I don't know about you, but I'm a firm believer in "learning by doing." You can show me something on paper or video all you want, but until I actually try something new out for myself and succeed (or fail and try again), I have no concrete evidence to go off.
Over the past couple of months, we've seen numerous attempts by both supporters and opponents of the Patient Protection and Affordable Care Act, perhaps better known as Obamacare, to lend their best "guesstimate" as to whether the upcoming transformative health bill would be a success or a dismal failure. Supporters of the bill will note the expansion of coverage to low-income families and lower-than-expected average premium rates across the nation relative to the Congressional Budget Office's original estimates. Opponents, though, will point at the numerous delays and glitches that have already arisen.
Obamacare's biggest hurdles
Perhaps no two hurdles are bigger for the kick-start of Obamacare -- now that the state- and federally run health exchanges are just two days from opening for business -- than the technical and educational aspects of the bill. Never before have we seen a need for cloud-based software to jell so quickly together and be able to access multiple branches of the government in seconds or less than we're seeing with this bill. By the same token, Obamacare navigators in many states received late starts in their education process, leaving many to question whether they're qualified to help consumers make smart choices.
Just a few days prior, criticism of the bill grew when the Department of Health and Human Services announced that neither its Spanish-language health exchange nor it small-business health exchange would be ready for three weeks to about one month. Spanish-speaking citizens and small-business employees could still sign up for health insurance, but they'd need to do it the old-fashioned way, by snail mail or possibly over the phone.
New problems crop up -- is now the time for concern?
Recently, we get even more confirmation that technical and educational gaps could mark the start of this bill.
According to a report by The Washington Post, four potentially serious glitches have already popped up. In the District of Columbia, consumers signing up for health insurance won't be made immediately aware if they qualify for Medicaid or other types of subsidies. In Vermont, the online marketplace won't be ready to accept premium payments for another month. In California, where there are a huge number of uninsured citizens (about 1.4 million) that will soon qualify for Medicaid under the expansion, insurers probably won't get the application of someone who applies for health insurance on Oct. 1 for about a month, because many insurance brokers are still uncertified. And finally, Oregon's online marketplace won't be ready by Oct. 1, but you'll still be able to apply by other mediums, such as written application or phone call.
In a completely separate report from Reuters, it notes that Ohio Lt. Governor Mary Taylor commented that it's quite possible her state's health exchange could crash on the first day because of high traffic volume. Also, in Colorado, subsidy calculations are going to need to be performed over the phone rather than online.
Not encouraging news ... but not abnormal, either. If you recall, when Medicare Part D went into effect in 2006, it was marred by glitches as well. For example, in August 2006 the U.S. government accidentally reimbursed 230,000 people for their prescription drug benefits instead of deducting their premium payment. A month later, roughly 100,000 people were still having difficulty paying their monthly premium. In a similar instance, just 10 days after Medicare Part D officially kicked off in January 2006, enrollees in Massachusetts were being turned away at pharmacies despite the state's pledge that it would be picking up the tab for Medicare Part D members.
The point is that glitches are commonplace and they should, by now, be expected. The only way we're going to concretely be able to judge this bill's success or failure is based on its performance over time -- a.k.a. learn by doing!
How this could affect your investments
Although these wild assumptions on the success or failure of Obamacare probably won't have an effect on the long-term success or failure of the bill, they definitely could have an effect on your investments in the health-care sector in the short and intermediate time frame.
Not to beat the proverbial dead horse here, but insurance companies such as WellPoint (NYSE: WLP ) , Aetna (NYSE: AET ) , and CIGNA bet big by making multibillion-dollar purchases over the past two years to get their slice of the government-sponsored care pie. While it still looks promising that millions of newly eligible citizens under the Medicaid expansion are going to sign up and contribute significantly to these insurers' bottom lines, investors may need to put their lofty expectations out a few months, as glitches could come back to haunt their lofty expectations.
The companies behind the technology responsible for Obamacare's health exchanges could also take a hit. IBM (NYSE: IBM ) , for instance, owns Curam Software, one of the contracted software developers whose software helps calculate subsidies (should a consumer be eligible). According to Washington. D.C.. health exchange spokesperson Richard Sorian, IBM's Curam software miscalculated the appropriate subsidy in about 15% of cases in a test run in D.C. These are fixable glitches for sure, but companies like IBM have their reputation on the line and certainly don't want to be known as the reason Obamacare isn't reaching its full potential in their state.
Perhaps the thing to remember here is that some special-situations companies will be affected negligibly -- if even at all -- and could wind up being a nice safe haven for investors who don't want to chance being thrown for a loop early on in the enrollment stage because of inevitable glitches. Xerox (NYSE: XRX ) and Cerner (NASDAQ: CERN ) are two, in particular, that I can think of that could help investors make it through a glitch-filled first couple of weeks and beyond.
Xerox should interest investors as it's quickly becoming one of the largest Medicaid payment processors in the United States. It's already processing all of California's claims, and just imagine how quickly the dollar and transaction volume is going to grow when some 1.4 million new people become Medicaid-eligible in that state! Xerox is also acting as a collector of electronic health subsidies for many states from the government.
For Cerner, it's all about the ongoing push toward the digitization of health records and improving hospital efficiency. What Obamacare is really about is improving efficiency by reducing costs. Cerner's electronic-health record and revenue cycle management software are becoming staples among hospital operators looking to cut costs and improve margins. Cerner's software could come in particularly handy should Obamacare's initial enrollment turn out to be weaker than expected. Hospitals are counting on a higher percentage of fully insured people to get care and, in turn, reduce their doubtful (i.e., uncollected) revenue provision. If that doesn't happen, Cerner's efficient and cost-saving software could swoop in for the rescue.
Concrete answers are around the corner
Ultimately, we know glitches are inevitable. Every preceding transformative health reform has come with its own unique set of glitches, and Obamacare's kick-off will probably be no different. Your best bet is not to get swept up in the fanaticism of either supporters or opponents of the bill, but let the facts after a few weeks begin to speak for themselves.
As an investor, if you're taking the horizon view (five years or longer), you're probably not too concerned about short-term glitches in Obamacare. The end result should be millions of new health-care enrollees in both the individual markets and government-sponsored care, which will be a boost for practically all insurers.
As always, stay tuned over the coming days as we at The Motley Fool will do our best to keep you abreast to the latest news surrounding this controversial bill and the imminent opening of state- and federally run health exchanges on Tuesday.
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