How do companies make millions of dollars with a really bad idea?
They advise state governments on how to comply with federal Obamacare mandates, and then help the states build new websites.
The subject of Obamacare scarcely came up as a topic in the recent election, and it remains overwhelmingly unpopular. Yet it is already costing taxpayers lots of money, and has created a whole new stream of corporate welfare.
The President’s “if you like your Doctor, you can keep your Doctor” promise and his pledge to “bend the healthcare cost curve downward” are both fiction. What is non-fiction, however, is the fact that state governments are paying private consulting firms big bucks to lay the groundwork for our nation’s new healthcare bureaucracies. Among the beneficiaries of the new government spending are both Democrats, and Republicans, and they’re scooping-up taxpayer dollars in both Red and Blue states.
Chief among the concerns of individual state governments has been figuring out how to comply with the “health insurance exchange” mandate that has been imposed by the feds. And what, precisely, is a “health insurance exchange” anyway? Most of the consultants can’t actually say with certainty what any particular state’s “health insurance exchange” should consist of (a point on which I’ll elaborate later). But generally speaking, the states and the U.S. Department of Health and Human Services are envisioning that each state would have its own website that lists all the various health insurance policies that are authorized to be bought and sold in that state, along with links to the respective insurance companies’ websites. It’s also likely that each state exchange will include a call center, with a toll-free number where consumers can get their questions answered.
Federal mandates of Obamacare’s magnitude pose new challenges for the states. So many of the states have hired private business consulting firms to figure out how to set up an insurance exchange that complies with the federal requirements, while many other states are soliciting proposals from these companies in anticipation of creating a future exchange.
So how difficult and costly could it be, do you suppose, to set up a website and a call center for the residents of one individual state? In the world of private enterprise, most small to midsize companies doing business within a specific region of the U.S. would be foolish to spend much more than a hundred thousand dollars for their customer service website and the infrastructure for a call center, and in many cases the project could be completed for much less.
But this is where the corporate welfare of Obamacare kicks in to high gear. Companies, careers, and personal fortunes are being made by people who are consulting the states, as firms bill the individual states millions of dollars for the website and call center set-ups.
Take for example a company called Leavitt Partners, LLC. Founded by the former Republican Governor of Utah (and former U.S. Secretary of Health and Human Services) Michael Leavitt, the company describes itself as a “healthcare intelligence business,” and is focused solely on state-by-state Obamacare compliance (they have already completed Utah’s insurance exchange start-up).
Last month Leavitt Partners representatives traveled north and proposed to build an exchange for their neighboring state of Idaho, a state with a population of less than 1.7 million people and with elected leaders who haven’t yet decided which direction they will take with the federal mandates. Once the Leavitt representatives unveiled their proposed price tag to build an exchange - $70 million-an incredulous member of Idaho’s state insurance task force asked “does Governor Leavitt really believe that this is a good idea?” Company associate Brett Graham replied with the nuanced explanation that “Governor Leavitt doesn’t like the feds dictating to the states,” however, the Governor also believes that the states should “stand inside the circle with the feds rather than stand outside of it” (it’s also noteworthy that while Leavitt is making millions of dollars showing states how to do Obamacare, he also publicly endorsed the presidential candidate who vowed to repeal it – Mitt Romney – and was chosen to oversee the Washington transition team had Romney won the election).
Leavitt’s proposal is not the most expensive that the sparsely populated Idaho has received. The global accounting and consulting firm KPMG weighed-in with a price tag of $77 million, and when a state official asked what the residents of Idaho would get in return for such a large expenditure, KPMG representative Andrew Gottschalk was vague: “It’s hard to explain exactly what you get…It’s hardware, it’s software, there’s infrastructure, there’s people and staffing” he stated. “There would likely be a call center. It’s all kinds of things… there’s a lot of stuff….but it’s hard to be specific.”
States spending millions of taxpayer dollars, and receiving “all kinds of things” and “a lot of stuff” in return. That’s our present-day reality with Obamacare. Along with Leavitt Partners and KPMG, global consulting firms Maximus and Mercer are also cashing-in. These firms employ well educated, highly skilled professionals with JD’s, MBA’s, and advanced degrees in information systems and healthcare management, most of whom would undoubtedly reject the idea that they are welfare recipients. As the Maximus corporate website states, “we leverage our extensive experience and strong commitment to ethics to provide high quality services and solutions.”
Yet the need for finding “solutions” to the federal government illustrates Obamacare’s problem. The fact that states as small as Idaho are even considering spending tens of millions of dollars to employ highly educated “experts” to create new statewide bureaucracies that are in full compliance with the already cumbersome federal bureaucracy demonstrates that government is our problem in the healthcare markets, and not our solution.
Austin Hill is an Author, Consultant, and Host of "Austin Hill's Big World of Small Business," a syndicated talk show about small business ownership and entrepreneurship. He is Co-Author of the new release "The Virtues Of Capitalism: A Moral Case For Free Markets." , Author of "White House Confidential: The Little Book Of Weird Presidential History," and a frequent guest host for Washington, DC's 105.9 WMAL Talk Radio.