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 (WAG +0.00%) and CVS (CVS 0.91%) 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 (MCK 0.28%).
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.
