America's Bitter Pill

by Steven Brill

  Bad news dominated the headlines, many of which were based on emails and other documents the congressional committees had subpoenaed revealing all of the internal worrying and bickering at CMS prior to the launch.

  “We knew we really had something as we began getting these documents,” one Republican staffer recalled. “One was better than the next, showing how panicked these guys were and how they had lied to us when they testified that summer that everything was on track. Every page was a smoking gun.”

  As they sifted through the emails and memos, however, the investigators struggled to find evidence to prove that the people at the Obama White House were not simply as clueless as everyone else about what had really been going on during the summer. Except for the McKinsey consultants’ report and briefings—which were in late March and April—there was nothing indicating that Obama or any of his staff people had seen any of those CMS documents.

  When it came to Obama and his direct reports, this seemed to be more about aloof, incompetent management than a cover-up, though the Republicans would try to make the latter charge stick.

  ON NOVEMBER 13, 2013, CMS issued its first report on monthly enrollments, covering the disastrous October rollout. The press was invited to a conference call, which started nearly a half hour late while Muzak on the phone line repeated the song “Just Because I Love You.”

  “To date, 106,185 persons have enrolled and selected a Marketplace plan,” the accompanying white paper began.

  It was not until the third paragraph down that what should have been the headline number was provided: 80,000 of those 106,185 enrollees had come from the state-run exchanges, such as Kentucky’s, New York’s, and California’s. That meant that just 26,794 people had enrolled over the entire month through the federal exchange covering thirty-six states—less than 5 percent of what the administration had been counting on for the first month. It averaged out to twenty-four enrollments per day in each state on the federal website.

  The same day, The Washington Post ran a front-page story headlined “Troubled HealthCare.gov Unlikely to Work Fully by End of November.” Citing “an official with knowledge of the project,” the Post reported that “government workers and technical contractors racing to repair the Web site have concluded … that the only way for large numbers of Americans to enroll in the health-care plans soon is by using other means so that the online system isn’t overburdened.”

  Mickey Dickerson and his people were too busy to read newspapers.

  The next day, November 14, Wolf Blitzer opened his CNN Situation Room show by calling Obamacare a “snowballing debacle.” The rolling headline under Blitzer flashed “Can Obamacare Survive?”

  WINNING OVER THE RECCHIS

  For Sean and Stephanie Recchi, Obamacare became good news on the day Blitzer’s show aired. Confused by what they could figure out from the sputtering website, yet curious about what I had told them about how the law didn’t allow insurers to discriminate against those with preexisting conditions, the Ohio couple—who had struggled to pay for Sean’s cancer treatments—had gone to a local insurance agent for advice.

  “When they came to my office, Stephanie [Recchi] told me right up front, ‘I don’t want any part of Obamacare,’ ” recalled Lancaster, Ohio, insurance agent Barry Cohen. “These were clearly people who don’t like the president. So I kind of let that slide and just asked them for basic information and told them we could go on the Ohio exchange”—which was actually the Ohio section of the federal Obamacare exchange—“and show them what’s available.”

  What Stephanie soon discovered, she told me, “was a godsend.” The business that she and her husband had launched—which sold a product that enabled consumers to store their DNA or that of family members for future genetic testing—had recently received investor interest after being featured on an episode of the television series CSI. She estimated to Cohen that their income would be about $90,000 in 2014. Even at that level, her family of four would qualify for a subsidy under Obamacare.

  The Recchis and their agent soon zeroed in on a plan with a $793 monthly premium that provided full coverage, although with a deductible of $12,000 for the entire family, meaning the Recchis would pay the first $12,000 in expenses. After the deductible was reached, there would be no co-payments for anything, including all drugs.

  The Obamacare subsidy, assuming the $90,000 income that the Recchis had estimated, brought their monthly premium cost down to $566 from $793. If their income was the same $40,000 Stephanie had estimated for 2013, the subsidy would increase and their premium would be just $17 a month.

  “They had budgeted insurance at $1,200 for each of them plus two new employees, for their new business,” says Cohen. “That’s $2,400 a month for the two of them, compared to $566, so they were thrilled.… They had seen all those stories on television, and because of their views about Obama, they believed what they wanted to believe—until they saw these policies and these numbers.”

  “Here I get full protection for $566, compared to no protection for almost $500,” Stephanie says, referring to her old plan that had cost $469 and that the MD Anderson Cancer Center had scoffed at. “This is wonderful.”

  Actually, it ended up better than that. Because Cohen could enter only the Recchis’ actual reported 2013 income onto the website, not their anticipated income if and when the investment deal is completed, and because that income turned out to be less than the $40,000 Stephanie had estimated, the website moved them automatically into Medicaid—meaning their coverage, for now, was free.

  That was because Ohio governor John Kasich had decided to buck many of his fellow Republican governors and accept Obamacare’s subsidies so that he could expand Medicaid coverage.

  Kasich’s decision, however, illustrated one of three aspects of the Recchis’ story that threw cold water on an otherwise fairy-tale ending.

  First, if Kasich had followed the lead of Obamacare resisters such as Texas governor Rick Perry, the Recchis would have been in a through-the-looking-glass situation. If, as it turned out, their income was below the poverty level, in Texas they would have had to pay the full $793 for their insurance. However, if their income actually was $90,000, rather than below the poverty level, they would pay only $566.

  That’s because the law as written had required all states to accept the government’s subsidy for Medicaid to be extended to everyone with incomes below the poverty level (and, in fact up to 33 percent above the poverty level). As a result, no premium subsidies in the exchange plans were provided for people below the poverty level, because they would presumably go into Medicaid. But then the Supreme Court had ruled in its otherwise pro-Obamacare decision in June 2012 that the states’ expansion of Medicaid had to be voluntary. That left the poor in states such as Texas or Florida that did not expand Medicaid faced with having to pay more than those who are not poor but who got subsidies if their incomes were below 400 percent of the poverty level. Unlike those middle-class families, the poor families could only buy health insurance without subsidies because they were supposed to have been sent into Medicaid. The move by most Republican governors to block them was, President Obama later asserted to me, a “completely unnecessary and mean spirited decision to continue to deny coverage to those who need it most because of politics.”

  Fortunately for the Recchis, Kasich and Ohio had opted to expand Medicaid.

  The second asterisk to the Recchis’ happy ending was that even once the website was fixed by the surge team so that visitors could use it, Sean and Stephanie still needed help from Cohen, their insurance agent, to make sense of it all. There were all of those “bronze,” “silver,” “gold,” and “platinum” levels of coverage to figure out, each featuring multiple variations of premiums, co-pays, co-insurance, and deductibles. Worse were the hard-to-find and harder-to-understand lists of which hospitals and doctors were in each insurance company’s network. And those lists were models of clarity compared to the lists of drugs that were covered by each plan.<
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  “There is no way the Recchis or anyone else can figure out what they’re buying without someone who has been trained sitting with them,” said Cohen. Sure, that was a self-serving assessment. Yet in interviews across the country with people who had already signed up for Obamacare, I found no one who fully understood the benefits, the costs, and, most important, the limits of what they were buying unless they were helped by agents or by “navigators”—the enrollment assistants trained and licensed by officials operating the exchanges. Indeed, I needed Cohen’s help to understand it, and I have a law degree and have been writing about all of this for two years.

  Understanding those details, including the limits, related to what consumers are buying put another damper on the Recchis’ story: Their insurance—whether Medicaid for now, or the private plan they are likely to transition to later—was not going to cover them at MD Anderson in Houston. No Ohio plan would. In fact, only two of seventy-nine plans offered in Texas on its federally run Obamacare exchange included coverage at MD Anderson.

  MD Anderson is extravagantly expensive and, with its well-deserved international brand name, has more than enough business without letting insurance companies beat them down for discounts in return for being included in the new, relatively narrow networks set up for many of the policies sold on the exchanges.

  More generally, one of the ways insurance companies had tried to limit their costs and the premiums they were charging on the Obamacare exchanges was to use these narrow networks that are limited to the hospitals, doctors, and other providers who offer them relatively cost-effective prices. Because there was often little or no relationship between cost and quality in the dysfunctional world of healthcare economics, this did not necessarily mean patients would receive inferior care, though it might. But it did mean that, contrary to the other promise President Obama had made in promoting Obamacare, patients would often not be able to “keep their doctor” or be treated at the hospital of their choice.

  In other words, expanding coverage to people like the Recchis while trying to control premium costs was going to mean that not everyone got the platinum care they wanted and that others would get. When it came to healthcare, as opposed to buying a car, that might be difficult to accept.

  “No, we don’t get MD Anderson, but we do get the Cleveland Clinic and lots of other good care,” Stephanie told me. “We understand that.”

  ZEKE ON DEFENSE

  The crash of the president’s signature domestic initiative dominated the Sunday talk shows through the end of November. Even the president’s defenders added to the fallout. On a December 1, 2013, Fox News Sunday appearance, Zeke Emanuel, now ensconced as a deputy provost at the University of Pennsylvania and a fellow at the Center for American Progress, brushed aside criticism of the narrow networks. Fox host Chris Wallace said the narrow networks seemed to break that Obama promise that you could “keep your doctor.” People who wanted to keep their doctor, “could pay more,” Emanuel replied.

  Ten days before that, I had appeared with Emanuel on a panel at the Council on Foreign Relations in Manhattan to discuss the American healthcare system. When I casually mentioned that Obamacare had neglected tort reform, Emanuel angrily declared that “President Obama has done more for medical tort reform than any president in history.” As he continued—citing the pilot projects to be carried out by CMS that were written into the law but that he had criticized in White House meetings as meaningless—the audience began hissing.

  The Council on Foreign Relations is a polite, mostly upper-crust group. I had never seen an audience there hiss, even when leaders of the most hostile, anti-American countries had come to speak.

  The hissing continued.

  Out of the corner of my eye I noticed a man get up and storm out, as if someone from Hamas had just decreed death to Israel.

  That afternoon, Joseph Cari, the angry man in the Council on Foreign Relations audience, called me to explain why he had walked out. Cari, a wealthy financier from Chicago, explained that he had been a national finance chairman for Al Gore’s 2000 presidential campaign and had been active in Democratic Party fund-raising on and off since. He was incensed at what he believed to be Emanuel’s dodging. And, as a businessman, he harbored a longtime resentment of his party’s willingness to let trial lawyers dictate the Democrats’ position on sensible tort reform. “Whatever city the Democrats go to for a fund-raiser,” he said, “it is always the top trial lawyers who help organize it. And they won’t let any Democrat touch tort reform. How could he [Emanuel] have said that?”

  Ten months later, when I checked with CMS about those pilot projects Emanuel had extolled, I was told by a spokesman, on background, that the program had never been funded at CMS.

  TURKEY DAY, DEADLINE DAY

  After a slew of fixes on November 27, 2013, the day before Thanksgiving, and more on Thanksgiving morning, the tech surge team went to Todd Park’s house for turkey. Later that night, they returned to the office to execute still more fixes, where they shared pies brought in by Jeffrey Zients.

  On Sunday, December 1, Zients issued a public report, impressively detailing the website’s rescue. A series of hardware upgrades had dramatically increased capacity. The system was now able to handle at least fifty thousand simultaneous users and probably more. There had been more than four hundred bug fixes. The percentage of the time the website was up and running had gone from an abysmal 43 percent at the beginning of November to 95 percent (still bad compared to any good e-commerce site). And Jini Kim and her team had knocked the error rate from 6 percent down to .5 percent. (By the end of January it would be well below .5 percent and still dropping.)

  The press generally accepted the new numbers, but questioned whether the site would be able to handle the traffic surge expected ahead of the December 23 deadline for people who wanted coverage effective on January 1, which was when the mandate requiring coverage kicked in.

  Zients, Park, and the rescue crew were worried about that, too. Yet throughout December, their numbers kept improving, helped by Jini Kim’s falling error rate and by a group of new Dickerson recruits who parachuted in for stays of a few weeks or, in some cases, vowed to stay until the close of enrollment at the end of March.

  Andrew Slavitt, the executive overseeing the work of QSSI, which Zients had installed as the general contractor to work with the surge team, was mightily impressed. Slavitt’s title was executive vice president of Optum, of which QSSI was a subsidiary. Optum itself was the analytics and consulting unit of UnitedHealthcare, the giant insurer. Beginning in December, Slavitt started taking various members of the Silicon Valley surge team aside and attempted to recruit them. UnitedHealthcare knew that the basic insurance business was not the key to its future, he told them. But Optum—its fast-growing data cruncher—was the future. In fact, he told Mikey Dickerson, “Optum was going to be the Google of healthcare. You should join us.”

  Dickerson told him that he already worked for the Google of Google.

  MORE RETREATS ON THE RULES

  On December 19, 2013, the Obama administration threw in the towel on insurance cancellations, announcing that anyone who faced a hardship because their plan had been canceled would be exempt from the requirement of the individual mandate throughout 2014. The hard line on grandfathering that Lambrew and the other Obama people had taken had now completely backfired. Now, hundreds of thousands of people, maybe millions, already with insurance in the individual market—the same market that the exchanges were meant to serve—would not have to buy new, better insurance on those exchanges.

  “LIKE A ROCKET SHIP”

  Early on Monday, December 23, 2013, Dickerson and the team gathered at the command center early to see if what they had rebuilt could handle the expected last-minute stampede of people who wanted to be covered beginning January 1.

  “I’ll never forget that day,” Todd Park told me. “We’d been experiencing extraordinary traffic in December, but this was a whole new level of extraordinary.�
� By nine o’clock traffic was the same as the peak traffic we’d seen in the middle of a busy December day. Then from nine to eleven, the traffic astoundingly doubled. If you looked at the graphs it looked like a rocket ship.”

  Traffic rose to 65,000 simultaneous users, then to 83,000, the day’s high point.

  Everything held together.

  The result: 129,000 enrollments on December 23, about five times more in a single day than what the site had handled in all of October. Because the sign-up deadline for getting insurance that would take effect on January 1 had just been extended by another day, until Christmas Eve, Park and the team slept a few hours at the Doubletree and came back at dawn. Traffic was again at levels never seen until the day before—and produced 93,000 more enrollments.

  As it got later on the afternoon of Christmas Eve, the band was starting to break up. Paul Smith, the former Democratic National Committee techie who had put aside fund-raising for a start-up to join the team, left early to spend the holiday with his wife and young daughter, whom he had not seen in weeks. Although he was living only about thirty miles away in Baltimore, the commute had become an impossible luxury in the frantic weeks in the run-up to the deadline.

  Before Smith left, he gave an impassioned speech about what a privilege it had been to work on the project and to work with this crew. Then, recalled Park, “We all had a hug.”

  Later that night, Park talked by video chat to Mikey Dickerson’s parents in Connecticut. He thanked them for lending their son to the team and to the country.