Fix Healthcare.gov by turning it into Turbotax

Go to www.irs.gov. Look for the File Now button to file your taxes. You’ll find a list of options for filing, including software companies providing tax filing web sites and software. The IRS makes fillable online tax forms, and the instructions for completing them – so why not cut out the middleman and deliver a free irs.gov tax filing portal? Healthcare.gov is just the latest answer to that question – the government has a poor track record of delivering technology solutions, with IRS, FBI, and DHS systems as just a few examples of failure [1].

The department (Health & Human Services) managing the Obamacare rollout should take a lesson from the IRS: if you set the rules, and let the private market deliver the software, you can offload the expense and risk of technology development while still receiving the benefits of automation. Turbotax and its competitors receive not one dime from the IRS, and yet have taken a huge share in the multi-billion dollar tax filing preparation market. In addition, these companies have agreed to give their software away for free to low-income individuals, eliminating any criticism on fairness or access grounds.

Healthcare.gov could easily move to the same model, and here’s the crazy part – several companies, including eHealthInsurance.com and GetInsured.com, already have healthcare exchanges certified to sell ACA plans WITH subsidies! While any licensed insurance agent (including websites) can sell ACA-compliant policies, a handful have built out their technology to work with the federal government and provide access to subsidized ACA insurance. Rather than competing with these firms, Healthcare.gov could terminate many of its bloated IT contracts and simply list certified private exchanges on its site. These exchanges would provide a free shopping experience for consumers, and earn a commission on policies sold in a manner similar to the financing system for healthcare.gov itself [2]. Let HHS & CMS employees set and administer the rules of the ACA, and leave the exchanges themselves to the private sector – leading to benefits for taxpayers and health insurance shoppers alike.

[1] This paper found that 70% of government-run software projects failed to meet stated objectives. Government contract reform has become a hot topic as a result of healthcare.gov’s failure, but these problems have been going on for years.

[2] The ACA exchanges will charge insurers 3.5% of each policy premium sold on exchanges to finance the marketplace. While this “user fee” is lower than the commissions many private insurance brokers receive, many would likely still jump at the opportunity given the size of the new market on offer (perhaps 7 million individual policies through 2014).

The Failure of Healthcare IT

You can track a package down to the hour online. You can order a pizza online. You probably manage your finances online as well. You can even pay your taxes online! Why can’t you do almost anything with regard to your healthcare online? Why has the IT revolution failed so miserably in the health care industry?

A 2008 nationwide survey found that only 4% of physicians used a fully functional electronic medical records system (EMR). Health care information is certainly complex, but not any more so than information in many other industries. Integrating medical systems and ensuring seamless transfer of patients’ medical information would yield huge benefits, including fewer medical errors, few repeated tests, and less time spent filling forms. The security of modern IT systems has been tested by hackers again and again, but if it’s safe enough for trillions of dollars of financial transactions, it’s safe enough for medical records as well. So why haven’t EMR and health care IT progressed further?

IT Advance Who Benefits? Who Pays?
Electronic Medical Records Patients Doctors and Hospitals pay for installation, and could lose some revenue due to loss of additional tests, checkups, etc
Medical Record Portability Patients Doctors pay to upgrade systems, could lose revenue as above
Billing System Integration Doctors and Insurers Doctors and Insurers
Online Appointment Scheduling, Email Patients Doctors pay for website and systems, lose time spent on email if not reimbursed

Looking at the table above, it becomes obvious why America’s health care system practically guarantees IT will fail! In almost every case, information technology will cost health care providers money, while primarily benefiting patients (and perhaps payers). Why would any sane business invest in an IT system that has low or negative ROI? If health care were a truly free market, then in some areas IT might flourish, as patients demand conveniences like online appointments and control of their medical records. If US health care were dominated by a single payer, that system would enforce health care IT compliance and integration. But the bizarre no-man’s land of American health care reimbursement makes it difficult to advance IT beyond billing integration between providers and payers.

Can this situation be improved? The Obama administration has decided to get involved by offering carrots initially, followed by sticks later. Time will tell if this approach is sufficient to bring health care into the 21st century.