Waste of Taxpayer Dollars in Exchanges

May 21, 2014

There was massive mismanagement of federal dollars in the implementation of the Affordable Care Act, according to Christopher Conover, adjunct scholar at the American Enterprise Institute, Yevgeniy Feyman, Manhattan Institute policy analyst, and Katherine Restrepo, policy analyst at the John Locke Foundation.

The authors analyzed the taxpayer cost per Obamacare enrollee by adding together the federal grants paid to states to create their exchanges, federal premium subsidies to encourage the purchase of exchange coverage and the estimated amount of cost-sharing subsidies for low-income families purchasing silver exchange plans.

  • Nationally, federal taxpayers spent $4,633 per enrollee that signed up on the exchanges through April 19. That figure varies state to state, as Hawaii spent $ 24,947 in federal tax dollars per enrollee, while Tennessee spent $3,038.
  • On average, federal taxpayers paid 94 cents in subsidies for every dollar in exchange plan premiums. This does not mean that taxpayers covered 94 percent of premium costs, because taxpayers funded not just premium subsidies, but also the administrative costs of running the exchanges. In Arizona, taxpayers paid 63 cents for every dollar of exchange premiums, while Hawaii paid $6.38 for every dollar of exchange premiums.
  • The amount paid by federal taxpayers to cover the administrative costs of setting up and running the exchanges was 19 cents for every premium dollar.
  • Had the federal dollars used to set up the exchanges been incorporated into premiums instead of funded by taxpayers, premiums would have more than doubled in 10 states.

While taxpayer subsidies will in theory be amortized across enrollees over many future enrollment periods, the authors note that many states are getting rid of their exchanges already. Oregon and Massachusetts, for example, have already announced that they are scrapping their exchanges.

  • Nevada and Maryland appear likely to shut down their exchanges as well. In all, taxpayers spent $474 million on the Massachusetts, Oregon, Nevada and Maryland exchanges.
  • Minnesota and Hawaii have also had exchange problems. Looking at those six states, federal taxpayers have spent $834 million to enroll just 270,000 people.

Source: Christopher Conover, Yevgeniy Feyman and Katherine Restrepo, "Obamacare Exchanges Squander Taxpayer Dollars By The Boatload," Forbes, May 12, 2014. 

 

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