the Federal Reserve considers ways to begin tapering asset purchases without signaling withdrawal from monetary stimulus, the Financial Times reports that banks are not happy with at least one option.

“Executives at two of the top five US banks said a cut in the 0.25 per cent rate of interest on the $2.4tn in reserves they hold at the Fed would lead them to pass on the cost to depositors. Banks say they may have to charge because taking in deposits is not free.”

“About half of the reserves come from non-US banks that do not have to pay the deposit insurance fee. Their favourite manoeuvre is to take deposits from money market funds and park them overnight at the Fed, earning millions of dollars risk-free. Cutting the interest on reserves would stop that.”

How the 'Nuclear Option' May Help the Environment

The environment may be one of the biggest winners from the recent procedural changes invoked by Senate Democrats.

According to The Hill, “President Obama’s second-term regulations on climate change — is likely to have a better shot at surviving legal challenges once Obama’s nominees are confirmed for the crucial U.S. Court of Appeals for the District of Columbia.”

“Green groups suffered a major defeat at the circuit court last year when rules to cut soot-and smog-forming power plant emissions that cross state lines were shot down.”

“Advocates are hoping to avoid a similar defeat when the separate, upcoming carbon emissions standards face litigation at the court, which is a near certainty.”

In addition, “It may free Obama up to be more ambitious about putting forward folks that share [the administration’s] philosophy and be less fearful because of the 60-vote threshold.”

EPA Rule Could Produce Fire Hydrant Shortage

Reps. Bill Johnson (R-OH) and Paul Tonko (D-NY) “introduced legislation this week to block an Environmental Protection Agency (EPA) rule that would require fire hydrants to use lead-free pipes starting next year,” The Hill reports.

“Johnson says that ruling would cause an immediate shortage of fire hydrants across the country, as any that are ready for installation would not meet the EPA’s new requirement… The law requires drinking water to be transported in lead-free pipes, and the guidance said the EPA would apply this same requirement to water that comes out of fire hydrants.”

If it Looks Like Redistribution, and Acts Like Redistribution…

Redistribution: “These days the word is particularly toxic at the White House, where it has been hidden away to make the Affordable Care Act more palatable to the public and less a target for Republicans, who have long accused Democrats of seeking ‘socialized medicine.'”

According to the New York Times, despite best efforts by the Obama administration to argue otherwise, “the redistribution of wealth has always been a central feature of the law and lies at the heart of the insurance market disruptions driving political attacks this fall.”

Agrees Jonathan Gruber, health economist at MIT: “Americans want a fair and fixed insurance market …You cannot have that without some redistribution away from a small number of people.”

The White House sees it differently. White House strategist, David Axelrod: “Widening income inequality has, to some Americans at least, changed the meaning of redistribution. ‘The whole redistribution argument has shifted in the country because there’s a sense that a lot of redistribution has been to the top and not the bottom.'”

Americans Spend More on Healthcare But Get Less

An excellent chart from The Atlantic that highlights the nation’s irrational approach to healthcare spending: “We spend much more than any other rich country, but we certainly don’t get more for it. We get less. …. [In fact,] we spend more than four times as much as the Czech Republic does per persona, and live about just as long.”

“The problem is everybody wants the system to change, but nobody wants their corner of it to change … We can’t afford our healthcare exceptionalism.”

Immigration Reform Advocates Gear up for a Fight

With support for immigration reform dwindling in the House of Representatives, reform advocates are gearing up for a fight.

According to Molly Ball, “many activists have already begun to take a more aggressive tack, arguing that lobbying is over—it’s time for revenge.”

Frank Sharry, an immigration-reform advocate who heads America’s Voice, concurs: “We can’t force them to get to yes, but we can make them pay a price for getting to no … If this Congress isn’t going to pass immigration reform, let’s elect a Congress that will.”

An eclectic, bipartisan group of immigration reform activists has been frustrated by Republicans’ apparent shift from passing an immigration law to “winning [the] crusade against the many-splendored disaster that is the health-care law’s implementation.”

This frustration has only fueled the activists to take action: “Sharry estimates there are five to 10 Republicans in the House who could be defeated if the Latino vote goes strongly enough against them—not enough to hand the House to Democrats, who are currently 17 seats from the majority, but enough to send a message.”

Sequestration Will Be Worse in 2014

Government Executive highlights a new report by the Center for American Progress finding that “the tactics federal agencies used to reduce furloughs in fiscal 2013 are, in many cases, no longer available” for 2014.

From the Introduction: “There are four factors making next year’s sequester even more damaging than this year’s. First, and most simply, the sequester makes larger cuts in 2014 than it did in 2013. Second, many of the cuts that were legally made this year have not actually been implemented yet. Third, one-time fixes that mitigated sequestration’s worst impacts in 2013 cannot be used again next year. Fourth, sequestration made cuts to little-noticed but critical functions of government—cuts that will be particularly devastating if they are not reversed soon.”

Americans Satisfied with Their Personal Healthcare Coverage

A Gallup “review of recent research on healthcare cost, coverage, and quality reveals that Americans continue to be much more positive about their own personal healthcare situations than about the healthcare situation nationally ….These findings may help explain why the healthcare law has never been highly popular, even before the recent troubles in implementing it; many Americans simply feel that their healthcare situation is fine as it is.”

Gallup summarizes the “five key elements of American public opinion about healthcare”:

1. Americans’ views of their own healthcare coverage are quite positive, and much higher than the ratings they give healthcare coverage in the country more generally.

2. A majority of Americans remain satisfied with the cost of their healthcare — again much higher than their satisfaction with the cost of healthcare more generally across the nation.

3. Americans are quite positive about the quality of healthcare they personally receive. Their ratings of healthcare quality nationally are less positive, but still in majority territory.

4. Most Americans do not believe that the U.S. healthcare system is in crisis, but they do think it has major problems.

5. Americans now view healthcare as the second-most-important problem facing the country.

A Long List of Problems with Obamacare Rollout

White House officials were warned early on that it would be “impossible to open a fully functioning [healthcare] exchange on October 1”, according to a the New York Times investigation. Nevertheless, the warnings were ignored and “Government officials …insisted that Oct. 1 was not negotiable.”

The investigation reveals a number of contributing factors to the troubled rollout of

Unrealistic Goals: “The online exchange was crippled, people involved with building it said in recent interviews, because of a huge gap between the administration’s grand hopes and the practicalities of building a website that could function on opening day.”

Technical Glitches: “An initial assessment identified more than 600 hardware and software defects — ‘the longest list anybody had ever seen,’ one person involved with the project said.” As late as September, “the system failed a test of only 500 simulated users [and] the site was still down more than half the time in mid-October.”

Inexperienced Management: “The president’s signature initiative was effectively left under the day-to-day management of Henry Chao, a 19-year veteran of the Medicare agency with little clout and little formal background in computer science.”

Inexperienced Technical Management: Although CGI was selected as the prime contractor, “the Medicare agency reserved the role of general contractor, or system integrator, for itself, even though it lacked the necessary in-house software engineering resources to handle such a task.”

As “one computer expert with intimate knowledge of the project said, “Literally everyone involved was at fault.”

Two New Obamacare Delays

CNBC reports that the Obama administration has announced that two deadline extensions for the health care reform law.

“One extension gives consumers eight extra days, to Dec. 23, to enroll in Obamacare plans that kick in Jan. 1, and gives them until Dec. 31 to actually start paying for those plans. The other extension delays by one month, to next Nov. 15, the opening of enrollment for insurance beginning in 2015. That extension also will give consumers another week on the back end of that enrollment period, which now will close Jan. 15, instead of Dec. 7.”

“The second extension means that many consumers may not see the premium prices for plans until after congressional elections in early November 2014. But administration officials said the delay will give insurers more time to evaluate their first-ever experience offering coverage on the government-run individual plan exchanges, and set their prices accordingly for the next year to reflect that.”

The Weekly Numbers

Here are the economic data highlights for this week, along with consensus predictions, via Bill McBride and the Financial Times. This week’s highlights include home sale and house price data. All times are Eastern Time.

Monday, November 25
10:00 AM: Pending Home Sales Index for October. The consensus is for a 1.1% increase in the index.

Tuesday, November 26
9:00 AM: FHFA House Price Index for September 2013… The consensus is for a 0.4% increase.
9:00 AM: S&P/Case-Shiller House Price Index for September… The consensus is for a 13.1% year-over-year increase in the Composite 20 index (NSA) for August.
Note: The Census Bureau has postponed housing starts data for October until December 18.

Wednesday, November 27
8:30 AM: Durable Goods Orders for October from the Census Bureau. The consensus is for a 2.0% decrease in durable goods orders.

Thursday, November 28
Markets closed for the Thanksgiving Holiday.

Friday, November 29
Markets close early following the Thanksgiving Holiday.