Topic: Health Care & Welfare

The Real Costs of HealthCare.gov

In May, Department of Health and Human Services (HHS) Secretary Sylvia Burwell testified to Congress that costs for building HealthCare.gov were $834 million. New research from Bloomberg Government suggests that Burwell’s estimate represents a low-end estimate.

According to the new report, spending for HealthCare.gov has been an estimated $2.14 billion. Burwell’s estimates did not include numerous costs related to the project. For instance, she did not include the contract costs for processing paper applications, which are used as a backup. That contract cost $300 million.

Burwell’s figure also does not include spending at the IRS and other agencies related to ACA requirements. For instance, the IRS is required to provide real-time interfacing with HealthCare.gov to verify income and family size for insurance subsidy calculations. Those requirements cost $387 million.

Bloomberg also includes $400 million in costs that were excluded by HHS using creative accounting. When it wrote the ACA, Congress did not appropriate money to HHS for the construction of a federal exchange. Instead, it provided unlimited grants to states to construct their portals. When many states refused to construct their exchanges, HHS was forced to develop HealthCare.gov, but without a dedicated source of funding. HHS said it would need to “get creative” about funding options, leaving many wondering where HHS would eventually get the money. According to Bloomberg, HHS shifted money around to finance the construction of HealthCare.gov, using a number of existing contracts to finance the website’s construction.

Finally, Bloomberg included $255 million more in costs than Burwell due to time period differences. Burwell’s costs were as of February 2014. Bloomberg included costs until August 20, 2014, and then projected the current level of spending forward to the end of the fiscal year, September 30th. But this means that their figures are likely conservative too because federal agencies often ramp up spending— particularly contract spending—as it closes out its fiscal year.

Implementing the ACA is a costly exercise; Bloomberg says the $2.14 billion for HealthCare.gov administration is only a small part of the full $73 billion costs of Obamacare since its passage in 2010. But the administration nonetheless owes taxpayers an accurate accounting for the costs of the system.

Halbig v. Burwell: House Oversight Committee Subpoenas IRS

This was a long time coming.

Those who follow Halbig v. Burwell and similar cases know the IRS stands accused of taxing, borrowing, and spending billions of dollars contrary to the clear language of federal law. The agency is quite literally subjecting more than 50 million individuals and employers to taxation without representation.

Congressional investigators have been trying to figure out how the IRS could write a rule that so clearly contradicts the plain language of the Patient Protection and Affordable Care Act. Unfortunately, the agency has been largely stonewalling their efforts to obtain documents relating the the development of the regulation challenged in the Halbig cases.

Fortunately, finally, last week the House Committe on Oversight and Government Reform used its subpoena power to demand the IRS turn over the documents that show what whent into the agency’s decision.

We’ll see if the IRS complies, or if another of the agency’s hard drives conveniently crashes.

I’ve got a fuller write-up over at Darwin’s Fool.

FDA Doesn’t Want E-Cigs Marketed as Safer Than Tobacco Cigarettes

In a forthcoming article in Regulation California Polytechnic State University economics professor Michael Marlow describes the negative effects on public health of the proposed regulation of e-cigarettes. The FDA proposes to expand its authority granted under of Section 911 of the Family Smoking Prevention and Tobacco Control Act. “Section 911 bans marketing tobacco products as modified risk products without FDA approval. Moreover, manufacturers are unable to inform consumers their products do not contain tobacco.”

The prohibition on marketing e-cigarettes as safer than traditional cigarettes has not been subject to cost-benefit analysis. This is particularly significant given that the literature on e-cigarettes suggests that they help smokers quit. Even the JAMA Patient Page, published by The American Medical Association last January, highlighted a number of potential e-cigarette benefits such as their lack of tobacco and the less toxic nature of e-cigarette vapor compared to cigarette second-hand smoke.

In his back-of-the envelope calculation using quit rates from the published literature, Marlow estimates that the benefits related to e-cigarettes would be between $15.6 and $49.2 billion a year as the result of between 2.4 and 6.4 million smokers becoming former smokers every year. “Prohibiting sales to youth and requiring a clear description of product ingredients may be appropriate. But prohibiting any information regarding potential efficacy in harm reduction is hard to justify given substantial benefits reported in currently available studies.”

The Great Debate Over Hobby Lobby

The Supreme Court’s 5-4 ruling granting certain for-profit companies religious exemptions from Obamacare’s contraceptive mandate has of course generated a flurry of debates between conservatives and liberals (with libertarians siding with the right not to be forced by the government to violate your conscience). But what about within the camp that supported the decision in Hobby Lobby? Was there some conservative vs. libertarian split?

Well, as it happens, one of the icons of the libertarian legal movement, my former professor Richard Epstein, contributed an article to the most recent volume of the Cato Supreme Court Review. He concluded that Justice Samuel Alito’s majority opinion reached the right result for the wrong reason, that the Court should’ve rejected the mandate because the government didn’t have a compelling interest to advance not because it didn’t use the least-restrictive means to advance it. 

Epstein wasn’t able to attend our Constitution Day symposium, however, so Ed Whelan – president of the conservative Ethics & Public Policy Center and noted legal contributor to National Review Online – took Epstein’s place in discussing Hobby Lobby. Whelan took issue with Epstein’s approach; during the panel [see starting at 35:00] his comments about the Review article were akin to Justice Antonin Scalia’s “blistering concurrences” this term, agreeing with little other than the final judgment.

So this sounds ripe for the libertarian-versus-conservative trope, right? Maybe Epstein focused on liberty and Whelan on religion? Actually not really; (most of) their dispute is more about principle with pragmatism.

Decrying “Wishful Science” on NPR(!)

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”


First, a disclaimer. I don’t listen to NPR. “State radio” bugs me. But I have friends who do, and I was bowled over when one sent me a seemingly innocuous story about the search for a pharmaceutical treatment for Amyotrophic Lateral Sclerosis [ALS], the horrific ailment also known as Lou Gehrig’s Disease.

I knew something big was about to happen when correspondent Richard Harris led off with this zinger:

There’s a funding crunch for biomedical research in the United States—and it’s not just causing pain for scientists and universities.  It’s also creating incentives for researchers to cut corners—and that’s affecting people who are seriously ill.

Predictably, NPR, itself a federally (and privately) funded creature, said the problem was a lack of funding, even titling the piece, “Patients Vulnerable When Cash-Strapped Scientists Cut Corners.”

Allow NPR its sins, because what’s in the article is one key to a very disturbing trend, not just in biomedical science, but in “most disciplines and countries.” It seems that negative results are systematically disappearing from science. Those words appear in the title of a blockbuster 2012 article by University of Montreal’s Daniele Fanelli, more completely, “Negative Results are Disappearing from Most Disciplines and Countries.”

Memo to NPR:  Scientists  are always “cash-strapped.” Just ask one. The reason is very simple, and can be illustrated by my area, climate science.

There are actually very few people formally trained at the doctoral level in this field (yours truly being one of them).  One reason was that, prior to the specter of anthropogenerated climate change, there wasn’t very much money from the federal government. It was about a $50 million a year operation, if that much. We didn’t have enough research dough. 

Now the federal outlay is $2.3 billion. Guess what: we’re all climate scientists now. So ecologists, plant biologists, and even psychologists hitched their wagons to this gravy train. Today’s shocker: we don’t have enough research dough.

What Harris found out about ALS really does apply in a Fanelli-like fashion. It seems that drugs that work fine on mice and rats flop miserably when tested on humans. It turns out that the animal studies were all pretty shoddy.

Story Landis, director of the National Institute of Neurological Disorders and Stroke, explained why.  According to NPR, “There is no single answer, she says, but part of the explanation relates to a growing issue in biomedical science: the mad scramble for scarce research dollars.”  She went on: “The field has become hypercompetitive,” and NPR added, “Many excellent grant proposals get turned down, simply because there’s not enough money to go around. So Landis says scientists are tempted to oversell weak results.”  

“Getting a grant requires that you have an exciting story to tell, that you have preliminary data and you have published”, she says. “In the rush, to be perfectly honest, to get a wonderful story out on the street in a journal, and preferably with some publicity to match, scientists can cut corners.”

According to a research paper published earlier this year, corner-cutting turned out to be the rule, rather than the exception, in animal studies of ALS.

Stefano Bertuzzi, the executive director of the American Society for Cell Biology, says that’s because there is little incentive for scientists to take the time to go back and verify results from other labs;

“You want to be the first one to show something”, he says—not the one to verify or dispute a finding, “because you won’t get a big prize for that.”

Landis noted that “ALS is not the only example of this type of wishful science [emphasis added].”  She found similar problems with other drugs for other diseases.

It’s too bad that NPR didn’t then go to Montreal’s Fanelli, because they would have found that similar problems are infecting science everywhere, which is why Cato now has a Center for the Study of Science.

Coming up: I’ll be posting soon on what this does to science itself.  Teaser: if there’s little incentive to publish negative results, whatever reigning paradigm is operating in a given field will be very resistant to change. As the Center for the Study of Science’s Richard Lindzen has observed, there has been a remarkable lack of paradigm substitution in overall science as research budgets ballooned. Ironically, the more we spend on science, the more science can be harmed.

 

More Headaches in Obamacare Open Enrollment

Open enrollment for Obamacare’s second year begins in two months. Recent reports suggest that this year’s enrollment period will not be a smooth process.

According to Ricardo Alonso-Zaldivar of the Associated Press, individuals face many hurdles in signing up for or renewing coverage:

  • For the roughly 8 million people who signed up this year, the administration has set up automatic renewal. But consumers who go that route may regret it. They risk sticker shock by missing out on lower-premium options. And they could get stuck with an outdated and possibly incorrect government subsidy. Automatic renewal should be a last resort, consumer advocates say.
  • An additional 5 million people or so will be signing up for the first time on HealthCare.gov and state exchange websites. But the Nov. 15-Feb. 15 open enrollment season will be half as long the 2013-2014 sign-up period, and it overlaps with the holiday season.
  • Of those enrolled this year, the overwhelming majority received tax credits to help pay their premiums. Because those subsidies are tied to income, those 6.7 million consumers will have to file new forms with their 2014 tax returns to prove they got the right amount. Too much subsidy and their tax refunds will be reduced. Too little, and the government owes them.
  • Tens of millions of people who remained uninsured this year face tax penalties for the first time, unless they can secure an exemption.

These won’t be the only issues. In July, the Government Accountability Office told Congress that the HealthCare.gov website is still not complete. The back-end system that links the website to insurers and distributes the subsidies is not operational. Additionally, thousands, possibly millions, of insurance policies will be cancelled over the next several months for not including all of Obamacare’s mandates which will increase the confusion for individuals.

The Obama administration says that this year’s open enrollment period will be better than the last, but the complexity and short enrollment period will still create lots of headaches for consumers. Shockingly, overhauling a large swath of the United States economy is not easy work.