Wednesday, October 06, 2010

Is "" Worth $8.7 Million? Who's Asking?

by Stuart Zechman

At Swampland, Kate Pickert asks the commentariat for feedback on the value of the new government web site "":

The Health Care Number of the Day - $8.7 Million

Posted by Kate Pickert Wednesday, October 6, 2010 at 1:01 pm

I've praised the web site for being easy to use and for including a gigantic amount of information about private and public insurance plans which have, until now, not been accessible in one place online. The Department of Health and Human Services amassed and organized the data and factual information on in about six months and no doubt spent a premium on outside contracts who could design the web site and gather data quickly. The site is, in some ways, a preview of what health insurance exchanges might look like when they are up and running by 2014.

What do you think, Swamplanders? Worth the investment?

, to which I respond in commentary, as reprinted (with some edits) below:

Kate Pickert,

Is it worth the investment, you ask?

That's a question dealing with the value of the web application. To people who would otherwise be spending money on insurance without knowing how badly they're actually screwed by those policies (if that denial rate information is accurate, for example), I'm sure it's worth it.

The question of its worth probably remains very much to be seen. Incomplete data, or data that's only accurate up until the point at which insurers are contacted, and then representatives say "the real rates are X, the real policies are Y" will destroy the value of that investment. I'm sure we've all been to sites that advertise a price or an available item, and then found out that "the web site wasn't updated" with the real story, for whatever reason.

Also, the real worth of the investment depends on consumers' ability to shop for meaningful benefits at competitive rates, Kate Pickert.

If the anti-trust exemptions for insurers remain in place, and they're allowed to share information and fix prices, unlike normal businesses, then what good does it do consumers to "shop around" for fixed prices?

Who cares if there's a lovely, well-designed web site that lays out all of the different policies, if, at the end of the day, the prices are what the insurance industry in that state all say they are together? If there's no competition between insurers because they're allowed by law to act like cartels, and legally collude with one another on pricing, then what this really provides is an expensive, tax-payer funded web site that provides the illusion of competitive price-based consumer shopping, while the prices are fixed by the industry (and maybe HHS) as usual.

Let's hypothesize for a moment that the government passed a "computer sales reform bill," the UPACA --"User Protection, Affordable Computer Act."

Now let's assume that, unfortunately for individual computer purchasers, there were only state-based markets for computer resellers, so that Dell, HP-Compaq, Sony, Toshiba, ASUS, etc, had to have a separate company in each state, and didn't "compete" nationally. Also, a crazy, 1945 law declared that, unlike normally competitive companies, these state-based Dell, HP and Toshiba were allowed to share all of their information, and therefore fix prices together, to collude, in other words. This law allowed these computer companies to form trusts, state by state. That means these companies don't all try to compete with each other by lowering the price of their computers, or adding great new features. Dell just shares its pricing and retailing information for Kentucky with HP and Sony, and vice-versa, and they all come up with the same price for computers in Kentucky. It's easier for them than competing.

So, returning to that hypothetical "UPACA" act that our hypothetical Congress just passed, if part of the government's mission is to now provide a web application like "," and they then spend $8.7 million dollars making one available to consumers, what's still missing, Kate Pickert?

Well, you allude to it in your piece "Need Health Insurance? Click Here.", when you wrote "the number one thing people care about when shopping for insurance – price."

The reason people care about price when shopping for things like computers --or insurance-- is because they assume that prices are competitive, something that a big web site that looks like a market would allow ordinary folks to believe.

But, if makes consumers enter their zip code, and finds the computers for sale by the mini-Dell and mini-Toshiba in their state, where mini-Dell and mini-Toshiba are allowed to set the prices of computers un-competitively, and according to what they agree is best for both of them, then consumers aren't really price shopping, are they, Kate Pickert?

It's just that the web site the government spent big bucks on gives the appearance of shopping, since consumers can "look up their choices" and "see what's available." The prices they will end up paying will be whatever they're set at by the companies in their state, not what occur naturally in a market in which those companies have to compete with each other based on differences in price.

As Robert Gibbs put it so well at the beginning of this year, just prior to the President signing the PPACA into law:

[T]oday the President announced the administration’s strong support for repealing the antitrust exemption currently enjoyed by health insurers. At its core, health reform is all about ensuring that American families and businesses have more choices, benefit from more competition, and have greater control over their own health care. Repealing this exemption is an important part of that effort.

Today there are no rules outlawing bid rigging, price fixing, and other insurance company practices that will drive up health care costs, and often drive up their own profits as well.

So, is "" worth the $8.7 million dollar expense of making it?

Well, that depends on who's asking the question, doesn't it?

If the federal agency in charge finds it useful to temporarily provide voters with the illusion that they're shopping for deals, then yes, it's probably worth it.

If you're a consumer who will ultimately pay at the end of the day whatever HP and Dell have agreed you will pay in your state, then maybe it's not that wonderful of a deal.

Is it worth the investment?

Is a big web site in which you shop for cable TV from the one monopoly that provides your area with service worth the investment? Yes for them, maybe not so much for you.

Is it worth the investment to have a government web site in which mandated-by-federal-law consumers can look up the only price-fixed health insurance plans available to them in the state in which they happen to be trapped with their un-sellable, bottom-dropped-out value homes?

You tell us, Kate Pickert.

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