by Steven Brill
Baucus came down squarely on the Romneycare model of reforming rather than scrapping the current system by using the three-legged stool: no more exclusions for preexisting conditions; a mandate that everyone have insurance, which they could buy on a “national health insurance exchange” if they could not get insurance at work; and subsidies for what his white paper said were the “90 percent of uninsured individuals” who could not afford to buy policies. Those below the poverty line would go into an expanded Medicaid program; everyone else would get subsidies to buy on the exchange. In addition, all non-small businesses had to offer insurance to their workers or pay a penalty.
Those were the basics, which might have been enough for the campaign stump or for senators presiding over hearings. But actual healthcare reform—especially the type that was proposed to be jerry-rigged onto a patchwork of thousands of pages of existing laws and regulations and dozens of different funding and delivery systems—was all about the details. And those details would now be picked through by armies of lobbyists representing not just the usual-suspect heavy hitters, such as the drug or insurance companies, but special interests from every imaginable corner of medicine—from urologists to leukemia victims to private equity firms that had invested in ambulance services.
Fowler and her team had spent multiple all-nighters teasing out those details.
The section about universal free access to preventive care said that everyone, even the uninsured, would be given a “RightChoices card” to get a menu of preventive services to be defined by an “Independent Health Coverage Council.” That sounded like the independent board Fed chairman Bernanke, as well as Baucus and Grassley, the Iowa Republican, had warmed to during Baucus’s summit.
The same Independent Health Coverage Council, whose members would be appointed by the president and confirmed by the Senate, would define “coverage” and “affordable” for a provision requiring employers to offer workers affordable coverage. It would also define “adequate” for the section requiring insurance companies on the exchange to sell only “adequate” coverage.
Money would be saved by the funding of “Comparative Effectiveness Research,” that would advise Medicare (and private insurers) about what the most cost-effective drugs, devices, and treatments were.
An initiative that Grassley had pressed Baucus to include was also something Zeke Emanuel was obsessed with: doctors’ conflicts of interest in accepting consulting and speaking fees or lavish trips and other perks from drug companies or device makers whose products they prescribed. The Finance Committee had heard testimony that these companies now had some kind of financial relationship—from providing free samples to paying consulting fees—with 94 percent of all practicing physicians, and that drug companies spent $7 billion a year on visits to physicians by salesmen, who provided the doctors with $18 billion worth of free samples. There would now have to be full disclosure of those relationships, and it would be available on a national database.
In perhaps Baucus’s furthest lean to the left, his “Call to Action” proposed that anyone from the age of fifty-five to sixty-four be able immediately to buy into Medicare instead of paying far higher private insurance premiums, though this option would be available only during a transition period in the year or two before his insurance exchange kicked in.
BUT THESE AND HUNDREDS of other details weren’t really details at all in the larger scheme of things. They were placeholders for the fights to come. In Washington, legislation about something this broad—Baucus was proposing, after all, the equivalent of reforming the entire economy of France—requires hundreds if not thousands of pages, not ninety-eight.
For example, the section on the mandate said that it would be enforced “possibly through the U.S. tax system.” How would that work? And, if as in Massachusetts, where the state tax system had imposed a tax penalty on people who did not get insurance, how much would that penalty be?
“One option” for financing start-up costs for the health insurance exchange was “a small assessment on [insurance] premiums,” the white paper noted. How small? On all premiums for all health insurance, or just on the policies sold on the exchange?
“The ability of insurance companies to [charge] on the basis of age would also be limited,” the Baucus paper said. How limited? How much less could an insurer charge a twenty-four-year-old compared to a sixty-four-year-old? The insurance industry and their lobbyists would certainly be homing in on that detail.
Comparative effectiveness research sounded great. But who would appoint the researchers? Who would control what they studied? And what would it take for their research to see the light of day, much less be used by Medicare or private insurers to restrict use of a drug or device based on these experts’ determinations of cost-effectiveness? Experimental drugs that these experts might consider worthless or long shots not worth paying for were coveted by people suffering from different diseases.
Victims of serious illness, be it cataracts or lymphoma, now had their own highly effective lobbying organizations, typically supported by the drug companies whose products treated those ailments. Would they tolerate letting bureaucrats tell patients what treatments they could get? How would Billy Tauzin—the head of the drug industry lobby who said he was saved by a miracle drug—react to this?
Baucus, perhaps channeling Gruber’s warning about “going over the edge,” tiptoed around these questions in his “Call to Action.”
Similarly, the paper’s litany of how Americans overpay for MRIs, CT scans, drugs, and administrative costs compared to other countries was instructive. Yet there was nothing specific about what Baucus wanted to do about it.
The paper envisioned authorizing Medicare to try experiments in which hospitals and doctors saved money by providing “bundles” of services. They would be held accountable for, and paid based on, whether the patient got well rather than how many treatments he had. How would that work? Would the doctors and hospitals get to keep some of the savings for themselves? What if the patient’s doctor or hospital didn’t want to participate? Hadn’t this been tried in the 1990s with little success?
The “Call to Action” promised that there would be premium subsidies to make insurance affordable for all. But what did “affordable” mean? How high would a family’s income have to go before it didn’t qualify? Would income levels account for regional wage and cost of living differences, so that a family earning $100,000 a year in Manhattan could get a subsidy while a family with the same income in Baucus’s Montana wouldn’t?
States would be given grants to experiment with tort reform pilot projects that might cut the practice of defensive medicine, such as overtesting and overtreating, thought to be the result of doctors and hospitals fearing malpractice suits. How much would be spent on this? What kinds of projects? The trial lawyers and their beneficiaries in the Democratic Party would be all over that one.
On the next-to-last page there was an attempt to finesse an issue that was a political hand grenade: After declaring that John McCain’s approach of eliminating the tax exclusion for employer-based health insurance premiums “goes too far because it would cause widespread disruption,” Baucus declared that “more targeted reforms of the exclusion might make the incentive more equitable.” He suggested that this could be done by capping the benefit to be excluded from taxes based on the value of the benefit, or on a person’s income. In other words, lavish plans that provided complete coverage but little contribution from the worker might be taxed—or people with high incomes might be taxed—for the value of the insurance. But who would be taxed and how much?
In fact, Baucus and his team had wanted to go further. They had hoped that by eliminating much of the tax break by taxing people making more than $100,000 a year for the insurance benefit, they could get back some $300 billion over ten years. It was the largest component of their back-of-the-envelope strategy for financing all of their plan’s expanded coverage and other reforms.
But when the Baucus people to
uched base with the presidentelect’s gathering transition staff immediately after the election and showed them a draft of the “Call to Action,” the Obama people asked Fowler to scale back this provision and make it vague. Obama had promised that there would be no new taxes for the middle class. Taxes on health insurance benefits of those with incomes of more than $100,000 would violate that promise. Thus, the major revenue source for financing reform became another detail to be worked out later.
Baucus’s “Call to Action” might not have presented a fully baked plan for the Congressional Budget Office to score for the costs of all this expanded coverage, and for the programs envisioned to promote wellness and preventive care. And it might have been more a handwringing exercise than a battle plan when it came to dealing with how much more the country was paying, compared to other countries, for worse healthcare results. Nonetheless, it was a huge red flag waved in front of a thousand bulls. It presented so many lightly penciled-in details and was full of so many i’s to be dotted and t’s to be crossed—each potentially affecting billions of dollars and millions of patients—that, recalled a Baucus staffer who helped Fowler write the draft, “We quickly became everybody’s favorite date. Every lobbyist in town wanted to see us.”
KENNEDY’S LOWER-KEY PUSH
Ted Kennedy’s HELP Committee was in touch with Fowler’s group through the 2008 summer and fall. However, they had stuck to their own, lower-key effort to prepare their senators to mark up a bill. Beginning in October, the staffers, all Democrats, began convening meetings of representatives of doctors, hospital executives, insurers, drug companies, and large employers, as well as reform advocates and academics.
According to an account in a book written by senior Kennedy staffer John McDonough about these congressional deliberations,*4 the group quickly discarded both a radical single-payer approach that eliminated employer-paid insurance and a piecemeal approach that would expand coverage incrementally to various groups (such as more children) and enact limited insurance market reforms. Instead, they, too, focused on the Romneycare approach—broad reform but within the borders of the current system. That, of course, had also been the Clinton, Edwards, and (except for the full mandate) Obama framework, and it was where both the Baucus white paper and the Obama transition team had landed.
The HELP group also acknowledged in their internal discussions—more than Baucus’s “Call to Action” did and more than the Obama economic team was willing to—what the Romneycare chief had told Baucus’s summer summit: This approach was about going for broad coverage immediately and putting cost control aside for another day.
By November 19, 2008, Baucus had organized a meeting with the ailing Kennedy and four other senators, two Democrats and two Republicans. They included Grassley, the senior Republican on Baucus’s committee, and Chris Dodd, the Connecticut Democrat and close Kennedy friend whom Kennedy has asked to fill in for him as his illness increasingly forced him to the sidelines. The meeting, which was in Kennedy’s memento-festooned Capitol hideaway just off the Senate chamber, was friendly enough. The senators agreed to expand the group to eleven and instructed their staffs to prepare a summary of their areas of agreement and disagreement.
But one issue loomed that might spoil the good cheer: Kennedy had insisted that the Democrats hold open the possibility of trying to pass healthcare reform in the guise of legislation related mainly to taxes and finance. That kind of bill enabled a Senate process called budget reconciliation. Under Senate rules, budget reconciliation bills required only 51 votes, not the 60 needed to override a filibuster. The November 2008 elections had just boosted the Senate Democratic vote tally to 58 (including the independent Bernie Sanders of Vermont). Still, 58 was not 60, and two Senate Democrats, Kennedy and Robert Byrd, were now so ill they soon might not be able to get to the floor for a vote. Reconciliation was not an ideal way around a Republican roadblock because much of the envisioned healthcare reforms might not pass the financial issues–only smell test. But Kennedy and other Democrats considered it an important card to hold.
The following week, a meeting of all eleven senators and their staffs broke up over the reconciliation issue. They agreed to try again in January. However, with the need for an economic package to get through Congress becoming more urgent every day, no one now thought healthcare was going to happen in the first months of the new administration. Ted Kennedy was especially frustrated. He wasn’t sure how much time he had.
* * *
*4. Inside National Health Reform, published by University of California Press in 2011.
CHAPTER 7
PUNTING TO CAPITOL HILL
January–March 2009
AN OFFICIAL OF THE TEN-DAY-OLD OBAMA ADMINISTRATION TOLD the press it was “a stupid mistake” but that it would not derail Tom Daschle’s nomination to be secretary of health and human services. That was the cabinet post he was about to assume, in addition to a role as the White House czar in charge of healthcare reform.
Daschle had not reported as income on his tax returns the use of a car and driver that had been provided to him over a three-year span after he had left the Senate as part of his job as an adviser to a private equity fund. It was supposedly worth $182,000. As a result, he owed $100,000 in back taxes, which he immediately paid once the Senate committee staffers vetting his finances in preparation for a sure-thing Senate confirmation vote brought it to his attention.
However, with incoming Treasury secretary Timothy Geithner having already suffered the disclosure of his own embarrassing $34,000 back taxes problem, Daschle’s “stupid mistake” became a big mistake.
Five days later, on February 4, 2009, Daschle withdrew from consideration for both posts. The man who might have been able to finesse the differences in the White House between the healthcare reform team and the economic team, who might have strengthened the White House’s hand on Capitol Hill, and who might have been able to manage the HHS bureaucracy if a law was passed and had to be implemented, was now off the stage.
Rahm Emanuel saw the sudden talent and leadership gap as one more reason to question whether the new president ought to push ahead so soon with an ambitious reform plan, especially because with every passing day the challenge of getting an economic stimulus bill passed seemed to mount. But Obama insisted on moving ahead. “I am going to do this,” he promised Orszag. He instructed his chief of staff to find a new White House healthcare reform leader, and to begin a search for a new HHS secretary. He also made sure that more than $600 billion in expenditures for creating universal healthcare was put in a budget message he would send to Congress at the end of the month. The money was a placeholder; no specifics had been worked out for how it would be spent or how it would be paid for.
On March 2, 2009, Obama announced that Kathleen Sebelius, the second-term governor of Kansas, would be Daschle’s replacement at HHS.
The daughter of a former governor of Ohio, Sebelius was a seasoned politician and former state insurance commissioner, which gave her some healthcare policy experience. She was regarded as an effective governor, and, in fact, had been on the short list of possible Obama picks for vice president in 2008.
A governor’s executive experience is usually valuable in Washington cabinet jobs. But Sebelius had nothing like Daschle’s experience in Washington and with the HHS bureaucracy. More important, she would never have Daschle’s clout in the White House. Unlike Daschle, the former Senate majority leader, she had no significant relationship with Obama and was not simultaneously going to be a senior White House adviser with easy access to him. Daschle would have been the one person responsible for conceiving, passing, and implementing a healthcare reform law. Without him, there would be no one in charge.
Also in February, Rahm Emanuel found the other half of Daschle’s replacement. Nancy-Ann DeParle would be counselor to the president and director of the White House Office of Health Reform. DeParle, who was fifty-two at the time of her appointment, had run the agency that oversaw Medicare and Medicaid in the
Clinton administration, after which she had joined a private equity firm specializing in health industry investment.
A Rhodes scholar and graduate of Harvard Law School whose mother died of lung cancer when she was a teenager, DeParle grew up in Tennessee. Following a few years of practicing law there, she entered government service in her early thirties as the commissioner of the Tennessee Department of Health and Human Services. DeParle knew Rahm Emanuel and Lambrew from her Clinton administration days.
Friends regarded DeParle as a seasoned manager and savvy infighter when she had to be, and she certainly had the right résumé. But she, too, was no match for Daschle. Yet Obama took an almost instant liking to her, as did Valerie Jarrett. Zeke Emanuel would soon tell a friend that he thought the president was “mesmerized by her; maybe it’s that they both lost parents early on, or something.”
While Rahm Emanuel worked at replacing Daschle, the economics staff plugged away at staying involved in the healthcare debate, though they feared that with Daschle gone almost all of the initiative had been ceded to the Senate. They worried, presciently, that they would be reduced to playing at best an editing role in Congress’s writing of sweeping healthcare reform.
Eight days before the inauguration, Zeke Emanuel and Bob Kocher, the former McKinsey partner working for Larry Summers, had sent Lambrew a spreadsheet of possible provisions the administration could ask for in a reform bill that would start to bend the inexorably rising curve of healthcare costs. “Bending the cost curve” had become a mantra for reformers such as Orszag, Summers, Zeke Emanuel, and Kocher.