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 # 662  

August 2014





Government Health Care Rewards Failure

by David Hogberg, Ph.D.

 

A key problem afflicting government programs is that it is very difficult to hold government employees accountable for failure. Unless powerful political interests are harmed by that failure, government employees often face no penalties for incompetence or misdeeds.

In fact, sometimes incompetence or failure is rewarded.

Recent developments at some state-based ObamaCare exchanges and the U.S. Department of Veterans Affairs are cases in point.

The Maryland exchange, known as the Maryland Health Connection, had enrolled just under 68,000 in private plans by the end of April. That didn't even meet Maryland's revised enrollment goal of 70,000 — it was originally about 147,000.1 The main reason was that the Health Connection's website was a disaster. It often took hours for a person to merely log in.

The website performed as poorly as it did because the state lacked a plan for having it ready by the October 1, 2013 deadline. Prior to its launch, contractors hired to build the exchange fought to the point that they filed lawsuits, and two project managers quit.2 It got so bad that in March 2014, Maryland officials announced they would throw out their design and start over by borrowing the technology of the Connecticut exchange.3

The Inspector General of the federal Department of Health and Human Services has launched an investigation into the Maryland exchange, which has cost taxpayers about $170 million, so far.

One of the men who was supposed to oversee the Maryland Health Connection was Dr. Joshua Sharfstein, Secretary of Maryland's Department of Health and Mental Hygiene. Despite the exchange debacle, Sharfstein's job never seemed in jeopardy, as there was no hint that Governor Martin O'Malley would fire him. Instead, Sharfstein recently announced that he would be stepping down.

But he's not leaving in disgrace. Rather, he's landing a job as associate dean at the Johns Hopkins School of Public Health. Chances are good that it pays better than his current job, has more perks and comes with less responsibility.

There is also the ObamaCare exchange in Massachusetts, known as the Massachusetts Health Connector. It enrolled about 31,700 people by April, only about 13 percent of its 250,000 goal. Massachusetts hired CGI, the same company responsible for designing the infamous federal exchange. Officials at the Connector knew in July 2013 that CGI was way behind schedule for finishing the website in time for its October 1 launch. Nevertheless, Jean Yang, executive director of the Connector, failed to inform the Connector's board about the problems.4 This disaster has cost taxpayers $135.6 million thus far.

Yet Yang still has her job, as do the people who work just below her. Apparently, she is so pleased with their performance that she recently gave out raises of $10,000 or more to 11 of the 53 workers at the Connector.5

Those who favor government health care would likely point to the recent Veterans Affairs waiting list scandal as one in which those responsible for failure were held accountable. VA Secretary Eric Shinseki, for instance, was forced to resign and Undersecretary for Health Robert Petzel "voluntarily stepped down." VA chief medical officer John Pierce6 and the VA's Southwest Health Care Network director Susan Bowers "retired" after accusations of wrongdoing were made public,7 and Sharon Helmon, director of the Phoenix system, was forced to return the $9,345 bonus she received in 2013.8

Yet the VA scandal is the exception that proves the rule. A scandal that results in the deaths of 23 veterans is not only going to generate a lot of press, but will also provoke outrage among veterans groups that have a fair amount of influence on Capitol Hill. With that amount of pressure on Congress and the Obama Administration, it was only a matter of time before some heads rolled.

Despite the political pressure, however, many others who share responsibility will probably not pay a price for their failure. Directors of other problem VA sites, such as Tom Wisnieski of the North Florida/South Georgia area facility and Elizabeth Goolsby of the Fayetteville, North Carolina facility, still have their jobs. Helmon is currently suspended with pay — not quite a paid vacation, but the next best thing.9 Most of the bonuses that were paid to directors and other personnel at VA sites with wait-time problems have not yet been rescinded.

In the Cheyenne, Wyoming VA facility, a registered nurse, David Newman, was put on leave after an email from him leaked that taught fellow VA employees how to manipulate wait time data. "Yes, it is gaming the system a bit," he wrote in his email, but "the front office gets very upset" when the 14-day wait time standard is exceeded.10 It is not known how many fellow employees followed his instructions or how many, if any, will ever face penalties.

The reported number of veterans who were harmed (76) and died (23) because of waiting lists is almost surely low. Although the VA initially claimed it had examined 250 million cases going back to 1999, it had only actually reviewed 11,000 cases from 2010 to 2012.11 A CNN news story revealing that fact neglected to mention if any employees would be disciplined as a result.

Imagine if the VA were a private sector operation. Revenues would be hemorrhaging as patients stayed away in droves knowing that they couldn't get timely appointments. Were the VA a public company, its stock would have plummeted, much of the upper management would have been replaced, and the new management would be working to root out the employees who had played an integral part in falsifying wait time data. Unless the new management shaped things up in a hurry, big layoffs would occur.

Instead, what Congress did to "reform" the VA became a reward of sorts for the tragedy. As the August recess approached, the House and Senate agreed on $17 billion in new spending for the VA.12 This included $5 billion to hire new staff and another $1.5 billion to lease space for 27 new VA facilities. Never mind that the VA has close to $2 billion in underutilized property and spends millions each year maintaining vacant buildings that are in disrepair.13 The message that Congress is sending to the VA is, in effect, screw up and you'll get even more money.

Jean Yang sent exactly the same message when she gave out raises to the employees at the Massachusetts Health Connector. The message sent by Sharfstein's new gig at Johns Hopkins is that top government officials have little to fear from poor performance. Given the prestige of their position, a cushy job is waiting for them regardless.

The justifications given for rewarding failure are Orwellian. Yang claimed the raises were "needed to retain valued employees and improve performance going forward."14 When some members of the House proposed a ban on bonuses for all senior VA officials, the Senior Executives Association claimed, "halting bonuses will deter top executive talent from wanting to work for the VA."15

These episodes demonstrate why government-run health care won't work. Failure on the part of government employees is seldom penalized and at times is even rewarded. While the exchanges and the VA may improve for a time, they eventually will be beset by more incompetence and scandals. Given the incentives faced by government employees, it is inevitable.


David Hogberg, Ph. D., is senior fellow for health care policy at the National Center for Public Policy Research.


 

Footnotes:

1 Sarah Hurtubise, "No, Maryland's Obamacare exchange hasn't met its enrollment goal," The Daily Caller, February 24, 2014.

2 Charles Ornstein, "Epic Fail: Where Four State Health Exchanges Went Wrong," ProPublica, February 6, 2014.

3 Mary Pat Flaherty and Jenna Johnson, "Maryland set to replace troubled health exchange with Connecticut's system," Washington Post, March 28, 2014.

4 Ornstein, February 6, 2014; and Peter Suderman, "Obamacare's Failed State Exchanges," Reason, February 27, 2014, at http://reason.com/archives/2014/02/27/obamacares-failed-state-exchanges/ (August 13, 2014).

5 "Price of failure: Pay raises and promises," Editorial, Sentinel & Enterprise, August 9, 2013.

6 "VA medical inspector retires in fallout over veterans' care." Staff and Wire Reports, USA Today, July 2, 2014.

7 Dennis Wagner, "VA brass knew of false data for two years," USA Today, June 24, 2014.

8 Dennis Wagner, "Phoenix VA chief's bonus rescinded amid controversy," USA Today, May 22, 2014.

9 Craig Harris, "Phoenix VA: Ousted exec keeps salary while on leave," The Arizona Republic, June 20, 2014.

10 Alex Dobuzinskis, "Veterans Affairs worker in Wyoming placed on leave in patient delay scandal – report," Reuters, May 9, 2014, at http://www.reuters.com/article/2014/05/10/us-usa-veterans-wyoming-idUSKBN0DQ01I20140510 (August 13, 2014).

11 Drew Griffin, Scott Bronstein and Nelli Black, "VA blames 'confusion' for misstatements about deaths," CNN, August 8, 2014, at http://www.cnn.com/2014/08/07/politics/va-apology/ (August 13, 2014).

12 "Scandal Pays Off for the VA," Editorial, Wall Street Journal, August 4, 2014.

13 Charles S. Clark, "Lawmaker: VA Alone Is Sitting on $2B in Underused Property," Government Executive, July 30 2014; and Jana Winter, "EXCLUSIVE: VA Spends Million to Maintain Vacant and Hazardous Building—Cites Limited Funds for Demolition," Fox News, September 1, 2010, at http://www.foxnews.com/us/2010/08/31/veteran-affairs-spends-millions-on-hazardous-buildings/ (August 13, 2014).

14 Editorial, Sentinel & Enterprise, August 3, 2014.

15 Josh Hicks, "Pressure mounting to rescind VA bonuses over scheduling scandal," Federal Eye Blog, Washington Post, July 7, 2014, at http://www.washingtonpost.com/blogs/federal-eye/wp/2014/07/07/pressure-mounting-to-rescind-va-bonuses-over-scheduling-scandal/ (August 13, 2014).

 

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