3 Huge Differences Between the Medicare Part D and Obamacare Launches

A complicated and controversial major expansion of government involvement in health care runs into big technical problems. Americans complain. Politicians pontificate. But the year is 2005, not 2013. The big health-care change isn't Obamacare. It's Medicare Part D -- the prescription-drug program signed into law by George W. Bush.

There are certainly several similarities between the launches of Medicare Part D and Obamacare. However, the hurdles needing to be surmounted to achieve success after the initial problems aren't as similar as some might suggest. Here are three huge differences between the rollout efforts of Medicare Part D and Obamacare that underscore the challenges that lie ahead now. 

Source: Whitehouse.gov Archives.

1. Magnitude of technical problems
When Medicare Part D's website first launched, Walgreen (NYSE: WAG  ) and CVS (NYSE: CVS  ) were among several big pharmacy retailers reporting significant problems. Benefits couldn't be verified for thousands of Americans through the system, which was operated by a company later acquired in November 2006 by McKesson (NYSE: MCK  ) . 

Sounds a lot like the Obamacare exchange woes, doesn't it? The similarity only goes so far, though. NDCHealth made some changes to its system quickly to handle higher volumes. Within a couple of days, Walgreen reported that the problems weren't as bad. The Centers for Medicare and Medicaid Services, or CMS, said no glitches were occurring.

It's now been over a month since the Obamacare exchanges went live. Serious problems persist. The federal government felt the need to call in experts from across the country as part of a "tech surge" to fix the issues. But those issues aren't projected to be resolved until the end of November.  

That wasn't the end of the story for Medicare Part D, however. After the effective date, several hundred thousand senior citizens thought they were enrolled in the program but discovered their names weren't on the government's list. It took months to straighten matters out, although actions were taken to help ensure individuals could get their prescription drugs.

Unfortunately, the Obamacare problems seem likely to also continue well after the healthcare.gov website is fixed. According to the latest news reports, shockingly few applications actually resulted in successful enrollment. Some insurance officials estimated that as many as 99% of applications are missing key information needed for processing. Today's problems could prove much more severe than those from years ago.   

2. Importance of website to success of the program
Surveys conducted in 2006 suggested that only around one in 10 senior citizens used the Medicare Part D website on their own to enroll. However, CMS reported that more than one-third of individuals enrolling in the prescription-drug program used the website to do so. How is that possible? The explanation is that many seniors relied on others, such as brokers and family members, to navigate the online enrollment functionality.

Even with the higher number provided by CMS, the fact remains that most individuals didn't enroll online for Medicare Part D, at least at the beginning of the program. Although other alternatives also exist for signing up for health insurance plans, the online exchanges are critical to the success of Obamacare.

That's true partially because of the big public-relations push for Americans to use the exchanges because they would be as simple to use as Amazon.com. The ability to compare insurance plans and shop for the one that was the best fit has always been key to the sales pitch for Obamacare. There's also a simple technical reality: Other options of enrolling, such as using insurance agents still require use of the online website.  

3. Incentives to sign up
Medicare Part D launched with several incentives for seniors to enroll: new benefits they didn't have before, low premiums, and subsidies for individuals with low incomes. There was even a penalty for enrolling late -- although none for declining to enroll.

Similar incentives are also present with Obamacare. A big difference, though, is that many individuals could find it more financially attractive to forgo insurance -- especially in the first year or two. And because the health-reform legislation didn't give the IRS any real teeth to go after those who don't want to pay the penalties, the "stick" of Obamacare probably won't look too threatening to some Americans not enticed by the "carrot" of health insurance.

History lessons
While the hurdles remaining related to the Obamacare launch appear more daunting than the ones facing Medicare Part D in 2006, there's still a decent chance that the issues will be successfully resolved. Obamacare could one day become as popular as Medicare Part D is now -- with a remarkably high 90% overall satisfaction score.

Assuming that happens, we should learn yet another lesson from history. The stock performance of several of the companies in the news during the Medicare Part D implementation diverged dramatically over the next couple of years. CVS shares soared by 50%. McKesson saw its stock climb by nearly 24%. But Walgreen's stock fell 16% during the same period.

That goes to show that not every company that on the surface should benefit from a regulatory change necessarily will. How much the benefit actually is will also vary considerably. No two companies are alike. And neither are any two complicated and controversial major expansions of government involvement in health care.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 03, 2013, at 11:32 AM, peckbill wrote:

    Congress (Democrats and Republicans alike) need to get a handle on government operations and gain support of the American people. They need a few simple laws to fix a few important items before they try any big items like a Constitutional Amendment, 1) they need to read the Ethics Reform Act of 1989 and undo any reference that campaign fund contributions are nothing more than donations and therefore can be put into a individual Congressmen/women Leadership PAC (slush fund), 2) reinforce legislation to the IRS that the word “exclusively” regarding non-profit organizations is to be enforced as written and is not subject to interpretation, 3)add the following to any and all oaths of office for government hires, “I do solemnly swear that I will not lie to, steal from nor cheat the people I am elected to serve so long as I remain in this elected office.”, 4) make provisions to reimburse the Social Security Fund the 736 billion borrowed years ago and provide that no funds may be borrowed or re-aligned from that fund in the future. Accomplish this within a five (5) year period, 5) discontinue requiring the Postal Service to pay future benefits and treat the Postal Service as a normal business, 6) restrict foreign aid as long as programs within the United States of America, controlled by government spending, are not fully funded,7) approve legislation that will reduce and control costs of home and vehicle insurances so the lower and middle income individuals and families can buy a home and have a better vehicle to drive, 8) insider trading must be prohibited by members of Congress, their family and employees, and 9) members of Congress must not profit from any government subsidy deriving from any federal law approved by Congress.

    These are small things that can be done by House and Senate votes (it must be Democrats and Republicans working together) and a Presidential signature. These things are all close to every taxpayer and these are the items that need attention now.

  • Report this Comment On November 03, 2013, at 12:02 PM, racollard wrote:

    Sure has been a lot of articles lately on Obamacare here in the MF. Is this site suddenly starting to become a shill for Obama?

  • Report this Comment On November 04, 2013, at 2:12 PM, bignorske2001 wrote:

    This is revisionist history. I was a practicing retail pharmacist in 2005 when Medicare Part D started. The program started on January 1st, when of course nobody was available to call if you had a problem with the website. Almost none of the patients who had signed up had received their prescriprion insurance cards yet, so we had no registration information(company name, ID#, group#, etc.) and their agents had told them that they could just waltz into their pharmacy and get their prescription filled. In addition, the data lookup website that we were promised was unavailable for most of the first 3 months. On nights, weekends and holidays, we had to give a 3 day supply of meds for free and then hope that the patient was eligible and we were a valid provider. Many independepent pharmacies went out of business by doing this. They didn't want to lose their longtime customers, so they gave some free medication, and then found out that they wouldn't get paid. They either had to take out loans to cover their losses or go out of business. That was during George W. Bush's madministration. The system eventually worked just fine, and I doubt many would want to give up their Medicare Part D coverage, not to mention Social Security or regular Medicare. So, hang in there. The problem will get fixed and eventually prople will be very happy with this benefit. The Republicans are trying to make short-term political hay out of this, although they have no valid alternative to pro;pose, but it will ultimately backfire on them at the polls.

  • Report this Comment On November 21, 2013, at 7:51 PM, Heidikitty wrote:

    I am not a fan to say the least for Obama care but if I can make some money while they are fixing it or defunding it or whatever I am game

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