by Steven Brill
Kocher and Zeke Emanuel had been working on the spreadsheet since December. Their projected savings totaled more than $300 billion over ten years, to be gained by reforms ranging from requiring doctors to use electronic medical records, to cutting Medicare payments for oxygen and wheelchairs, to penalizing hospitals that had high rates of patients who were discharged and then readmitted within thirty days.
They got no reply from Lambrew.
However, the economic team hedged their bets on their continuing relevance by injecting one of those ideas into the $800 billion economic stimulus package being put together for more immediate action: Nearly $20 billion was allocated to provide incentives to doctors and hospitals that invested in scaling up to “meaningful use” of electronic records.
The other way Kocher, Zeke Emanuel, and their colleagues made themselves useful was by sharing much of their thinking about cost cuts with the Baucus and Kennedy staffs.
PEP RALLY IN THE EAST ROOM
On March 5, 2009, a few days before DeParle was officially to start work, about 150 legislators, union leaders, patients’ advocates, corporate CEOs, representatives of small business, doctors, healthcare industry executives, and seven people whom a White House press release called “Everyday Americans” were invited for an all-day meeting on healthcare reform.
Obama began the day by declaring to the group assembled in the East Room of the White House, “We have tried and fallen short, stalled time and again by failures of will, or Washington politics, or industry lobbying.… I know people are afraid we’ll draw the same old lines in the sand, give in to the same entrenched interests, and arrive back at the same stalemate we’ve been stuck in for decades. But I am here today,” Obama insisted, “because I believe that this time is different. This time, the call for reform is coming from the bottom up, from all across the spectrum—from doctors, nurses and patients; unions and businesses; hospitals, health care providers and community groups.”
With that send-off, each attendee was assigned a room in the White House or the Executive Office Building, where breakout sessions were to be moderated by White House staffers to address two questions: “What are the best ideas for getting all Americans covered?” and “What are the best ideas for bringing down costs?” Tellingly, there were two moderators for each session: typically, one from the economic staff and one from the domestic policy staff.
Lambrew, White House Domestic Policy Council chief Melody Barnes, and the White House congressional liaison staff had carefully chosen and invited potentially cooperative Republican legislators to be paired in the rooms with legislator friends from the other side of the aisle. They also stocked the room with a balanced group of industry and union leaders. Junior White House aides took notes to catalog the ideas discussed.
At four o’clock, everyone gathered back in the East Room, where the president was to conduct what the White House called “A Town Hall” meeting. First, Obama introduced a surprise guest: the ailing Senator Ted Kennedy.
Kennedy had missed all of the earlier sessions that day, and his presence for the wrap-up in the East Room had been uncertain until the last minute. Looking gaunt and walking unsteadily with a cane, he smiled broadly as he entered the room. The crowd, which included Republican minority leader Mitch McConnell, Republican senators Chuck Grassley of Iowa and Orrin Hatch of Utah, and a mix of Republican House members, gave Kennedy an ovation.
“It is thrilling to see you here, Teddy,” Obama began, before thanking him, Baucus, and Grassley for “the extraordinary work” they had been doing. “My understanding is that we have had an extraordinarily productive set of sessions,” the president continued.
Not really. Of the thirty-six people I later asked about the meeting, including some members of the president’s own staff, none could remember hearing any new ideas. Instead, they all agreed on the goals of expanding coverage and cutting costs. They praised apple-pie initiatives such as electronic medical records and more funding for wellness and prevention, and otherwise espoused positions that could have been predicted based on their politics or the interests they represented. Billy Tauzin, representing the pharmaceutical lobby, talked about the need to make sure nothing was done to dampen the profits necessary to encourage his employers to spend on the research and development of trailblazing new drugs.
The Republicans worried about deficits and the government interfering in the industry. The Democrats urged universal coverage as the top priority.
One group, whose moderators were Valerie Jarrett and Zeke Emanuel, barely got beyond opening statements because Emanuel so dominated the conversation, one participant told me.
Yet the sessions were friendly if inconclusive. As with Baucus’s summit—though that was far more substantive—there seemed to be a general feeling among participants in the various breakout meetings that they could agree to disagree today and somehow work out their differences down the road.
Even Chip Kahn was in an agreeable mood. Kahn, who now ran a hospital industry lobbying group, had created the insurance lobby’s “Harry and Louise” advertising campaign that had torpedoed Hillarycare in the early 1990s. According to a White House summary of the breakout session that Kahn joined, he had declared to those in his group “that times are different and ‘it’s time for action.’ ”
“It was all friendly,” PhRMA’s Tauzin told me. “Nothing new, but it did have the feel of a pep rally, especially when Teddy appeared.” The only point of sharp disagreement in the sessions was over what reformers called the “public option.” During the Democratic primary, the leading candidates, including Obama, had tempered their calls for subsidies to be provided to people to buy private insurance with proposals that the government would also set up a nonprofit insurer that would compete alongside the private companies.
It was the candidates’ fallback from the Medicare-for-all, single-payer alternative pushed unsuccessfully by Democrats from the Truman era through the 1980s and insisted on by the liberal Democrat Dennis Kucinich in the 2007 Las Vegas forum. The government wouldn’t take over everyone’s healthcare but would instead provide, as a consumer “option,” a government-run insurance plan that consumers could choose instead of private insurance.
The details of this alternative varied, depending on who was proposing it. In some versions, the public option’s nonprofit insurer would by law pay the same low prices Medicare pays to doctors and hospitals—which would effectively eliminate private insurance companies because they pay so much more than Medicare pays and, therefore, would have to charge much higher premiums than the public insurance company. In other versions, the government nonprofit insurer wouldn’t have any pricing advantage at all over the other insurers, which many thought made the idea pointless.
Obama had never been specific on the campaign trail about which version he favored, although, like the other leading Democratic primary candidates, he had said, generally, that he favored including some kind of public option. But the insurance companies, hospitals, doctors, drugmakers, and every other industry sector opposed even the seemingly weaker version, as did Republicans and other free market supporters. For them, the idea of a government insurer competing, with or without a pricing advantage at the start, with the private sector and doing whatever it could to drive down prices was a nonstarter.
Baucus agreed. His white paper had no public option. However, other Democrats, particularly liberals in the House led by California congressman Henry Waxman, were staunch proponents, as were many Democratic senators, including some on Kennedy’s HELP Committee. To them, the public option—even, somehow, the mild version—was a path toward getting rid of private insurance and moving to a single-payer system.
When the public option came up in the East Room, Obama waffled. He called on Grassley to offer some comments about the day’s events, and the Iowa Republican began by stressing that “Max Baucus and I have a pretty good record of working out bipartisan things—I think [there have been] only two bills in eight years that haven’
t been bipartisan.… And we expect to work on this in the committee in June.” However, Grassley continued, “The only thing that I would throw out for your consideration—and please don’t respond to this now, because I’m asking you just to think about it—there’s a lot of us that feel that the public [option]… is an unfair competitor and that … we have to keep what we have now strong, and make it stronger.”
“I’m not going to respond definitively,” Obama answered, whereupon he deftly summarized both sides of the argument and his eagerness to navigate between them:
The thinking on the public option has been that it gives consumers more choices, and it helps … keep the private sector honest, because there’s some competition out there. That’s been the thinking.
I recognize, though, the fear that if a public option is run through Washington, and there are incentives to try to tamp down costs … that private insurance plans might end up feeling overwhelmed. So I recognize that there’s that concern. I think it’s a serious one and a real one. And we’ll make sure that it gets addressed, partly because I assume it will be very hard to come out of committee unless we’re thinking about it a little bit. And so we want to make sure that that’s something that we pay attention to.
More generally, Obama was careful to stress that for him healthcare reform was about costs as much as it was about extending coverage—that he was firmly in both the policy camp personified by Lambrew and the economics camp led by Orszag and Larry Summers. He noted that when his staff selects ten sample letters for him to read out of the forty thousand he gets every day, “out of the ten, at least three every single day relate to somebody who’s having a healthcare crisis.”
Therefore, the president added, “There is a moral component to this that we can’t leave behind. Having said that,” he continued, “if we don’t address costs, we will not get this done. If people think we’re simply gonna take everyone who’s not insured and load them up into a system … the federal government will be bankrupt. State governments will be bankrupt. I’m talking to you liberal bleeding hearts out there,” he added. “Don’t think that we can solve this problem without tackling costs. And that may make some in the progressive community uncomfortable but it’s gotta be dealt with.”
Of course, to many of those progressives, the best way to tackle both costs and coverage was the single-payer Medicare-for-all system that everyone else acknowledged was a pipe dream politically—which Grassley had just confirmed by objecting to the far milder public option alternative.
Otherwise, the president stressed his open-mindedness. “During the campaign,” he said, “I put forward a plan for health care reform. I thought it was an excellent plan, but I don’t presume that it was a perfect plan or that it was the best possible plan.… If there is a way of getting this done … entirely through the market, I’d be happy to do it that way. If there was a way of doing it that involved more government regulation and involvement, I’m happy to do it that way, as well.”
To some in the East Room, Obama’s flexibility was disappointing. He was saying he would follow, not lead. He and his staff—both the Lambrew faction and the economics group—seemed to have their act together only in so far as they wanted to fulfill the president’s mandate that healthcare remain a priority. They had not decided on any specifics of their own.
“Remember, this was a few weeks after the inauguration,” recalled one industry representative. “Obama was still walking on water. He could do no wrong. But he has no plan for what he calls a national crisis? I was shocked. Can you imagine Lyndon Johnson not having a ten-point plan and telling the group in front of all those TV cameras, ‘Here’s my plan’? Who would have opposed him? Instead he farms this out to the Senate and House, just the way he farmed out the stimulus to Nancy Pelosi so she could turn it into a Christmas tree for the Democrats on the Hill.”
The Obama administration and its supporters saw it differently.
Phil Schiliro, Obama’s newly appointed head of congressional relations, was a longtime senior congressional staff person and a veteran of getting difficult bills through Congress. To him, a piece of legislation had to pass through a filter that represented all the different opponents who could derail it.
The problem, as Schiliro saw it, was that in 2009 the House and Senate had different filters. The House had a strong Democratic majority that would demand a more liberal bill than the Senate. So if the president had tried to send up a bill meant to please both, each side would have blocked it with its own filter. The only practical path was to let the two branches pass their own bills and negotiate the differences.
And then there was recent history. White House chief of staff Rahm Emanuel and other alumni of the Clinton White House remembered the disaster that had ensued when they presented a fully baked plan to Congress, albeit a monstrously complicated one, eighteen months after Bill Clinton took office.
Others believed that the vacuum created by Daschle’s sudden exit dictated this course. Besides, with all of the work Baucus and Kennedy and their staffs had done, the Senate had already stolen the show and seemed to be making great progress. Baucus and Kennedy had sent Obama a letter the day after Daschle dropped out, urging him to continue to make healthcare reform a priority. But they weren’t waiting.
And then there was the math. With only fifty-eight Democratic votes in the Senate (counting the independent Sanders of Vermont), Republicans such as Grassley would have to sign on to get reform past a filibuster. An Obama-branded bill seemed unlikely to get over that hurdle. There was nothing in the Constitution about a filibuster and the need for sixty Senate votes to pass legislation. Yet by 2009 that hurdle was accepted as a given.
Ted Kennedy agreed with Max Baucus not only that compromise was required, but that the real action was going to have to come from the Senate, not the White House. In fact, they had made a date to meet at Kennedy’s Georgetown home the day after the East Room gathering to pin down what they thought was possible and to reaffirm that this time their two committees were not going to let turf fights derail things.
Fowler and Baucus would arrive the next day for a lunch with Kennedy, his wife, Vicki, and David Bowen, Kennedy’s top health adviser. It lasted more than two hours, and included a tour of the house and a full display of the ailing Kennedy’s charm. Kennedy seemed to want to make sure that Baucus understood he was handing the torch to him.
“A SEAT AT THE TABLE”
The first nonlegislator Obama called on at his East Room town hall was a surprised Karen Ignagni, who, Obama happily noted, “represents America’s Health Insurance Plans.”
The insurers’ lead lobbyist thanked Obama and pledged her support: “We understand we have to earn a seat at the table,” Ignagni said, channeling her and Tauzin’s determination not to be on the menu. “You have our commitment to play, to contribute, and to help pass health care reform this year.”
“Karen, that’s good news,” Obama said. The crowd applauded.
The only semi-sour note was sounded by Mitch McConnell, the Republican Senate minority leader. When Obama called on him, McConnell politely urged the president to shift his priorities to worrying about the deficit and entitlement spending, including not only Medicare and Medicaid but also Social Security.
Obama dispatched the Republican leader with a promise to work with him on the problem, then pivoted to call on Henry Waxman, the liberal congressman from California.
OBAMACARE ON THE REPUBLICANS’ DINNER MENU
Obama had made only two brief mentions of healthcare in his inaugural address seven weeks before. As with his speech on Election Night, this was not surprising given the economic crisis and the historic ascension of the nation’s first African American to the presidency.
However, healthcare had been high on the agenda at a dinner held the night of the inaugural in a private room at Washington’s Caucus Room restaurant. And the discussion wasn’t nearly as polite as McConnell would be in the East Room seven weeks later.
Frank Luntz—the pollster who had helped then–House Speaker hopeful Newt Gingrich fashion the “Contract with America” platform to oppose President Bill Clinton—convened the dinner for leading Republicans. Ten from the House and ten from the Senate attended, along with about a dozen Republican strategists and lobbyists.
“The goal was to talk about what we could do about Obama, and healthcare was probably number one on the list,” Luntz told me. “We knew we couldn’t stop some kind of [economic] stimulus, but this we thought we could block—and we had to block it because it threatened to become another massive government takeover and entitlement.… Newt insisted,” Luntz added, referring to Gingrich, who also attended, “that this would ruin the country and in the short term ruin our party by giving something so big away to so many people.”
This was a discussion among pols, not policy wonks. According to Luntz, only Gingrich touched on the substance of the kind of reform Obama had talked about during the campaign, and he did so only in general terms: Obama wanted to set up a whole new entitlement system to give everyone health insurance.
The politics, recalled Luntz, were “pretty clear.” It was about both stopping anything the new president championed and also stopping another big-government program. No one mentioned that Obama was talking about a healthcare plan like the one Romney, and Nixon before him, had espoused.
Among the members of the House who dined with Luntz and Gingrich while the bands played on at the inaugural balls were then–minority leader Eric Cantor and then–budget committee chair Paul Ryan. On the Senate side Mitch McConnell was not there, but several of his top deputies were, including Tennessee’s Bob Corker and John Kyl of Arizona, who as minority whip ranked just below McConnell.