Understanding the Obamacare Rollout Fiasco

Too much contracting may mean that the organization loses the capacity to manage contractors. When that happens, no one inside the government knows what the contractor does. If you don't know how to build a web site, how do you manage a contract that pays a company to build a site?
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Even before Ronald Reagan began America's 30-year war against the federal government, public management was always complicated, difficult and cumbersome. When I worked in the federal government I distinctly remember thinking, "Why is it so hard to do the simplest things around here?" Purchasing a desk chair was like planning a trip to the moon. As I watch the slapstick, slapdash path of the Obamacare rollout, those same thoughts returned: A web site? These folks can't figure out how to build and launch a website? Apparently not.

When I first started teaching public management in the 1980s I wrote a book called The Effective Public Manager. In its first edition, the book presented some of the basics of management applied to the public sector. One of the reasons that public administration is so difficult is that government is assigned tough problems to solve. It is harder to end homelessness than to make a beer that "tastes great but is less filling." A second reason is that in order to prevent fraud and ensure fairness, public managers are subject to an incredible array of rules and regulations. The first edition of The Effective Public Manager included some of the workarounds I'd learned in the federal government: how to get around the rules without getting in trouble or breaking the law. Well before the time I was joined by my colleagues Bill Eimicke and Tanya Heikkila to write the fourth and fifth editions of the book, I had decided that the workarounds wasted resources and that some of the dysfunction of federal administration needed to be taken on directly. Some obstacles should not be avoided, they should be eliminated. In the last 15 years we have analyzed how one could apply modern management techniques such as quality management, outsourcing, benchmarking, electronic government and performance measurement to improving government performance.

One of the results of the 30-year attack on government is that even as America's population has grown and state and local governments have grown along with population, the number of federal employees has not grown. All of the federal government's growth has been hidden in private firms that operate as shadow staff to the federal government. This is brilliantly analyzed by my NYU colleague Paul Light in his book The True Size of Government. While some of this contracting has been productive, some of it may well be too much of a good thing. The decision to contract out, or what management professors call "the make-or-buy decision," should be based on issues related to organizational management and strategy, not political ideology. Too much contracting may mean that the organization loses the capacity to manage contractors. When that happens, no one left inside the government knows what the contractor does. If you don't know how to build a web site, how do you manage a contract that pays a company to build such a site? Brint Milward, a colleague at the University of Arizona, has aptly termed this phenomenon "the hollow state." It seems obvious that the problem with the Obamacare website is that no one in the U.S. Department of Health and Human Services seemed to know how to manage a complex web development and site launch project.

Of course, the website launch is not the only management problem with Obamacare. Another cause of problems in public administration can be complex policy designs that ignore issues related to implementation and administration. The Affordable Care Act is an example of an overly complex, difficult-to-implement piece of legislation. The goal of "maintaining" a free market in health insurance dominated the policymaking process. The complex interconnected program design requires everything to work right for funding projections to add up. The design of the program is a nightmare developed by economists, politicians, bureaucrats and lawyers. The practical issues of organizational management are ignored. No one seemed to ask the fundamental question: Do we have the organizational capacity to do this? What if something doesn't happen when it is supposed to happen?

The direction of America's national health care policy has been defined by political considerations to the exclusion of logic and even common sense. I support universal health care coverage. I even support the Affordable Care Act, which I believe, just like Social Security, Medicare and Medicaid, can be improved over time. However, it is clear that in an ideologically-polarized era there is no possibility of making the incremental fixes needed by any new program. Since political gridlock is coupled with the law's overly complex policy design, we are in for a long series of attacks on this program.

The difficulty arises because many of the problems with Obamacare are management problems resulting from the program's complex and even contradictory design. People are not being allowed to keep insurance policies that are substandard. President Obama promised people they could keep their policies if they wanted to, but he was wrong. Nice sound bite, but too bad it contradicted the new law. This problem led to political attacks by Congress resulting in a political response by the White House. The political fix was Obama's announcement that everyone could hold on to non-complying insurance policies for an extra year. Unfortunately, while the president consulted his political people and came up with a political response to the political attack, he seemed to forget that continuing the substandard policies created a management problem. Young and healthy people held many of the cheap but substandard policies. Insurance companies needed young people to buy more expensive policies offering more comprehensive coverage or the insured population would be too old and sick. The delicate balance of the complex policy design could not be tinkered with.

After he announced the policy of allowing people to hold onto their substandard policies, the president belatedly decided to meet with the CEOs of the nation's top health insurance companies. It is astonishing to me that this meeting did not take place before the president's announcement. Wouldn't he want to ask these companies if they thought his new policy was feasible? Apparently not. The political imperative of responding to the House Republican bill dominated any consideration of the practicality of the proposal.

The power of the insurance companies and the ideology favoring the free market resulted in the overly complicated design of the Affordable Care Act. The result is a simple equation: insurance-dominated health politics = complex policy design = major management problems. These days, very little legislation comes out of Washington and when it does, it seems to follow this path. Interest groups and ideology dominate and the resulting compromise is un-implementable. There is nothing new in this. What is new is that in the 24/7 news cycle and the post-Citizens United cash-rich political environment, half of Washington seems to live for the moment they can jump on any screw up. Calling attention to mistakes keeps the ratings up and the donations flowing. Dysfunction has become a business and the District of Columbia seems to be its national headquarters.

The Obama administration is complicit in this. Political considerations dominate much of what it does. The desperation for a health care deal resulted in a bad bill. The desperation for reelection resulted in the president misleading the public about the bill's provisions. Now, the desperation to fix the president's political error is resulting in a policy change that undermines the delicate balance of the complex design of national health care funding. Politics, ideology, overly complex policy and inadequate contractor management explain the fiasco of the botched roll out of national health care. It is all too predictable and pathetic.

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