by Steven Brill
Daschle had a better idea. He would do both.
Having been heavily involved in healthcare in his years in the Senate, Daschle had seen the kind of unwieldy, territorial bureaucracy the Department of Health and Human Services could be. In fact, the agency within HHS known as the Centers for Medicare and Medicaid Services (CMS), that dispensed the hundreds of billions of dollars for those programs, was itself a behemoth that resisted oversight even from its HHS parent. Daschle knew that together the two agencies had been perpetually turf conscious, even secretive, when it came to letting a president and his White House staff get a handle on what was going on at the HHS building a few blocks from the White House, or at the CMS headquarters outside Baltimore. A czar in the White House wouldn’t be nearly as effective, Daschle thought, as a czar who could be in the White House when necessary yet also encamped at and directly in control of HHS, too.
Obama liked the idea. He knew that Daschle, perhaps singularly, had the political smarts, the Capitol Hill credibility, the deep grounding in healthcare policy and passion for reform, and the experience with all the relevant bureaucracies to make this work. Plus, Obama knew Daschle was good at finding smart people to help him; three of Obama’s top staffers had first worked for Daschle.
But for Daschle one hesitation lingered through the November transition: Was Obama really going to stick to his plan to push healthcare reform, despite the warnings of so many of his top aides to deal with the economy first?
The two had one final conversation about that in about the third week in November. “He completely convinced me,” Daschle recalled. “He was even a bit annoyed that I kept asking.”
ADDING ORNAMENTS TO THE HOOD OF A JALOPY
When Daschle began working at the Obama transition team’s Washington office in November he brought Jeanne Lambrew with him. Lambrew was the University of Texas professor who, at the Baucus summit, had pushed back on the notion that the private sector could always be the answer; she was enamored of public healthcare providers, such as Medicaid and Medicare. With her writings and experience as a public health advocate in the Clinton administration she was a highly respected policy wonk, thought to come at most issues from the left. Lambrew had also co-authored a book with Daschle on healthcare reform. A key suggestion in the book had been to establish the kind of independent Federal Reserve–like board to regulate wasteful health spending that Baucus’s summit panel had seemed to warm to.
There were others with health policy experience joining the transition team, but Lambrew, as Daschle’s deputy and writing partner, was clearly the senior policy staffer. Lambrew might have been inclined to push for a more radical overhaul. However, political realities—combined with the lessons learned in the Clinton years, along with Obama’s own campaign platform—dictated that the system was going to be reformed, not scrapped. “We were going to build on the house we had, not knock it down and rebuild a new house,” recalled one senior Obama adviser. “Sometimes that’s messier and harder, but that’s the reality we had to work with.”
That made sense for those focused on the realities of Washington. However, to those working in the trenches, it sidestepped a different reality.
When I began my reporting for the special issue of Time about medical costs, I approached a doctor friend for an introduction to healthcare economics. He sent this email summarizing his view of his world:
You are attempting to investigate and understand a miasma of convoluted, dysfunctional, poorly integrated systems. It’s like a car built in 1965. In its early years it performed well even though it was misused and abused. The warranty was up decades ago and never renewed. No parts are around anymore to fix it. It’s time to abandon it and, with great care, buy a new car.
This was a doctor who practiced in the Bronx, not on Capitol Hill.
Resigning themselves to stick with the old house, or jalopy, threatened to limit what the Obama team could do about costs for the same reason that scrapping the system wouldn’t fly politically. As Princeton healthcare economist Uwe Reinhardt liked to say, “Cutting healthcare costs means cutting someone’s income”—income that represented close to a sixth of the economy and, therefore, wielded unequaled power in terms of money and breadth.
THE LEFT-WING WONK AND THE KNOW-IT-ALL
True to Orszag’s notion, to which Obama had agreed, that healthcare reform was intrinsic to economic reform and recovery, the gathering economic team thrust itself into the deliberations of the domestic policy transition team that was responsible for figuring out a healthcare reform plan. The economics group was led by former Treasury secretary Larry Summers, who was to become the president’s head of the National Economic Council in the White House, as well as Orszag. They were backed up by two younger men who had trained as physicians and had immersed themselves in healthcare economics and policy.
One was Bob Kocher, who had been a partner at McKinsey & Company. Kocher, thirty-nine, had led the giant consulting firm’s healthcare economics research team. A Harvard-trained internist, Kocher was a walking encyclopedia of healthcare markets data who had an uncanny ability to turn it all into eye-opening PowerPoint presentations illustrating the dysfunction of the American system. Summers put him on the National Economic Council staff.
The other was Ezekiel Emanuel, a cancer specialist and former associate professor at Harvard Medical School who was chairing the National Institutes of Health’s Department of Bioethics, which he had founded.
With an MD and a PhD (in political philosophy) from Harvard, a master’s from Oxford, and a position teaching oncology at the Dana-Farber Cancer Institute in Boston, Zeke Emanuel was the most academically credentialed of the trio of brilliant Emanuel brothers. There was Ari, the Hollywood agent who had become an entertainment mogul and was supposedly the model for the profane hyperagent in the HBO series Entourage. And, of course, there was Rahm, the Clinton aide who had become a fast-rising congressman from Chicago, and was about to become the president’s chief of staff. Zeke, who at fifty-one in December 2008, was the oldest of the Emanuel brothers, was also the brashest—which was clearing a high bar.
As soon as Zeke knew that Rahm was going to be chief of staff he had petitioned his brother for a job working on healthcare. The Emanuel brothers are fanatically loyal to one another, but they spare no niceties when talking among themselves. “Rahm told me to go f—— myself,” Zeke recalled. “But he knew I was right and talked to Orszag about getting me a spot through him.” As Orszag moved into his job as head of the Office of Management and Budget, he arranged for Zeke to be loaned to the OMB from the National Institutes of Health while staying on the NIH payroll.
Zeke had the brains, cunning, and biting persona of his two brothers, the Hollywood deal maker and Washington pol. But he was ready, willing, and able to layer it with the self-righteousness of a guy who treated cancer patients. When it came to healthcare issues, at times Zeke Emanuel had taken positions that others may have agreed with but thought too edgy to articulate. In particular, his take on healthcare economics—informed by what he had studied in philosophy, had seen as a cancer doctor, and had confronted as a bioethicist at the National Institutes of Health—had sometimes found him flirting with topics such as whether patients near the end of life should be encouraged to forgo painful, expensive care.
Almost immediately an awkward divide became clear, separating the Lambrew camp and the economics folks. In particular, Lambrew and Zeke Emanuel seemed to those who observed them to have developed a dislike for each other almost from the start.
Lambrew treated Emanuel as if she thought he was a know-it-all who couldn’t stand not to dominate the conversation and wouldn’t hesitate to use his academic and medical credentials to pull rank on anyone who disagreed with him.
To Emanuel, Lambrew was the naïve, left-wing policy wonk who wanted unlimited healthcare for everyone, even if the taxpayers had to pay for it and even if the care being provided was unnecessary.
But, according to three senior Obama adv
isers, Lambrew was fast gaining an ally that neither Zeke nor Rahm Emanuel had counted on—Valerie Jarrett.
THE REAL CHIEF OF STAFF
Jarrett was coming to the White House with the title of senior adviser to the president. In 1991, just before Michelle Obama had married the future president, Jarrett had hired the future Mrs. Obama to work at city hall in Chicago, where Jarrett was a deputy chief of staff to the mayor. Since then, Jarrett, who was fifty-three during the transition, had been a big sister of sorts to both Obamas, giving them career advice, introducing them to power players around town, and ultimately encouraging and guiding Barack Obama’s ascent from community organizer to state senator to U.S. senator to president.
Through the campaign and the transition, Jarrett had assumed an outsized role as the person closest to both the president and First Lady. In fact, according to five of the highest ranking White House officials, through the Obama presidency, no senior Obama aide regardless of title or stature—not Rahm Emanuel nor any future Obama chief of staff, nor Tom Daschle, let alone any other cabinet member—would ever be senior to Jarrett when it came to having the president’s ear or his confidence. As a practical matter, these Obama advisers maintained, Jarrett was the real chief of staff on any issues that she wanted to weigh in on, and she jealously protected that position by making sure the president never gave anyone else too much power.*3
Reporters would begin to catch on to her influence later in the administration; the press began quoting anonymous White House staffers as calling Jarrett the night stalker because she, alone, would go up to the first family’s living quarters in the evening, after all the issues of the day had supposedly been hashed out, and provide the last word.
Asked about the assessments of those five senior officials that Jarrett was “the real chief of staff,” Obama declined comment.
It wasn’t so much that Lambrew was a Jarrett favorite, though the two did get along well. Rather, it was a matter of Jarrett almost immediately not liking the idea of Rahm Emanuel being in charge. Although the soon-to-be-former congressman was a Chicago politician, he had not traveled in her circles. And, as a former Bill Clinton aide, he had, in fact, remained neutral in the Hillary Clinton contest with Obama. It was understandable that the more genial Obama wanted the take-no-prisoners Emanuel to be the chief who could keep the rest of the staff in line and make deals on Capitol Hill. But his hard-charging style and portfolio had to be kept in check, Jarrett told another senior Obama adviser. Now, the sudden arrival on the scene of Rahm’s even more rambunctious brother seemed like part of a Rahm power play.
Besides, to the extent she had delved into the issue, Jarrett thought that extending coverage should, indeed, win out over fights about cost control that the new administration was likely to lose. That was exactly how Lambrew and the domestic policy staff saw it. For Lambrew and those working with her, healthcare reform had always been about extending coverage, something they knew the president-elect had become impassioned about as he met the uninsured or underinsured on the campaign trail.
Summers, Orszag, Kocher, Zeke Emanuel, and the rest of the economic team, however, saw reform in terms of their turf. They were determined to try to go after healthcare costs and spending as a tool for economic recovery—something the boss had also become impassioned about.
Yet Orszag was also the one who had told the Baucus summit how difficult attacking healthcare costs would be politically. And Jon Kingsdale, who ran Romneycare, had conceded at the same forum that in Massachusetts they had decided to go for expanded coverage first and deal with costs later because “politically” that was “the right choice.”
Now, in the first weeks of the transition, Jonathan Gruber, who had designed Romneycare, delivered a message to both sides that neither wanted to hear. Although Gruber was not officially on the transition team, he was talking to the people who were, and he gave them his blunter version of Kingsdale’s concession. “I told them,” he recalled, “that you can either try to expand coverage or you can try to do something to control costs. But trying to control costs too much dooms whatever you do, because the lobbyists will kill you. That’s what happened to Hillary in 1993.”
The industry will happily allow universal coverage, Gruber explained to the transition people, “because that creates more customers. What it won’t allow is cost control.”
Which meant that the industry’s idea of reform would be for the government to create more customers who would, through insurance subsidized by the government, Romneycare-style, pay the same sky-high prices for hospital care, drugs, and medical devices that everyone was already paying.
“Then the question becomes,” Gruber continued, “what’s the most we can do about cost control in a coverage bill without going too far and rolling the whole thing over the edge?”
Lambrew was fine with that prescription. Expanding coverage was the priority.
The transition economic team heard Gruber, but they were determined to prove him wrong.
When it came to healthcare, Daschle was senior enough—and seasoned enough—to have a foot in both the economic and healthcare reform camps. He, too, was confident the new Obama team could go further than Gruber thought without going over the edge. And he thought he could handle any friction with Lambrew, his protégé co-author. Nor was he worried about Jarrett.
Meantime, the Senate was moving ahead, not waiting for how the Obama camp might resolve these conflicts.
* * *
*2. In a 2012 biography of Obama’s mother, Stanley Ann Dunham, journalist Janny Scott reported that Ms. Dunham’s fight with an insurance company was about whether a preexisting condition nullified her disability insurance, not the coverage for her cancer treatment.
*3. Jarrett, as is her practice, declined to be interviewed.
CHAPTER 6
EVERY LOBBYIST’S FAVORITE DATE
November–December 2008
MAX BAUCUS HAD CONTINUED WITH EVEN MORE HEARINGS AFTER his June summit. Liz Fowler and the Finance Committee staff, including those working for Republicans as well as Democrats, had continued meeting with as many experts—in academia, think tanks, and trade associations—as they could find. Baucus himself met with seventy of his ninety-nine colleagues, one-on-one or in small groups, to get their thoughts and create still more momentum.
Baucus was on a mission. Despite his willingness and ability to forge compromises, during a thirty-year career in the Senate Baucus had produced no truly landmark legislation. In fact, as one of the most conservative Democrats who had often voted with Republicans, he was not regarded even in his own party as a standout lawmaker. It was clear to his staff that he intended to change that. The senator from Montana was certain the time for comprehensive healthcare reform had finally come and that he could be the one to make it happen. He was determined to make his moon shot.
“He was chairman of a powerful committee, and it was near the end of his career, so he wanted to do something big with that power,” is how one staff member put it.
It was no surprise, then, that Baucus wasted no time making sure his favorite issue was on the president-elect’s agenda before the Obama transition team could even find their desks. On November 6, 2008, two days after the election, the Senate finance chair sent Obama a letter telling him that “next week I will present to you and to the country my plan to move forward on health care reform in the early days of the 111th Congress and of your administration.”
That was followed on November 12 by a Baucus white paper, “Call to Action: Health Reform 2009.”
Its public release was the first sign of an odd twist in what history might have predicted would be the dynamics of the relationship between a president elected with much fanfare and high expectations and the members of his own party on Capitol Hill. Baucus was poised to take the lead, and the incoming president and his transition team, even with the campaign now over, were willing to follow. This was not going to be anything like Franklin D. Roosevelt’s first one hundred days, when th
e new president sent proposals to Congress to be passed, quickly.
Instead, Baucus’s staff sent their white paper to the Obama transition team as a courtesy, and incorporated minimal suggestions. It wasn’t that the two camps differed; by now most Democrats in Congress and on the presidential campaign trail had settled on the same core ideas, modeled after Romneycare. It was just that the lead came from a different end of Pennsylvania Avenue. Baucus, after all, had decided when he had rehired Fowler in early 2008 to push for reform, no matter which party won the White House.
The white paper—drafted by a team of seven, headed by Fowler—covered the healthcare landscape on ninety-eight small-print, heavily footnoted pages. It began with the overview that had stunned Fowler as a sophomore in college: “The U.S. is the only developed country that does not guarantee health coverage for all of its citizens.”
LOTS OF DETAILS, BUT DOZENS OF BILLION-DOLLAR QUESTIONS
Baucus had wanted to draft actual legislation. Fowler convinced him not to. Proposing legislation would make for too specific a target because the Congressional Budget Office—the nonpartisan agency that projects the costs of any proposed legislation, a process called scoring—would have to score it. That would invite attacks about provisions that might or might not make it into a bill to be negotiated with Republicans and with the House of Representatives and the White House.
Baucus agreed. Besides, he wasn’t fully wedded to everything in the plan; he just wanted to keep things moving. So he went with Fowler’s white paper approach.
However, Baucus was sure of one thing. He wanted to present a moderate plan from the start—a plan that could attract bipartisan support and send a signal to more liberal Democrats that this time a law was going to be drafted that could actually survive the gauntlet to come of lobbyists and conservative opposition. That meant he was going to stake out one clear position from the outset: This law would not provide for the government-run, single-payer insurance system that the more liberal members of his party argued was the only solution to spreading coverage while cutting costs.
