America's Bitter Pill

by Steven Brill

  Moreover, the numbers crunchers at the CBO seemed to prefer that whatever mistakes they made would be mistakes that projected that some initiative would cost more than it might or that some tax or fee would bring in less than it might. That way, if they ended up being wrong, it would be good news for the country’s bottom line.

  That, too, was not how real-world projections were done. True, no business wanted to miss its targets. But if every investor habitually projected costs too high or revenue too low, there would be no investments.

  Nonetheless, the other extraordinary thing about the CBO was that its scores were accepted as the last word by everyone. The experts drafting the law might complain to the point of hysteria, yet it did no good. The CBO score was the score.

  Accordingly, the CBO process was seen as something not to respect but, as with the decision to put the doc fix aside while still promising it as part of reform, to game as best one could. In short, CBO was an only-in-Washington institution—an independent body whose only virtue was its independence. Which meant not only freedom from political influence but also freedom from having to do its job the way people in the real world did.

  THE DEMOCRATS AND THE TRIAL LAWYERS

  In the same meeting in which the White House staff decided to take the doc fix out of the bill, they discussed another issue that the doctors cared about: medical malpractice tort reform.

  Like many healthcare and legal policy analysts, the economic team believed that trial lawyers were abusing the courts by suing doctors too often for bad outcomes rather than bad treatment. Making it harder for doctors to be sued successfully would cut spending because it would lessen the practice of defensive medicine.

  Doctors would no longer have the reason, or the excuse, to order extra blood tests or MRIs or CT scans as a way of demonstrating in a courtroom that they did everything they could to prevent whatever adverse event they might be sued for. For example, doctors in the United States order 70 percent more CT scans per capita than German doctors do (and the bill per test is four times as high). And emergency room doctors will tell you that it has become routine to order one or more CT scans for almost any complaint—either because the tests are so profitable or because they are practicing defensive medicine, or both.

  Some healthcare experts estimated that malpractice reform could save as much as $70 billion a year (5 percent of hospital and doctor expense). Even a 1 percent cut in doctor and hospital costs would yield $14 billion in savings or $140 billion over ten years, including about $40 billion in federal Medicare and Medicaid cost savings that the CBO could score.

  The economic team was not the only constituency pushing tort reform. Initiatives designed to curb meritless suits against physicians and hospitals had also been promised to the American Medical Association in return for the doctors’ support.

  Yet now, someone on the domestic policy team reported in the September 2 meeting, the president had been told by Harry Reid that Reid would not bring any bill up for a vote that included tort reform. Pretty much every Washington Democrat knew that Reid, himself a former lawyer, was forever mindful of the fact that trial lawyers (along with the unions) were the most reliable source of big-money support for his Senate Democrats.

  The White House group decided that the best they could do was ask the president to talk to Reid and try to persuade him at least to include some kind of test programs. They were not hopeful.

  “THE CHARACTER OF OUR COUNTRY”

  When Ted Kennedy was told in May that he had little time left, he wrote a letter to Obama and asked his wife to give it to the president after he died. On September 3, 2009, Vicki Kennedy fulfilled his wish.

  The letter might surprise those who are cynical about politicians or liberals or Kennedys in particular—who think they don’t care about anything except their careers. Written when Kennedy had zero to gain, when he wasn’t running for anything and had only months to live, it began by thanking the president “for your repeated personal kindnesses to me.” Then, it was all about healthcare:

  When I thought of all the years, all the battles, and all the memories of my long public life, I felt confident in these closing days that while I will not be there when it happens, you will be the president who at long last signs into law the health care reform that is the great unfinished business of our society. For me, this cause stretched across decades; it has been disappointed, but never finally defeated. It was the cause of my life. And in the past year, the prospect of victory sustained me—and the work of achieving it summoned my energy and determination.

  There will be struggles—there always have been—and they are already underway again. But as we moved forward in these months, I learned that you will not yield to calls to retreat … I saw your conviction that the time is now and witnessed your unwavering commitment and understanding that health care is a decisive issue for our future prosperity. But you have also reminded all of us that it concerns more than material things; that what we face is above all a moral issue; that at stake are not just the details of policy, but fundamental principles of social justice and the character of our country.…

  And while I will not see the victory, I was able to look forward and know that we will—yes, we will—fulfill the promise of health care in America as a right and not a privilege.…

  So, I wrote this to thank you one last time as a friend—and to stand with you one last time for change and the America we can become.

  Obama was so moved by the letter that, with Vicki Kennedy’s permission, he decided to use quotes from it as the centerpiece of a nationally televised speech to Congress on the evening of September 9 that he hoped would counter the storm from the Tea Party summer.

  “What we have … seen in these last months is the same partisan spectacle that only hardens the disdain many Americans have toward their own government,” Obama told Congress. “Instead of honest debate, we have seen scare tactics.… And out of this blizzard of charges and counter-charges, confusion has reigned.”

  Obama then walked America through his plan, spelling out what it would do and what it would not do, including be a “government takeover.” And then he brought up “our beloved friend and colleague, Ted Kennedy,” quoting liberally from Kennedy’s letter, and playing off of Kennedy’s description of reform as being about “the character of our country.”

  “I’ve thought about that phrase quite a bit in recent days—the character of our country,” Obama said. “One of the unique and wonderful things about America has always been our self-reliance, our rugged individualism, our fierce defense of freedom, and our healthy skepticism of government. And figuring out the appropriate size and role of government has always been a source of rigorous and, yes, sometimes angry debate.

  “For some of Ted Kennedy’s critics,” Obama continued, “his brand of liberalism represented an affront to American liberty. In their mind, his passion for universal health care was nothing more than a passion for big government. But those of us who knew Teddy and worked with him here—people of both parties—know that what drove him was something more.… His friend Chuck Grassley knows that. They worked together to provide health care to children with disabilities.

  “On issues like these,” Obama concluded, “Ted Kennedy’s passion was born not of some rigid ideology, but of his own experience. It was the experience of having two children stricken with cancer. He never forgot the sheer terror and helplessness that any parent feels when a child is badly sick. And he was able to imagine what it must be like for those without insurance; what it would be like to have to say to a wife or a child or an aging parent—there is something that could make you better, but I just can’t afford it. That large-heartedness—that concern and regard for the plight of others—is not a partisan feeling. It is not a Republican or a Democratic feeling. It, too, is part of the American character—our ability to stand in other people’s shoes.”

  Polls following the September 9 prime-time speech to Congress were positive. And Schiliro and his
congressional liaison team thought it had worked to reenergize Obama’s immediate audience of Capitol Hill Democrats, especially in the House.

  However, what received most of the attention was an outburst from South Carolina Republican congressman Joe Wilson, who seemed unmoved by Obama’s celebration of Ted Kennedy’s “large-heartedness.”

  “You lie,” Wilson shouted when the president promised that undocumented aliens would not be covered by Obamacare. Obama was telling the truth. No version of the pending draft covered people who were in the country illegally. Nonetheless, Wilson’s outburst hogged much of the attention.

  What got almost no attention was something else Obama said—that “the plan I’m proposing will cost around $900 billion over ten years.” That was $200 billion to $300 billion less than the CBO was estimating would be the outlays (before offsetting savings and taxes designed to make it deficit neutral) for the House and Senate plans being debated, and $300 billion less than the plan Obama had chosen from the PowerPoint options given to him in April. Instead, it was the reduced back-of-the-envelope estimate that Obama had instructed the domestic policy and economic teams to come up with during the late spring and summer—which was the ongoing cause of all those tense, contentious White House meetings since the spring, in which they debated changes in various subsidy formulas and other aspects of the package. It was also why the doc fix had been thrown overboard.

  There was something even more surprising to those working in the weeds on the various proposals. Obama had referred to “my plan.”

  What plan? The White House had never issued a proposal, continuing to prefer, as Obama had told the staff at the April 30 meeting, “to give the House and Senate the space they need.”

  CHAPTER 11

  SNOW JOBS, POISON PILLS, AND BOTOX

  September–December 2009

  A WEEK AFTER OBAMA’S SPEECH TO CONGRESS, ON SEPTEMBER 16, 2009, Baucus gave up on a bipartisan bill. He had sent Republicans Grassley and Snowe a final version of the 223-page draft that Fowler and her team had assembled summarizing his proposal. After hearing nothing back from them, he circulated the draft to the entire Finance Committee as his own.

  Baucus’s proposed law was Romneycare, USA:

  • The three-legged stool: an individual mandate, no exclusion of preexisting conditions, and subsidies for buying insurance for those who needed it.

  • Online exchanges for people to compare insurers’ offerings before deciding what to buy.

  • The same Romneycare arrangement of insurance offerings to be sold on those exchanges: The least expensive plan would be the “bronze plan,” offering the minimum people would have to buy to fulfill the mandate. More expensive “silver,” “gold,” and “platinum” options would provide more generous protection.

  Subsidies for people to buy the mandated insurance would be pegged to the cost of the second lowest priced silver plan offered.

  People with incomes at 100 percent of the official poverty line (about $24,000 for a family of four) and up to 300 percent above it (about $72,000) would not have to pay above certain percentages of their incomes for that silver plan. Any higher costs would be picked up by the government subsidies. (For now, Baucus had decided to be less generous than the Obama people, who wanted subsidies for people earning up to 400 percent of poverty.) Buyers on the exchanges could use the same subsidies calculated based on the silver plan’s cost to buy the cheaper bronze plan or the more expensive gold and platinum packages.

  Those living below the poverty line would be given Medicaid for free.

  From the left, Baucus’s plan drew criticism because the subsidies seemed so stingy that premiums would be unaffordable for many families, especially those in the lower middle class. In fact, the subsidies were less generous than those in the Romneycare plan. On this core provision, Baucus had come out on the right of the Republican governor.

  The left was also unhappy because, unlike the House proposals and the one already voted on by the Senate HELP Committee, Baucus’s draft had no provision for a public option—the government-run insurer to compete with the private insurers. Instead, the government would help finance nonprofit cooperatives to sell insurance, although few experts saw that as a meaningful alternative.

  From the right, of course, Baucus’s plan was attacked as a government takeover.

  The Obama staff knew Baucus’s draft was coming but did not know all the details until just before he released it.

  TAXING BROKERS AND BOTOX

  The main concern at the White House was revenue.

  True to his white paper pronouncement Baucus had included a tax on employer-paid health insurance that was the largest single contributor (worth as much as $300 billion over ten years) to the new revenues his plan projected in order to achieve budget neutrality.

  Obama’s staff had hotly debated this tax since the summer. The White House health reform and political staffs were against it because of the political flack it would get from the unions. That would surely cause some Democrats to break away, endangering not only one or more of the crucial votes in the Senate but even the Democratic majority in the House.

  More than that, as senior political adviser David Axelrod had constantly reminded the group, Obama had spent tens of millions of dollars on campaign ads attacking John McCain for wanting to remove the tax exclusion on workers’ healthcare benefits. Axelrod had even prepared a brief video reel of the ads to show at one meeting.

  Predictably, the economic team had a different view. This was a huge revenue raiser, and it might be the only way to pay for reform. In July, they had even invited three outside economists, whom Emanuel and Kocher carefully rehearsed, to come in and explain to the president why it was a good idea.

  The numbers had been tempting, but by the summer the policy and political teams had prevailed. Obama had attacked the idea on the campaign trail and promised not to raise any taxes on the middle class at all. He was not going to go back on that.

  With Obama poised to oppose Baucus’s biggest money raiser, his staff and senior Treasury Department officials began in September to go over a new list of taxes or penalties to take its place. Summers suggested taxing health insurance brokers’ fees. Someone else suggested a tax on Botox and other plastic surgery expenses. A tax on diagnostic tests such as MRIs or CT scans was talked about for a while. Only the plastic surgery tax would make it into the draft, but just the fact that all of them were put on the table and discussed with staffers on Capitol Hill set off fire alarms for whole new squadrons of lobbyists. Even a highly technical suggestion for Medicare to save money by changing the way it paid for kidney dialysis, which was worth “only” a few billion dollars over ten years, got David Beier of Amgen and his team fired up, because Amgen would have been on the receiving end of that one.

  At one September 22 meeting, Gene Sperling from Treasury suggested six other revisions to Baucus’s draft that could raise money. But, recorded one of the participants who was taking notes, “NAD”—Nancy-Ann DeParle, who, with Jeanne Lambrew, was the main communications link to the Baucus staff—“was inattentive.”

  The same day, DeParle got wind of a plan by Republicans to torpedo the bill by backing a more radical reform being proposed by Oregon Democrat Ron Wyden, a Senate Finance Committee member. Wyden had made healthcare reform a pet issue, but his views about it differed significantly from Baucus’s. He was going to propose an amendment in the committee that would allow employers to stop providing insurance and instead give tax-free vouchers to their employees to buy insurance on the new exchanges. It was a variation on the old McCain plan that the unions and many Democrats in the Senate would hate. All the Republicans and some Democrats were likely to vote for it, meaning it could become a poison pill making the overall law intolerable to most Democrats.

  “Reid is going to call Wyden and tell him to go to hell,” is how the notes taken by one of DeParle’s colleagues described the strategy for sidelining Wyden.

  ON SEPTEMBER 22, 2009, t
he Senate Finance Committee started its debate on Baucus’s draft.

  Tony Clapsis, the young refugee from Lehman Brothers who had done the math that helped win concessions from the drug and hospital industries, was amazed and impressed that for four weeks the senators waded so deeply into the details.

  True, they often focused on heavily lobbied constituent issues, such as whether Blanche Lincoln’s tanning bed manufacturers back home in Arkansas would face a new tax, or whether Michael Bennet’s ski resorts in Colorado would have to count seasonal waiters and instructors as full-time employees.

  But they dug into nuances related to the heavier policy issues, too. Barbara Mikulski of Maryland was deep into the kinds of preventive care that would have to be included for free in the basic insurance package. She, along with several other senators, mostly women, demanded, for example, that the Senate should ignore a just-issued report questioning the advisability of women getting mammograms before reaching age fifty. Mammograms for women over forty were kept in, despite the new evidence that the tests at that age produced so many false positives, compared to lifesaving diagnoses, that they caused more expense, more needless treatment, and more scares than they were worth.

  These were the kinds of costly compromises with medical science that drove doctor-reformers like Zeke Emanuel crazy. Of course, the lobby for the companies that made mammography equipment got into that fight, too.