by Steven Brill
But WellPoint, which was the only insurer she could initially find selling insurance on the individual market in Nevada, didn’t care. Because of her preexisting condition, she was rejected. She then found a plan from another insurer. But because of her prior condition, it was so costly and had such a high deductible that after a few months of paying premiums she leaped at the chance when a neighbor told her about an $8.50 per hour job at the airport that provided full insurance.
It was her only workable alternative.
Insurance plans offered by large employers, called group plans, do not screen individuals for their health history or even their age. That’s because the “pool” of people to be insured is large enough that the risks among them average out—which is what insurance is supposed to be about: large groups of people paying premiums in order to share the risk that some of them will need help.
But unlike with Romneycare in Massachusetts, when insurers sold policies to individuals in Nevada and the rest of the country they were allowed to discriminate. Indeed, discrimination was their business model. The individual market was premised on the insurer gauging the risk—which is called underwriting—of each person applying for insurance.
In that sense it was not really insurance at all, because it was not about a large group covering for the losses of one of its members. Rather, it was about the insurance company making a bet on Mary Fowler’s risk of getting sick. Only it was making a bet using data about Mary Fowler’s age, her health history (which she had to supply to them in pages of excruciating detail and which she had to tell the truth about or the insurance would not apply), and her lifestyle and circumstances. (Did she smoke? Was she likely to get pregnant? How old was she?)
All that data—all that underwriting expertise—gave the insurers a far better sense of the odds than Mary Fowler could ever have. Think of it in terms of another Las Vegas bet. Underwriting was like card counting in blackjack, where the player who can keep track of all the cards that have been played has an advantage in deciding whether to draw another one. Casinos kick out card counters because they believe a good counter’s skill puts the house at a disadvantage. With health insurance underwriting, it’s the house that always had the advantage. They accept your premiums only when the data tells them it’s a good bet.
A TOUGH INSURER HIRES A REFORMER
WellPoint, the insurer that rejected Mary, traced its roots to those schoolteachers in Dallas who signed up for hospital insurance under the Blue Cross brand in 1929.
From that quiet start, insurance plans from Blue Cross and Blue Shield, which was launched in the 1930s as insurance covering doctors’ care, began to proliferate through the first half of the twentieth century. The Blues, as they were called, were the leading source of private, employer-sponsored insurance.
As the plans began shooting up across the country, the originators of the first Blues formed an association that claimed the Blue Shield and Blue Cross trademarks and logos as their intellectual property. They then licensed them to newcomers in other states and regions, so there would be only one Blue in each place. There would be no competing Blues in any region. The association itself remained a nonprofit organization, although most of the insurers licensing the Blue name soon transitioned into large profit makers.
By 2007, having recently merged with another Blue licensee called Anthem, which dominated California, WellPoint had become the country’s second largest health insurer, insuring one in every nine Americans and recording more than $60 billion in revenue and $5 billion in pre-tax income.
The company was known among industry regulators as one of the tougher, more consumer-unfriendly industry giants.
Mary Fowler was certainly no fan.
Which caused a bit of embarrassment for her daughter Liz during Liz’s first day at her new job in 2007—at WellPoint, where she had become vice president for public policy.
Bob and Mary Fowler had come to visit Liz in Washington that day. When Mary, making small talk, told one of Liz’s coworkers that she was now living in Nevada, the coworker gushed, “That’s great. We’re the leading insurer there. You should buy our policy.”
“I tried and you rejected me,” Elizabeth’s mother shot back.
FROM THE START, Liz Fowler had been concerned that WellPoint might not be a good fit.
That was because before arriving at WellPoint, Fowler, who by then was forty, had spent her career pushing healthcare reform. She had evolved into a moderate on the subject, because she thought moderate reform, as opposed to a single-payer-style upheaval, was all that was likely to be achievable, if that. But at WellPoint—which in 2007 was fiercely (and successfully) leading the fight against Arnold Schwarzenegger’s Romney-style proposal for California—even moderate change was to be resisted at all costs.
Fowler had come to WellPoint from a senior position working on healthcare for Max Baucus of Montana, the senior Democrat on the powerful Senate Finance Committee. She had decided to make a career change because Baucus had lost a lot of his friends among Democrats after he supported President George W. Bush’s 2003 legislation to extend prescription drug coverage to people on Medicare, a program called Medicare Part D. The rank and file Democrats’ objection to the Bush law was that while it did extend a benefit to seniors, the benefit was not enough, mostly because there was a huge gap in their coverage, later dubbed the “doughnut hole.” Besides, the law was a budget buster, a completely new and unpaid-for entitlement that was aimed, the Democrats charged, at currying favor for the Republicans with seniors while creating huge deficits for the next president.
Worst of all, the Democrats saw the law as an enormous handout to the pharmaceutical companies and their lobbyists, who fed so much money into Republican campaign coffers; the law prohibited Medicare from negotiating discounts with the drug companies, even though private insurers routinely negotiated such discounts.
Fowler thought her boss’s role in creating Part D was honorable and even right on the merits because the new law provided important aid to seniors. However, she also knew that the fallout would limit his clout on Capitol Hill, at least for the next few years.
So why not take a breather from the Hill and earn more money with less frustration?
When she decided to leave Baucus, Fowler resisted offers to become a lobbyist. WellPoint told her that she would advise broadly on policy, not lobby her old colleagues. She would not make nearly the money she could make as a lobbyist, but she would earn more than if she stayed in government, and, she thought, she could feel good about her work.
“Healthcare policy is what I know,” she later told me. “If I can’t do that and need to stay in Washington [where her husband works as a lawyer], what am I going to do? Open a doggy day care center?… I didn’t want to be a lobbyist and call my old friends and colleagues and say ‘Hey, I have this thing I want to come talk to you about.’ But I was okay with doing broad policy analysis.”
STILL, WELLPOINT WAS a long way from where Liz Fowler had started.
As the daughter of a family practitioner in Minnesota, Fowler had always been interested in healthcare, so much so that she was a premed student when she enrolled at the University of Pennsylvania. Her interest in being a doctor waned as she began to hear more from her father about how his practice had become less satisfying because of all the Medicare rules, insurance paperwork, and other distractions that had come to dominate his workday.
Fowler’s focus shifted completely when she took a class in healthcare policy as a sophomore. She had vaguely understood that some of her father’s patients had faced crushing medical bills, which had contributed to her father’s overall unhappiness with his practice. But she was amazed to learn that most developed countries around the world had figured out how to provide affordable healthcare for all or most of their people. Fowler was stunned, as only a twenty-year-old college sophomore could be, that there was something her country was not best at and, in fact, in her professor’s estimation had become one of the worst at.
She was soon determined to be part of changing that. She liked what she had learned in class about the Swedish system so much, she recalled, “that I even tried to take Swedish.”
After graduating from Penn in 1989, Fowler went to work as a policy analyst at Medicare. Two years later, she left to get a doctorate from the Johns Hopkins School of Public Health. While at Hopkins she worked as a researcher for Gerard Anderson, a leading healthcare economist. (Though a highly regarded academic, Anderson’s view of healthcare in America boiled down to this blunt prescription: “The prices are all too high.”)
Fowler also spent a summer working at the mecca of single-payer advocates—the English National Health Service. Established after World War II and funded through general taxes, the NHS generally provides all medical care for free to all residents. Healthcare spending as a percent of England’s gross domestic product is about half of what it is in the United States, while healthcare outcomes are generally better.
Fowler had then followed a man she was serious about back to Minnesota, where she decided to enroll at the University of Minnesota Law School.
After graduation and following an unhappy stint at a prestigious Washington law firm, she took her first job on Capitol Hill in 1999. By 2005 she had become Baucus’s chief Democratic counsel for healthcare on the Senate Finance Committee.
BY THE END OF 2007, Fowler, too, could see the stars aligning. She had watched from a vantage point that made her uncomfortable—a huge insurance company fighting reform—but she could see momentum building. Costs and coverage had become such a burden for people like her mother that the forces for reform were stirring again. Healthcare was suddenly getting attention as a big issue in the coming presidential election—an election that seemed likely to put the Democrats back in charge.
Meantime, the businessman Republican governor of Massachusetts seemed to have gotten together with Ted Kennedy to cook up a plan that had produced bipartisan praise and, in fact, seemed to have revived a spirit of bipartisan comity. That was the kind of environment in which Max Baucus could do his best work.
Maybe it was time to go back.
CHAPTER 3
MAX, BARACK, HILLARY, BILLY, AND THE GATHERING CONSENSUS
March–May 2008
BY MARCH 2008, LIZ FOWLER HAD RETURNED TO THE SENATE FINANCE Committee. With the Democrats having retaken the Senate majority in the 2006 elections, her boss, Max Baucus, was now chairman.
Baucus told Fowler and the rest of his staff that he was determined to set the stage for systemic healthcare reform in 2008. Mindful of the precedent set by Romneycare, he thought he could pull it off whether a Democrat or Republican was elected that November. Baucus, a conservative Democrat, prided himself on doing deals with Republicans. He considered himself the ultimate doer–deal maker, not a partisan barn burner.
When Baucus, then sixty-six, met with his staff to discuss healthcare, he often talked about Lester Skramsted, whose picture Baucus kept on his desk. Eight years before, Baucus had befriended Skramsted in a living room in Libby, Montana, at a gathering of people stricken with asbestosis, a chronic and often deadly lung disease. Extensive litigation had proven that their illness was the result of an environmentally unsafe mining operation operated in Libby by W. R. Grace, the giant chemical and materials company. Even family members of workers like Skramsted had been infected when the miners carried the asbestos dust home every night on their clothing. Their children sometimes fell ill just by sitting on their fathers’ laps. “It was so sad,” Fowler recalled.
Settlements of liability claims against Grace were not sufficient, in Baucus’s view, to cover the medical care necessary over the duration of their often-terminal illness; and Baucus had long cited the struggle of Skramsted (who died in 2007) and his family in talking about the need to give Americans better healthcare protection.
A graduate of Stanford and Stanford Law School, Baucus had worked in Washington for the Securities and Exchange Commission before returning to Montana to practice law. He was elected to the state legislature in 1973, the U.S. Congress in 1974, and the U.S. Senate in 1978.
At first impression, Baucus’s genial demeanor, punctuated by a habit of bursting into a grin even after he hears or says something serious, often make him seem less intelligent or substance-oriented than he is. Yet, Fowler recalled, “Max was really serious about healthcare. He wanted to do something big and thought this was the time.”
“So did I,” Fowler continued. “This was the best opportunity in one hundred years of people talking about doing something.”
During that one hundred years, Fowler added, from Theodore Roosevelt to FDR to Truman to Clinton and to Romneycare—the proposals had kept moving further to the right, with the Democrats moving closer to the Republican position. “If we waited any longer, who knew what we would end up with?”
Baucus decided that the smartest way to proceed would be for Fowler and the rest of his staff to plan a series of hearings on healthcare reform that would culminate in a bipartisan Capitol Hill “summit” late in the spring of 2008. That would, in turn, produce draft legislation or, failing that, a “white paper” summarizing the myriad healthcare-related policy issues and the chairman’s take on them.
“IS THERE ROOM FOR OLD TEDDY?”
About a month before Fowler and her team started putting together those hearings, Barack Obama had received the call he had been hoping for since his campaign had begun a year earlier.
“Is there still room on that train for Old Teddy?” Senator Edward Kennedy asked Obama on January 28, 2008.
According to his widow, Vicki, who was with Kennedy during the call, and to a top Obama campaign aide, Kennedy did not make support of healthcare reform or anything else a quid pro quo during the call, which came to be considered a pivotal moment in the Obama campaign. But Kennedy did mention his career-long cause, saying words to the effect of “Oh, by the way, you know how I feel about healthcare and I really appreciate your commitment to reform.”
Hillary Clinton was furious about the Kennedy endorsement. Had she been in the room during that call hearing Kennedy remind Obama of the Massachusetts senator’s devotion to healthcare reform, she would have been still more beside herself. For the principal issue Obama had found to separate himself from Clinton during the 2008 primary season had to do with healthcare.
“SHAME ON YOU, BARACK OBAMA”
As she had in Las Vegas at the beginning of the campaign, Clinton had continued to tout the individual mandate as a key part of a reform package. Ted Kennedy had championed the mandate from the time he had sung its praises in the 2006 Romneycare law.
Obama had not simply continued to exclude a mandate from his plan. His campaign was now distributing flyers in battleground states attacking Clinton for wanting “to make you buy health insurance you can’t afford.” The flyers didn’t mention that the Clinton plan—in fact, the most expensive and core element of the Clinton plan—called for government subsidies for those who could not afford the insurance.
On February 23, 2008, less than a month following Kennedy’s Obama endorsement, Clinton held a press conference in Ohio, where she did not hide her fury at the man who was now her sole opponent. It produced probably the angriest news clips of the Democratic primary.
“Time and time again,” Clinton thundered, holding up an Obama campaign flyer, “you hear one thing in speeches and then you see a campaign that has the worst kind of tactics, reminiscent of the same sort of Republican attacks on Democrats.… Since when do Democrats attack one another on universal health care? I thought we were trying to realize Harry Truman’s dream. I thought this campaign finally gave us an opportunity to put together a coalition to achieve universal health care. That’s what Senator Edwards and I talked about throughout the campaign. Just because Senator Obama chose not to present a universal health care plan does not give him the right to attack me because I did.… So shame on you, Barack Obama,” she spat into the microphones, supplying a sound bite
that made its way into every 2008 primary highlight reel.
Apart from their differences over the mandate—which Obama maintained was unenforceable and unnecessary because people would not need to be forced to buy affordable insurance—Obama had by that point developed a plan that was almost the same as Clinton’s and Romneycare: Employers would be required to keep providing insurance; exchanges would be set up so that people without employer coverage could buy in the individual market in a competitive environment, with subsidies given to families who couldn’t afford the premiums; and insurance companies would not be allowed to discriminate against anyone on the basis of preexisting conditions.
As with the other candidates, Obama had now met enough people on the campaign trail whose stories he could use to punctuate his plea for universal coverage. Within three months of his Las Vegas flop, he began speaking powerfully about the Chicos family, small business owners in Decorah, Iowa, struggling to pay monthly insurance premiums that had swollen to $1,000 a month because Mr. Chicos had had cancer.
But Obama never mentioned a mandate.
Gruber, the MIT professor and Romneycare co-inventor, was a Democrat. But he had not signed on with Obama, Clinton, or anyone else during the primary campaign. He had met with Obama in 2006 when Obama was on the verge of entering the race, and found him “interested in the issue and fairly knowledgeable,” he recalled. “But I thought Hillary was likely to win, and, in any event, because of my relationship with Romney”—who was running for the Republican nomination—“I decided to stay out.”