Blue States Rewarded with Slush Funds from the Failure of Obamacare Exchanges?

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Time to revisit, in the wake of what many think may be the death of Obamacare, what happens to the money invested in the failed exchanges. For some background, here’s the current status of the debacle that was supposed to ensure everyone had affordable healthcare:

Other failures took longer to become manifest. The architects of Obamacare are deeply distrustful of the role of for-profit companies in the health-care business because, in their nearly pristine ignorance, they falsely believe profits to be net deductions from the sum of the public good rather than measures of the creation of real social value. So they created incentives to set up co-ops, nonprofit enterprises that would administer Obamacare plans in particular states and jurisdictions. It was obvious from the beginning that if Obamacare’s perverse incentives created insurance pools that were older and sicker rather than younger and healthier, these co-ops wouldn’t be economically viable: You need lots of young, healthy insurance subscribers to offset the costs associated with your older, sicker subscribers. Many of us — myself included — assumed that the federal government under President Obama would simply write these co-ops huge checks to keep them afloat. We were half right: The government is writing them huge checks, but they are failing anyway, so fundamental is their economic unsustainability. Half of the co-ops have gone belly-up already, including large, prominent, splendidly subsidized ones in Kentucky, New York, Louisiana, and South Carolina. Hundreds of thousands of customers have lost their coverage as a result. Hundreds of millions of dollars in taxpayers’ money has been poured into these enterprises, to no avail.

The real problem, apparently, is that Obamacare was still operating in the free-market economy. And in the free market economy, the financial rewards that come from success are achieved by making a profit from selling products and services to consumers who willingly purchase them. In the business of big government, so-called, financial reward instead seems to come from epic failure, cronyism, and corruption. After the failures of the state-based Obamacare exchanges in Oregon and Maryland, blue states are seeking to be rewarded with “slush funds” from lawsuits against developers of the exchanges.

Federal taxpayer funds paid for the state-based exchanges in the 14 states that opted to create them instead of directing health insurance customers under the Affordable Care Act (Obamacare) to use the federal exchange at HealthCare.gov. The failure of the Cover Oregon exchange had lead to Oregon suing Oracle for the failure of that exchange. The failure of the Maryland exchange has lead to an already settled lawsuit where Noridian Healthcare Solutions has been ordered to pay $45 million, of which some will go to the state of Maryland. While the federal government funded the costs of creating these state-based exchanges, the awarding of some of these funds to the state of Maryland as a result of this lawsuit creates a slush-fund that rewards that state for it’s failed Obamacare exchange. It is not yet known how those funds will be allocated at the state level.

Andrew Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services (CMS) might be involved in facilitating states recovering some of the money from the failed exchanges after they were funded entirely with federal taxpayer dollars.

Writing for The American Spectator, David Catron addresses this issue:

Yet it is a virtual certainty that Slavitt is supervising the negotiations between CMS and Maryland concerning how the spoils of the Noridian agreement will be divvied up, a role for which he possesses no legal authority whatsoever.

In Oregon, the state’s attorney general made it clear that funds from the suit against Oracle would be recovered by the states, despite the fact that the entire $300 million spent building Cover Oregaon came from federal taxpayer dollars. It is likely that lawsuits over the failed exchanges in as many as one dozen more states will results in efforts to recover those funds to states that accepted entirely federal taxpayer moneys for the creation of the Obamacare exchanges.

A recent report from the General Accounting Office (GAO) notes that under Obamacare, the states received federal taxpayer funding to set up the health insurance marketplace sites, known as state-based exchanges. More than $5.5 billion was allocated for the creation of the exchanges in the 50 states, of which more than $3.2 billion has been spent. The states have spent more than $1.4 billion of those funds on the IT costs of the exchange web sites, and a total of $297 million of that has been recovered by the federal government.

Many of these state exchanges have failed, despite the money spent on them, and those states have had to re-direct their citizens to the federal exchange instead, which itself has had its share of problems. The real lesson of Obamacare has been the effort to create these so-called “marketplaces” for the purchasing of federally approved medical insurance plans has proven again how disastrously government fails when it attempts to do what the free market economy can do so much more effectively and efficiently. This failure is more evidence of the audacity of big government. Not only has the failure cost taxpayers billions of dollars, but now it seems that politicians in the very states that failed the worst will, as a result, have millions of federal tax dollars in state slucs funds to do with as they please. Obamacare keeps ripping us off.


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