The Problem with Blaming ‘Private Sector’ Companies for the Problems with the Obamacare Website

by Oct 13, 2013Health & Vaccines, Liberty & Economy9 comments

Aha! So, you see, the problems with are not the government's fault, but the private sector!

The government website where people are supposed to be able to go online and sign up for health insurance under Obamacare has proven incredibly dysfunctional. The Obama administration and Obamacare supporters tried to argue this was just because so many people were eager to participate that the high traffic caused the problems. That spin couldn’t withstand much scrutiny. The New York Times in a recent article acknowledges that the main problem was the website’s design, but adds its own spin:

The technical problems that have hampered enrollment in the online health insurance exchanges resulted from the failure of a major software component, designed by private contractors, that crashed under the weight of millions of users last week, federal officials said Monday.

Aha! So, you see, the problems with are not the government’s fault, but the private sector! The private sector built a site with problems including the following:

In some cases, the Web site does not recognize users who established accounts before Oct. 1, when the online marketplaces opened for consumers to shop for insurance. Other users are prevented from establishing accounts. Some who successfully established a marketplace account received an e-mail asking them to verify their e-mail addresses, but the link provided did not work.

The identification of the software component as the main cause of the Web site’s problems was the most detailed explanation that federal officials have given since the online marketplaces opened.

So, what private contractors built the site?

The prime contractor for the federal exchange — CGI Federal, a unit of the CGI Group, based in Montreal — and the company operating a “data services hub” for the government — Quality Software Services Inc., a unit of the UnitedHealth Group — told Congress at a hearing on Sept. 10 that they were ready for a surge of users when enrollment opened on Oct. 1.

But here’s the thing: these are not “private sector” businesses. Hunter Lewis points out the fallacy here in his new book Crony Capitalism in America:

The term Government Sponsored Enterprise (GSE) is often applied to so-called private enterprises that have been founded by government and still enjoy public support of one kind or another. Pre-eminent examples include the mortgage giants Fannie Mae and Freddie Mac. It is appropriate, however, to apply the term GSE more broadly … [to] “private” firms and organizations [that] reach out and try to ally themselves with public officials.

Lewis provides a long list of businesses that do not operate within a free market, but through alliance with government. The distinction is immensely significant.

In a free market, individuals engage in voluntary exchange for mutual benefit, but government uses force to expropriate wealth from some individuals to redistribute to others.

The voluntary exchange of the free market creates prices determined by supply and demand that help to direct scarce resources towards productive ends as determined by the subjective choices of consumers, but the forceful expropriation of government directs resources away from those ends and towards other purposes determined at best arbitrarily by bureaucrats, or, worse, for corrupt reasons.

Any business that relies on government contracts by definition is not operating in a free market and so it is misleading to characterize any such business as belonging to the “private” sector. The defense industry, for example.

Neither are they strictly “public”, true, since the government doesn’t own these businesses. It is not a socialist system. Instead, what we see is a merger of state and corporate power. This is what Mussolini called “corporatism”. Otherwise known as “fascism”. I’ll just call it the “private-public sector” to distinguish it from the truly “private” sector.

If you click the link provided by the Times to visit the CGI Federal website, you’ll find:

For more than 36 years, U.S. defense, civilian and intelligence agencies have partnered with CGI to support their mission-essential needs at every stage of program, product and business lifecycle. These partnerships fuel our deep understanding of the challenges and opportunities facing our clients and inform the development of solutions to help them improve outcomes and maximize results.

If you click the link to the Quality Software Services, Inc., website, then from the menu select “Strategic Partners” and “Clients“, you’ll find:

QSSI delivers solutions that improve how Federal, State, and Commercial organizations service their constituents and stakeholders. We focus on delivering cost savings and improved efficiency across IT projects of all sizes.


As a CMMI Maturity Level 3 Certified organization, QSSI provides consulting expertise on multi-year projects across several Federal agencies and State Governments.

We have nearly a decade of experience in the full life cycle management of IT Practice Areas for application in:

  • Government-to-Citizen
  • Government-to-Business
  • Government-to-Government

Does this look like the “private” sector to you?

I highly recommend Hunter Lewis’s two new books Free Prices Now! and Crony Capitalism in America.

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About Jeremy R. Hammond

About Jeremy R. Hammond

I am an independent journalist, political analyst, publisher and editor of Foreign Policy Journal, book author, and writing coach.

My writings empower readers with the knowledge they need to see through state propaganda intended to manufacture their consent for criminal government policies.

By recognizing when we are being lied to and why, we can fight effectively for liberty, peace, and justice, in order to create a better world for ourselves, our children, and future generations of humanity.

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  1. Jorge's Jungle

    I place blame on the government and the parties contracted to develop the website regardless of how the line between private and public sector is blurred. You’re approaching this from the libertarian perspective which makes it a private sector vs. public sector issue. And yes I know NYT pointed the finger first. It’s an interesting angle, but I have a suggestion. Why not simply place blame on the government contract bid process? It’s the root of the grey areas you’ve mentioned between the private and public sectors, and eliminates much of the politically charged incantations between political parties.

    BTW, html enabled comments. Nice.

    • Jeremy R. Hammond

      “I place blame on the government and the parties contracted to develop the website regardless of how the line between private and public sector is blurred.”

      So do I.

      “You’re approaching this from the libertarian perspective which makes it a private sector vs. public sector issue.”

      The whole point of this post was rather to CORRECT the “private sector vs. public sector” misconception.

      • Jorge's Jungle

        You did that, but did so in a way that overlooked the problem causing this public-private sector blur. Right now it’s a bit like talking about earthquake aftershocks without ever mentioning the big quake. I think this might lead to misconceptions about government.

        I should mention I’m not criticizing what you wrote at all, but rather think this article is interesting and deserving of a Part II follow-up to discuss the problems associated with the government bid process, and how it creates this public-private sector blur.

      • Jeremy R. Hammond

        I don’t understand what you mean. How things are bid has nothing to do with my point.

      • Jorge's Jungle

        Yes, it does. The government bid/contract work process creates the “private-public sector” as you call it. I’ll try to explain without getting too wordy.

        First, let’s say there are 100 private sector companies interested in bidding on a new and improved ACA website. But…

        -Bidding on federal government work requires special knowledge and experience to process the paperwork required. It’s a specialized field in and of itself. This eliminates the ability for many companies to bid. Subtract 80 businesses.

        -Many contract jobs require special security clearance. Subtract 10 more.

        -Many contract jobs require previous experience working for the federal government (or a very impressive portfolio, referrals, lobbying, etc.) Subtract 8.

        So now we’re only looking at 2 companies capable, qualified, and established enough to do the work. They’re large companies, lobby heavily, have a team of lawyers, etc. They almost always get the government work, and that’s basically their only cash cow. They’ve had to essentially build their business model around securing these bids, and they’re too expensive for anyone other than government and large corporations to hire at this point. These 2 companies end up competing with each other often, and both play a game of thrones. Think corruption, lobbying, lack of competition, etc.

        Before you know it the lines are blurred. They’re quasi private-public sector companies.

      • Jeremy R. Hammond

        I know how bidding works. The assertion that government selects the most capable and qualified companies to contract with is dubious, but that’s tangential. I still don’t understand what you mean by saying I ‘overlooked’ the bidding process. Again, HOW a company comes to work for government is irrelevant to my point that it is misleading to describe government contractors as “private” sector businesses. It seems clear that you agree with this point, so I don’t understand what you’re contesting about what I said.

      • Jorge's Jungle

        “Overlooked” might not be the best word. Please don’t let that hang you up.

        I’m not contesting what you said in the article or asserting that the government always selects the most capable and qualified contractors. I mentioned lobbyists and corruption, and thought it was implied this led to not always selecting the best guy for the job.

        Anyways, let me back up here for a second.

        When most news outlets speak of the private-public sector, as you call it, they start by talking about what causes it. Government bid process policies –> powerful entities –> lobbying + corruption –> private sector contractors in bed with government = private-public sector blurred lines/ corrupt system.

        What they don’t do, however, is expand upon that idea to discuss the trickle down problems this creates. They don’t talk about how this erodes the free market, or how it creates a fascist-like entity as you described. I feel this is a more libertarian-centric line of thought, so it’s not going to appeal to many people. (Anytime fascism is brought into a discussion it’s as if the mic cuts out.) What is more universally understood, however, is the corruption which leads to the private-public sector. If you continue this line of thought to tell about the problems this creates it makes, in my mind, a more complete argument to support your ideas (which I agree with.) This is why I thought it would be nice to do a part II to put everything together in one big picture. Plus, I think it would be great if you 1UP’d the media by taking it even further.

        I know that’s not the intention of your article. I was just trying to make a suggestion that would more or less appeal to the masses.

      • Jeremy R. Hammond

        If people want a fuller look at the kind of corruption that drives this process, I would recommend Lewis’s book “Crony Capitalism”, linked to above at Amazon.

      • Jorge's Jungle

        That’s cool. Not my intended purpose for making the suggestion, but I get it.

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