A Counterfactual on the Exchanges

by Reihan Salam

Though all of the new insurance exchanges have faced hiccups, exchanges built by state governments seem to have fared better than exchanges built by the federal government. Sean Trende estimates how high enrollment levels might have been had the federal exchanges performed as well as the state exchanges, and the results are at least mildly encouraging for supporters of Obamacare:

The bottom line is this: If the national exchanges were functioning as well as the best-functioning state exchange — and encountering the same demand — we’d probably be on the low end of the administration’s acceptable enrollment range. If the middle state were representative of the country as a whole, we’d be below it, but not by an overwhelming amount.

And elsewhere, Ezra Klein identifies a deeper reason why it’s hard to build government IT that works — for one thing, the kind of open process that tends to yield government IT that works threatens incumbents, including sympathetic incumbents:

The Obama campaign didn’t think too hard about the metaphor underlying the idea of an iPod government. It sounded good, gesturing vaguely at modernization and simplicity. But the iPod was a disruptive innovation. It destroyed a lot of companies that manufactured parts and products for CD players. It accelerated a change toward a model of purchasing music that put music stores across the country out of business.

Actually creating an iPod government would be no less disruptive. It would require radically overhauling the federal procurement system. It would mean ripping through the IT departments of agency after agency. It would mean facing down lawsuits and union reps. And it would mean, inevitably, overcoming the trump card that IT offices everywhere use to circumscribe openness and transparency: security. “The security that government is obsessed with is often the counterpoint to usability,” Bracken notes. “In many government services you really only see two voices: the voice of security and the voice of procurement. The voice of usability isn’t in there as well.”

This has struck me as a tension in the Obama worldview since the start of his presidency: productivity gains are driven in no small part by the entry of new firms that introduce new business models and the exit of old firms that fail to keep up, and bringing productivity gains to the health and education sectors will entail a great deal of dislocation.

A number of observers, like the well-regarded editorial technologist Paul Ford, have argued that open-source development would have greatly improved the building of the exchanges. This is almost certainly true. But the exchanges might have also benefited from a greater willingness to let consumers see the unsubsidized prices of the new insurance policies available on the exchanges. (Consider, for example, the success ValuePenguin.com has had in providing consumers with information on how the ACA will impact premiums.) One hopes that future government IT projects will benefit from the lessons learned.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.