Commentary: How to make health care reform exchanges economically viable

I always have had an ear for conspiracy theories. I still watch Oliver Stone’s “JFK” almost religiously and freeze frame during the shooting incidence. But when it comes to the health care exchanges created by the Patient Protection and Affordable Care Act, even I cannot start to consider a deep-seated conspiracy. The more I look at it, the more obvious the answer becomes: It's simple economics, that greatest leveler of them all.

Although there were seven states/coalitions that received the early innovator grants to set up their exchanges — ranging from just above $6 million to Maryland, all the way to more than $50 million to Oklahoma — two of the top three grantees, Oklahoma and Kansas, have returned the grants. And by the whispers of the conversations in the corridors of power, there may be others that may follow in their footsteps.

What’s going on? States simply do not have money to support an insurance exchange once federal support runs out at the end of 2014. To accept the grants — thereby committing them to an operational exchange — is an unthinkable option at this stage. They simply cannot perceive the ROI on this.

At one stage, it sounded pretty good because the grants would have given the states the opportunity to modernize their age-old legacy systems for other social services, like the Children’s Health Insurance Program and Medicaid, while working on the implementation of exchanges. I am sure everybody thought, however briefly, that there could be an opportunity to integrate them all under a single state-of-the-art system.

The problem is that states started realizing that it was not that easy to integrate those systems and that even if state lawmakers succeeded, they still could not see the offsetting revenue source for the incremental support cost for the uninsured population. I am sure, once the economic reality became clear, the sheen started to come off of the federal offer.

As we all know that the economy of scale plays a huge part in any such endeavor, let me propose a slightly radical idea here: Why have 50 exchanges in 50 states? Why not have a national exchange, or five or six regional exchanges? This setup will have two primary beneficial side effects:

1. The geographical restrictions borne by some national payers and of most all local payers will be alleviated to a large extent. You play on the national/regional exchange and if you get a set of members from a region that you have ignored hitherto, tough luck. For you to participate in the opportunity to grab a share of 40+ million uninsured prospective members, be prepared to support those areas that you have consciously ignored ‘til now.

2. The feds don’t have to spend the hundreds of millions of dollars on these early innovation grants. I am sure some smart people sitting in the Health and Human Services Department can come out with a services-oriented architecture that can accommodate the core requirements of all states with enough open hooks to accommodate unique state-specific characteristics as add-on.

I know I may be proposing a simplistic solution to the seemingly insurmountable problem of ever-increasing health care cost and social responsibility to provide cover for all, but this may an instance where Occam’s razor — the theory that the simplest solution is the correct solution — makes the most sense.

Sabharwal is chief solution architect in the Healthcare and Life Sciences unit at Infosys Technologies LTD. His commentary, excerpted and edited here, originally appeared on a blog for Health Data Management, a SourceMedia publication.