by Steven Brill
Bernanke allowed that creating an independent board to control health costs might not be a bad idea. He even offered as an analogy the way elected officials had shielded themselves from politically unpopular yet necessary decisions related to closing military bases by setting up an independent commission to choose which would be the unlucky cities and towns that suffered the shutdown of such large employers. Congress then had to vote the plan up or down, with no changes.
What was more surprising was how Grassley, a Republican, seemed to warm to the idea of an independent panel of Washington experts making cost cuts affecting the healthcare people would receive: “We know … that Congress does not seem to have the political guts to do anything about it now,” Grassley told Bernanke. “So I do think … that trying to find some mechanisms … might be the way to go forward.”
Later in the day, even conservative senator Mike Crapo, a Republican from Idaho, said he thought that “having some type of a base closure type approach to this” was a “good idea.”
“NO ONE WANTS TO TALK ABOUT COST”
Following Bernanke was a panel that included MIT’s Jonathan Gruber. He pointed to Romneycare’s success in expanding coverage, while conceding that costs had exceeded the state’s budget projections.
Picking up on the subject of costs, Craig Barrett—the CEO of Intel, who had formed a business-labor coalition with Andy Stern and his service employees union to push healthcare reform—offered this indelible description of the problem: “Medical costs go up by how much each year? One Iraq war. The U.S. increases its health care costs by one Iraq war per year.”
The Intel CEO’s frustration had mounted as he had listened to the discussion, Barrett said, because it seemed to focus only on coverage, not costs. “I always come back to the issue of cost.… No one wants to talk about cost because that’s tough,” Barrett said. “As a bigger employer, we are very happy to provide health care costs. As our health care costs approach a billion dollars a year in a couple of years, it’s going to be increasingly an economic disincentive to do business in the United States.”
Other panels covered root causes of the crisis—obesity, smoking, lack of access to routine checkups—and the need to deal with them. Everyone agreed. Who wouldn’t? Likewise, everyone seemed to agree that any reform would have to include easier access to preventive care, such as mammograms to catch breast cancer early. No one spoiled the party by dwelling on the complications, such as whether certain preventive tests created so many false alarms that they raised both costs and anguish, much less whether the special interests that profited from those tests would ever allow Congress to scrutinize them or exclude them from the list of easy-to-access, subsidized preventive care. (Would hearing tests count? What about prostate cancer screenings of questionable value?)
A LESSON IN POLITICAL SCIENCE
Among the most thoughtful panelists was Peter Orszag, then the head of the nonpartisan Congressional Budget Office, or CBO. He summarized the obstacles involved in eliminating what he said was the $750 billion a year (at the time, almost exactly the same as the entire defense budget) that America wastes on excessive healthcare spending.
“The political scientists will say,” Orszag said, “that a common problem is, you’re not in a good situation when there’s a concentrated interest, [where] someone’s income is being affected, and diffuse benefits.” In other words, reform will be difficult because it would mean taking money away from those who directly benefit from it—people who sell healthcare, and will be motivated to hire lobbyists—in order to benefit the more general population who, because of insurance, won’t get the direct benefit of the healthcare savings.
If that hurdle could be overcome, Orszag added, the best ways to cut costs would be to use information technology to judge and act on the comparative effectiveness of drugs, medical devices, and other treatments.
Moreover, the system had to be overhauled to pay doctors and hospitals based on their results, not on the fee-for-service basis of how many times a doctor saw a patient or how many tests the doctor ordered. This was a favorite theme of Orszag, an economist with degrees from Princeton and the London School of Economics.
There was unanimous agreement that something had to be done about fee-for-service, too.
But when it came to specifics, it was a lot easier to focus on providing more care to more people than on where to cut costs in order to pay for that care.
Jon Kingsdale’s testimony crystallized the coverage-cost dichotomy, and the differing degree of political difficulty associated with each. Kingsdale, a veteran manager of health insurance plans, had run Romneycare from the beginning. He clearly convinced the senators and their staffs that Romneycare’s three-legged stool—no exclusions for preexisting conditions, an individual mandate to buy insurance, and subsidies to buy it for those who needed help—had worked to spread insurance coverage in Massachusetts.
But midway through his appearance he echoed Orszag’s political science lesson about spreading coverage being a lot easier than tackling costs: “I think politically … which is something you have to think a lot about, that we made the right choice. We went for coverage, frankly, before we went for specific cost containment. Though there is broad agreement on the need for containment, any particular cost containment idea means reducing revenue flow to somebody, and there is always stronger opposition from even a smaller party than there is broad depth of broad support. So, I think that’s the right order.… So we’re now wrestling with cost containment.”
In other words, Intel’s Barrett was right: “No one wants to talk about cost because that’s tough.”
One discordant note was sounded by Jeanne Lambrew, a professor at the Lyndon B. Johnson School of Public Affairs, who had worked on healthcare in the Clinton administration. A champion of Medicare and Medicaid, Lambrew disagreed with those touting the private marketplace as the prime solution, noting, “It is hard to imagine a private system that functions without public programs filling in those gaps.… I think the interesting part about public programs that we often underestimate is they are standard setters. They are critical to leveraging the types of reforms that we would like to see in our health care system.”
That point of mild debate notwithstanding—and with thirty-two panelists, plus dozens more experts asking questions from the audience, there were many such differences—by the end of the day, Baucus’s summit had the “Kumbaya” feel of a university commencement.
Or, as Nebraska Democrat Kent Conrad put it, “I want to say this: When I came here twenty-two years ago, this is what I thought the United States Senate would be like.” Pausing while the audience laughed, Conrad added, “Boy, has this been a rare experience. I want to applaud Chairman Baucus and Senator Grassley. This is what it should be like.”
Baucus ended the day on the same upbeat note. “There is more agreement than there is disagreement,” he said. “I find that very, very encouraging.… The stars, I think, are aligned about as well as they are going to be for us to really move, and we have an opportunity in the next administration, whoever it might be, to tackle this.”
Three weeks later it seemed that the most likely next administration was, in fact, not going to move.
CHAPTER 5
A NEW PRESIDENT COMMITS, AND HIS CAMP DIVIDES
July–November 2008
UNTIL HILLARY CLINTON HAD CONCEDED THE DEMOCRATIC NOMINATION to Barack Obama nine days before the Baucus summit, on June 7, 2008, Neera Tanden had been the Clinton campaign’s chief domestic policy adviser. In fact, she had been in charge of debate preparation the night Clinton outshined Obama in Las Vegas the year before.
By 2008, she was a hardcore Clinton loyalist, having worked on Hillary Clinton’s Senate staff and Senate campaign, and, before that, as deputy domestic policy adviser in the Bill Clinton White House.
In between the Clinton White House and the Hillary Clinton Senate race, Tanden had worked at the Center for American Progress, the left-of-center think tank f
ull of Clinton administration alumni that had organized the 2007 Las Vegas debate.
Tanden, who was thirty-eight in 2008, had a classic only-in-America résumé: The child of parents who emigrated from India, her mother had been forced to go on welfare and food stamps after Tanden’s father left when she was five. By the time Neera was twenty-six, she had graduated from UCLA and Yale Law School and gone to Washington, where she quickly moved up the ladder through a variety of staff positions.
Jason Horowitz, in a memorable 2011 profile in The Washington Post, described Tanden’s D.C. persona this way: “At 5 feet 2 inches tall, with an infectious laugh and impatience for ineptitude, Tanden brims with a moxie that can shift to sarcasm. Critics and allies alike describe her as an effective molder and messenger of intricate policy, as well as an expert practitioner of in-house politics. Friends say she is remarkably well-rounded: a model wife and mother, ideal company for a glass of wine, a perfect partner for spontaneous office dancing.”
Tanden had hesitated at the offer to join the Obama campaign as senior domestic policy adviser. She was close and fiercely loyal to Hillary Clinton. However, now she wanted Obama to win, badly.
So by the end of June she and her artist husband and two young children had moved to Chicago to join the campaign.
A few days later, Tanden attended her first meeting with the new boss and his senior staff. Sitting around a conference table were Obama, campaign manager David Plouffe, and senior campaign adviser David Axelrod, as well as the pollsters who worked for Axelrod. The group began to run through how the campaign was going to deal with various policy issues. When healthcare came up, an Obama pollster seemed to shrug it off. His data showed, he said offhandedly, that while healthcare reform might have been a good issue in a Democratic primary, it didn’t score well in a general election. In fact, pushing it might scare off independents. “We should forget it,” he said.
Axelrod and Plouffe nodded in agreement.
“What the f——,” Tanden thought to herself. “I just moved my family out here and was told I could concentrate on healthcare while the others did the economy.”
But then Obama broke in. “If I become president, I’m going to try to do healthcare fast. And I can’t do it fast if I don’t talk about it in the campaign. So we have to talk about it.”
As they left the meeting, Obama took a relieved Tanden aside and casually said something that left her wondering whether to cry or laugh. “You know,” Obama said. “I think maybe Hillary was right about the mandate.… I’m not going to talk about it in the campaign, but we may need it.”
THE OBAMA STUMP SPEECH
Through the fall, Obama talked repeatedly about the healthcare crisis and how he was going to fix it.
His healthcare stump speech tended to stick to the basics, never mentioning a mandate and focusing on what the polls said was the best target—insurance companies.
“If I am president, I will finally fix the problems in our health care system that we’ve been talking about for too long,” he promised a Miami campaign rally in October. “My mother died of ovarian cancer at the age of fifty-three, and I’ll never forget how she spent the final months of her life lying in a hospital bed, fighting with her insurance company because they claimed that her cancer was a preexisting condition and didn’t want to pay for treatment. If I am president, I will make sure those insurance companies can never do that again.
“My health care plan,” he continued, “will make sure insurance companies can’t discriminate against those who are sick and need care most. If you have health insurance, the only thing that will change under my plan is that we will lower premiums. If you don’t have health insurance, you’ll be able to get the same kind of health insurance that members of Congress get for themselves,” he added, referring vaguely to how his planned insurance exchanges would gather people in large risk pools the way government employees’ insurance did. “And we’ll invest in preventative care and new technology to finally lower the cost of health care for families, businesses, and the entire economy. That’s the change we need.”
Beyond the fact that Obama was misstating or not remembering his mother’s fight with her insurance company correctly and would be caught on that in a book published four years later,*2 the statement in the stump speech that people would be able to keep the insurance they had (but would pay less for it) would later come back to haunt him.
However, in the fall of 2008, healthcare turned out to be a winner, in large part because his Republican opponent’s stance was so weak and tin-eared.
The McCain answer to the healthcare crisis wasn’t the Romneycare solution created by the Republican opponent he had just vanquished in the primaries. Instead, McCain took half of the original Heritage Foundation solution—not the mandate, but the elimination of the tax exemption given to everyone who got health insurance from an employer. With the billions in extra taxes that this would yield every year McCain promised to provide a $5,000 voucher for every family to buy its own health insurance from the incumbent insurers. Now everyone would have the cost-cutting incentive they lacked when their employers bought them insurance. They would become savvy, hard-bargaining customers in the healthcare marketplace because they would have “skin in the game,” as proponents of the plan put it. And with that $5,000 voucher, everyone could go into the market.
To the extent that McCain’s plan was understood by voters at all—and that was questionable, given how McCain de-emphasized healthcare on the stump—it was a loser on multiple counts. It portended exactly the kind of mass disruption that people instinctively feared because everyone with a job might lose their insurance. It constituted a tax increase for those Americans for whom the current tax exemption might be worth more than a $5,000 per family voucher. It still put people with preexisting conditions at the mercy of insurance companies. And it put everyone up against the challenge of trying to buy insurance using a voucher that was not likely to cover the full cost.
What mattered more than the details, according to polling done at the time that showed McCain overwhelmingly on the losing side of this debate, was that McCain’s plan threatened to upend the employer-based system that most Americans were used to.
TRANSITION INFIGHTING
Obama did not mention healthcare in his victory speech in Chicago’s Grant Park on Election Night, 2008. Given the history of the occasion and the fact that the country had been plunged into an economic crisis, that was no surprise.
But beginning the next day and through the early days of the transition, a dynamic played out that was similar to what Neera Tanden had gone through in her first meeting with Obama and his staff in July. Most of the Obama people, including newly appointed chief of staff Rahm Emanuel, didn’t want to bother with healthcare in the early days of the administration. They were focused on an economy in free fall, and were leery, even dismissive, of any distraction—least of all a distraction that would engage the most powerful lobbies in Washington.
Rattling those cages anytime was a huge risk, as the Clintons had discovered. That was a memory especially indelible to Emanuel, who had worked in the Clinton White House. Why launch some big healthcare proposal in the middle of a financial crisis when Congress was going to be asked to act quickly on a huge economic stimulus bill?
Ironically, some of the people being asked to frame Obama’s economic package disagreed—particularly Peter Orszag, the head of the Congressional Budget Office, who had testified at the Baucus summit in June about the need for, and difficulty of, tackling health costs. Orszag was involved in the transition and was about to be appointed as the head of the White House Office of Management and Budget.
As his testimony before Baucus’s group had suggested, Orszag was consumed with the idea that healthcare was the economy’s Achilles’ heel. Some of his friends considered him a fanatic about it, even linking it to the lanky economist’s obsession with diet and exercise.
Orszag and other economists working on the transition argued to
Obama that, while of course they had to push ahead with the financial stimulus package, fixing the healthcare system was, as Bernanke had told the Baucus panel, a key ingredient in fixing the American economy. Healthcare costs threatened both job growth and the deficit, they reminded Obama.
For Obama, this economic angle was a handy argument to use against aides such as Emanuel, political guru David Axelrod, and Phil Schiliro, who was about to be put in charge of congressional relations. But, Obama later told me, his mind was already made up. “We didn’t have the luxury of working on just one big issue—the times demanded more,” he recalled. “I believed that reforming our health care system wasn’t a side project, but a vital part of rebuilding our economy.… It was clear that we couldn’t address the problem of the middle class falling behind in the long term, without taking on health care in the short term. And we had a once in a generation chance to do it.”
“He was really into healthcare, all the nuances and details,” recalled Tom Daschle, the former Senate majority leader and healthcare policy aficionado who had become an Obama confidant. “He told me about all the people he’d met on the [campaign] trail with healthcare stories,” added Daschle, recounting a conversation he said he had with the president-elect early in the transition. “And he said he was going to do it now.”
Obama’s plan for getting it done sooner rather than later involved Daschle. Within days of being elected, Obama started talking to Daschle about taking over the fight for healthcare reform, either as a healthcare “czar” in the White House or as secretary of the Department of Health and Human Services (HHS).