I had a million things racing through my head while reading Steven Brill's
America's Bitter Pill, a well-reported deep dive into the flaws in America's health care system and the passage and implementation of the Affordable Care Act. (I like "PPACA" as the acronym, rather than "Obamacare," which is tendentious, or the "A-C-A," which sounds less like a bill than an interest group.)
I recommend reading the book. It's really three stories in one: one about legislative maneuvering, one about executive branch execution (my area of interest), and one about Brill's thoughts on justices and injustices in the health care marketplace.
None of them quite warrant a full article, but I wanted to clean out my brain and get my initial thoughts on paper somewhere. Some of these are comments on the book, others are comments on the events themselves. So, without further ado: a brain dump.
At its core, theirs was a plan any Republican or chamber of commerce lobbyist would likely love: The government would create tens of millions of new customers for all those profiting from the current system--insurers, drug companies, hospitals, and makers of all varieties of high-margin medical equipment, from CT scans to defibrillators. - Chapter 2
I found this description to be tendentious, depicting the average Republican as a sort of vulgar plutocrat focused only on business profits. It seemed to me that Brill was trying to set up a narrative where Republican opposition to PPACA was entirely founded on a desire to oppose President Obama, rather than over real concerns with the policy.
Ultimately, if the private sector continues to make a ton of money in health care, that's fine. But if government distortions of the marketplace result in higher prices than that which a freer market would bear, then Republicans would (and should) oppose. The ideology is not "What's good for doctors is good for America."
Grassley and Baucus were good friends and had worked together to produce numerous Finance Committee legislative initiative. The Democratic and Republican staffs also got along. "I remember going to one of the Finance meetings on health," recalled one [Ted] Kennedy staffer, "and you couldn't tell the Democrats from the Republicans." Their summit, organized by the staff to include participation in marathon panel sessions by everyone who was anyone in healthcare policy, was going to be a big deal. - Chapter 3
This was one of those "Aha!" moments in reading a book. This kind of buddy-buddy politics is part of what ignited the Tea Party: the idea that their representatives became captured by the Washington system. Frankly, Republicans and Democrats
should sound different on health care.
... 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 [Neera] Tanden aside and casually said something that left her wondering whether to laugh or cry. "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." - Chapter 5
This alludes to then-candidate Obama's famous opposition of the individual mandate in the Democratic primary campaign. "Flip-flops" don't really bother me, if politicians are forthright about why they changed their minds. But this sort of political nihilism bothers me. It just does. I know it's par for the course, but why should we tolerate it without calling it out when we see it?
Meanwhile, while Obama was dodging on the mandate, his VP was calling John McCain's sensible plan to detach employment from insurance the
biggest middle class tax hike in history.
One potentially devastating cut involved a reform long proposed by Democrats and resisted by Republicans that would allow Medicare to negotiate the prices it paid for prescription drugs. In what had become an enduring monument to the lobbying power of the drug companies, in 2003 Congress had prohibited Medicare, the world's largest drug buyer, from negotiating prices the way insurance companies were allowed to. Instead the government had to pay 106 percent of what the drugmakers reported to them was their "average wholesale price," a straitjacket that cost taxpayers $40 billion a year. PhRMA's highest priority, according to [lobbyist Billy] Tauzin, was preserving that law, even if it meant giving back some money to the federal government through discounts related to other Medicare and Medicaid payments. - Chapter 8, p. 97
Brill was extremely skeptical of all arguments about pharmaceutical innovation, slamming pharmaceutical companies for excess profits. But I think he has an overly-mechanistic view of the way that corporate profit margins work, and
completely ignores survivor bias in markets; Megan McArdle
offers the necessary corrective.
Also, $40 billion a year for decentralized pharmaceutical innovation that benefits the
entire world isn't a bad use of government funds.
During their negotiations with the Baucus staff, the PhRMA people had talked vaguely about helping to get their $80 billion deal done by supporting a political action fund that would buy television ads supporting senators who favored reform and attacking those who didn't or were wavering. Messina and Selib, aided by political consultant Nicholas Baldick, were now calling in that promise. They outlined a plan for PhRMA to become the main financier of two political action committees that would buy those ads, by which, under law, would not have to reveal their donors. The funds had the kind of innocuous-sounding names that Obama had made fun of on the campaign trail when attacking special-interest money polluting politics: Health Economy Now and Americans for Stable Quality Care.
PhRMA ultimately contributed $70 million to the two funds, while the unions and other left-of-center groups chipped in relatively token amounts. The Service Employees International Union's Michelle Newar, who attended the April 15 [2009] meeting, explained the lopsided funding this way in an email to her colleagues, including SEIU boss Andy Stern: "They plan to hit up the 'bad guys' for most of the $. ... They want us to put in just enugh to be able to put our names on it--@ 100k." - Chapter 8, p. 100
Something something laws and sausages.
[The insurance companies'] tight profit margins were dwarfed by those of the drug companies, the device makers, and even the purportedly nonprofit hospitals.
This was because even in noncompetitive markets, insurers had to buy products from suppliers--hospitals, device makers, drug companies--that had been able in the past two decades to raise their prices with abandon.
That's not to say that the big insurers are managed well or that they haven't reacted to the corner they have been forced into by taking it out on their consumers. But it does mean they are the only industry players who, however unsympathetic, are on the consumer and taxpayer side of the divide. Like us, they buy healthcare. Yet the White House healthcare reform policy team thought they should be the only players to have their profits capped. They were the bad guys. - Chapter 9, p. 122
This was a good observation from Brill; I think it often gets missed in health care stories. This is, of course, part and parcel of our inflation of health
care and health
insurance. But Brill sees it.
Sixty people from the White House and the Department of Health and Human Services attended a July 15, 2009, "innovation" meeting that Summers's and Orszag's people considered a bust, because it was mostly taken up with the HHS and Medicare people explaining why they couldn't make better use of data and didn't have the computer systems that could implement bundled payments. - Chapter 9, p. 138
Just an amusing anecdote about the way the bureaucracy works and the way political appointees work. They are often conflated, but this is appropriate. The former has more power on issues they choose to emphasize, but the latter has more power on net.
[Pollster David] Simas was right. Bureaucrats were regarded as evil. But if [self-styled Republican message guru Frank] Luntz had his way, Obama was going to become the "evil" bureaucrat in chief. This label would stick despite the fact that, from the Democratic perspective, Obama's plan was the opposite of a government "takeover" of healthcare. Rather, it was all about the government, through premium subsidies, giving everyone money to buy healthcare from the same private insurers who would pay the same high prices to the same private drug companies, doctors, device makers, and "non-profit" but profitable hospitals to provide it. - Chapter 9, p. 143
I initially flagged this because I missed the "Democratic perspective" piece; I thought Brill was adding in some sort of facile on-the-spot fact check. And frankly, we see this sort of thing in fact-checks all the time: the underlying Democratic assumptions are equivalent to the ones that the fact-checkers use, and the veracity of a given assertion is graded more favorably than it would be under different assumptions. This would be one of those cases. Considering PPACA to be a "government takeover" is not an unreasonable position: the insurers are essentially converted into highly-regulated utilities that have to provide specific services, responsive to the whims of government.
[Health policy adviser Jeanne] Lambrew wanted no insurance policies to be grandfathered at all once the exchanges were launched. She hated the insurance companies, she told one meeting, and especially hated the insurers who sold those skimpy, often useless policies. Consumers needed to be protected. Period. - Chapter 9, p. 146
It must have been very difficult for people like Ms. Lambrew to deal with PPACA, because it was so much a giveaway to private business.
... on September 2, with Obamacare in such trouble, the Baucus people and [Nancy] DeParle's White House team had agreed that they would leave the doc fix out of the bill. Why? Because the Congressional Budget Office had scored its cost at $200 billion over ten years. Jettisoning it would instantly bring healthcare reform $200 billion closer to the deficit neutrality they had promised. They would tell the doctors they would do a permanent fix in a separate bill, something Washington had failed to do for more than fifteen years. Sure, the CBO would still score that separate bill at $200 billion if and when such a bill was drafted, but that wouldn't count against Obamacare. - Chapter 10, p. 154
Among the many things about PPACA that drove me crazy was the flagrant, ridiculous gaming of the CBO process. These budget shenanigans are just so fundamentally dishonest; they wanted to create a brand new entitlement, but refused to own the implications.
The most important drafting mistake seemed to say that insurance bought on the exchanges run by the federal government and not by the states (if a state decided not to set up its own exchange) would not qualify for subsidies at all, although elsewhere the language did, as was clearly intended, including the exchanges run from Washington. - Chapter 13, p. 194
I found this passage (and the surrounding paragraphs) frustrating, mostly because of an error of omission: Brill never mentions the
Gruber "speak-o" about the potential for subsidies to states to be used as a cudgel. But there are a couple of reasons to think it
could have been. One is that the statute uses a similar threat against subsidies for noncompliance over the Medicaid funding structure. The other, though, I think is more critical: if you simply think about the way the bill was put together, it is likely that different drafters had different opinions over different sections. The bill was moved quickly and covers a
ton of ground; we don't really know what was intended, and there was surely more than one drafter. I would bet that
someone involved thought that the rationale of punishing states that didn't participate was a solid one. But it didn't get hashed out.
At the very least, it's not unambiguous, as Brill claims.
Brill, as he tends to do, gives the Democrats the benefit of the doubt on these questions, but there are reasons to problematize that. (Incidentally,
this is how media bias actually works: it's about assumptions and the benefit of the doubt. Of
course the Democrats meant for subsidies to be available for everybody.)
Also, in general, if you can't take a massive bill to a conference committee, it shouldn't pass.
The night of the House vote, Obama gathered his staff on the Truman Balcony for a champagne celebration. Obama toasted his team, although he noted that "now we all have to get to work."
One member of the group, while sharing everyone else's near delirium, later recalled that there was something slightly troubling about what Obama said next. The president seemed more focused on the work ahead involving getting people to sign up on the exchanges, rather than on executing all the steps that had to be completed--the regulations, the software, the rules for the insurance companies--to get people to the stage where they could sign up. "Assumption that passage = execution, which is worrisome," is how this healthcare staffer shorthanded it that night in a journal that this person kept. - Chapter 13, p. 192-193
I found this anecdote unsurprising. Obama obviously cares a great deal about
policy, and he's wonderful at
politics. But he has never seemed particularly animated by the nitty-gritty of
governance, choosing instead to believe in the capabilities of the professional bureaucracy while he focused on other areas. Scandals in his administration--such as they have existed--have been due to incompetent or corrupt governance throughout the broad executive branch, not in specific actions within his White House.
This is an issue that animates me, and frankly should animate more of my friends on the Left: if government is incompetent, the best-laid policy proposals will fail, citizens will suffer, and people will resent government.
"[Obama] had never run anything before," added another former close adviser who was in the White House at the time. "And I think he was finding his way about how much detail to get into, how much attention he should pay to this stuff. It was always, 'You guys figure it out.'" - Chapter 14, p. 204
Another point in favor of electing people with some sort of experience.
When I looked at [a] list of salaries for the Time article, I discovered that compared with their peers at equally venerable nonprofits, these executives were comfortably ensconced in a medical ecosystem that was in a world of its own. For example, Sloan Kettering had two development office executives, or fund-raisers, making $1,483,000 and $844,000. Another New York nonprofit that mines the same field for donors--the Metropolitan Museum of Art--paid its top development officer $345,000. Harvard paid its chief fund-raiser $392,000. - Chapter 15, p. 233
Brill's focus on salaries for executives was disproportionate. Sure, they're high, and perhaps a bit of an outrage. But they're a rounding error on costs. Personnel costs are driven by the salaries of the line-workers: doctors, nurses, technicians, etc.
Through the Republican primary contests of 2012, the former Massachusetts governor had been put on the defensive by opponents who charged that the reviled Obamacare was the offspring of Romneycare. Tim Pawlenty, the Minnesota governor who had ordered every agency in his state to have nothing to do with the new law, had taken to calling Obamacare O'Romneycare. - Chapter 16, p. 248
Pawlenty called it "Obamneycare," a far cleverer portmanteau.
On the 2012 campaign trail he promised to repeal Obamacare on the first day of his presidency. What he had done in one state, he asserted, did not justify Obama's "one-size-fits-all" for all states, and he attacked a federally imposed mandate as an assault on liberty that would not work.
Jonathan Gruber, the MIT economist who had helped Romney create Romneycare and then worked on Obamacare, had sat out the 2008 election. Now, he happily allowed himself to be interviewed at every opportunity confirming that Obamacare was modeled exactly from Romneycare and, like Romneycare, was going to work fine. - Chapter 16, p. 248
Brill takes pains throughout the book to compare the similarities between Romneycare and PPACA, suggesting that Republican opposition to it was disingenuous or a product of motivated reasoning. But there were good reasons--and remain good reasons--to be OK with Romneycare and to dislike PPACA. Ramesh Ponnuru and Yuval Levin wrote the
most relevant piece on this back in 2012. Romneycare was a decent solution within the confines of a badly-designed federal context. A federal solution should have moved
away from those issues to repair the federal problems, rather than entrenching them further. It did not.
Also worth noting is
this excellent piece from Reihan Salam, who discusses the origins of the individual mandate. The staffer who created the mandate originally is now an aid to mainstream Democrat Richard Blumenthal, which says something about the way that the parties have shifted over the last 20 years, and, more trenchantly, about how little Republican policy people focused on health care prior to PPACA.
... with the Court having cleared away what looked to be the final external hurdle for the law to go forward, the insurers and the rest of the healthcare industry assumed they would start seeing the necessary regulations and other preparations flowing out from Washington with fire-hose velocity.
However, through the summer of 2012, nothing happened. There was a presidential election looming, and the Obama political team didn't want to pollute the news cycles with anything that cold prompt an Obamacare story. Someone was bound to criticize anything they issued. "We literally fell a year behind," a senior CMS official told me. "We were told by the White House to do nothing, not even circulate drafts of regs, because they might leak out if lobbyists got ahold of them." - Chapter 16, p. 259
The Obama administration has consistently put politics ahead of governance, period, end of story.
So we had agreed that through the summer I would make multiple trips to Washington to look in on how this massive program and its core e-commerce website was being built. I even told my editors that based on the efficient, dedicated people I had seen at the CMS campus in Baltimore while reporting on the vetting and processing of Alana A.'s Medicare bills for the first article, this was likely to be an uplifting saga of unsung heroes. Whatever the political dysfunction in Washington, Obama's managers and these civil servants were going to prove that big government could work. - Chapter 18, p. 289
I admire Brill for laying his biases out so clearly here: he was expecting a big government success story and had trouble imagining bureaucratic disaster. Left-leaning folks, in general, have more confidence in government than it warrants.
Lucky for him, Brill found the Kentucky success story and focused on it as a contrast to the federal debacle.
One additional point: there is a connection between governance dysfunction and political dysfunction.
White House chief of staff Denis McDonough had a friend who had been pestering him with calls in September. The friend warned the chief of staff that his insurance industry contacts thought the exchange wasn't even close to being ready. One had even told McDonough's friend that his company was thinking of pulling out to avoid being involved in what was going to be a fiasco. "My people say he's overreacting to some last-minute problems," McDonough had assured his friend.
Now, on the evening of September 30, just hours before the launch, McDonough called the same friend. "Based on the reports I'm getting I think we're gonna knock your socks off tomorrow," he promised. - Chapter 19, p. 322
It's interesting to me that private sector folks had a better idea of what was going on than public sector folks.
There were some additional points in this book about how the disaster unfolded, and how the administration repaired it with a "tech surge" of talented young programmers liberated from most government contracting restrictions (which worked out better, frankly, than I anticipated).
A couple of things that I thought warranted more coverage in the book:
1. A discussion of how broadly the Obama administration defined basic services, and how vigorously they pushed things like birth control as a requirement. (see: Little Sisters of the Poor, Hobby Lobby, etc). This is part of why even the bronze plans are expensive.
2. The Obama administration's essential function as an
ad hoc conference committee, smoothing out drafting errors with an incredibly broad interpretation of executive discretion.
In the end, though, what we see is President Obama's desperate desire for a legacy, to catch the great whale of American politics and to go down in the history books as bringing about universal care. I suspect historians will give him what he wants. But the plan could have been a lot better, a lot less controversial, and/or a lot less disruptive. (I would have preferred for Obama to use his legislative majorities to go after the structural issues in American health care first. And once Scott Brown won, I thought that Obama should have scaled back a bit, opting for a straightforward expansion of Medicaid. I bet that would've passed without issue.)
