The criminal’s guide to upward mobility.
Steven Brill on how health-care reform went wrong.
Working in the White House on a Saturday afternoon had become routine for Zeke Emanuel and Bob Kocher,” Steven Brill tells us at the beginning of Chapter 9 of his ambitious new history of the Affordable Care Act, “America’s Bitter Pill” (Random House):
But they were usually able to leave at a decent hour. However, at 5 p.m. on Saturday, April 25, 2009, they were thrown into a state of near-panic. Emanuel, Kocher, and the rest of the staff from the Office of Management and Budget and the National Economic Council had been blindsided by the domestic policy crew.
At issue was a briefing paper written by the head of the White House health-care-reform effort, Nancy-Ann DeParle. It was early in the planning stages for Obamacare, and DeParle’s memo was a three-thousand-word document, in which she made the political case for a broad expansion of coverage. Kocher and Emanuel were taken aback. They were worried about the cost of the bill. The memo was supposed to go to the President at eight o’clock that night, which gave them just three hours to respond. “Any hopes for an early departure that Saturday evening were gone,” Brill writes.
By this point in the narrative, the reader is well acquainted with the cast of characters. DeParle was “a Rhodes scholar and graduate of Harvard Law School . . . a seasoned manager and savvy infighter when she had to be,” with a background in private equity. Kocher, a “Harvard-trained internist,” late of McKinsey, 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.” Emanuel was the “brashest” and most “academically credentialed of the trio of brilliant Emanuel brothers,” took “edgy” positions, and had 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.” He had “brains, cunning and [a] biting persona,” and was “ready, willing and able to layer it with the self-righteousness of a guy who treated cancer patients.” The two worked with Lawrence Summers—the “celebrated Harvard economics professor” and former Harvard president—and Peter Orszag, the whiz kid out of the Congressional Budget Office by way of Princeton and the London School of Economics. Brill, a graduate of Yale and Yale Law School, tends to specify the Ivy League credentials of his protagonists up front, with the result that his book sometimes reads like the class-notes section of an alumni bulletin. Barack Obama, we are reminded, is “the former Harvard Law Review president.” Jonathan Gruber, who was a Ph.D. student of Larry Summers at Harvard, was “an outgoing guy who had the intellectual chops of an Ivy League academic without the withdrawn personality.” And so on.
So there they were, Kocher of Harvard and Emanuel of Harvard blindsided by DeParle of Harvard. The evening became a blur. The two men tried desperately to alter the language of the briefing paper. But they were blocked by DeParle and her colleague Jeanne Lambrew—the “highly respected policy wonk,” who, at one of the first major congressional health-care summits, had “pushed back on the notion that the private sector could always be the answer.” The best they could do was alter a few words and phrases. Round One to DeParle.
For six pages, Brill painstakingly carries the story forward. Key phrases of the memo are parsed, their implications interrogated. “These options have been presented to your senior staff, and we have developed a package that could plausibly offset the cost of reform,” DeParle wrote. But the pronoun “we,” Brill argues, was ambiguous: it included her team but not the economic team. And could one side of the White House policy staff formulate a “package” without the other side? The directive from the Oval Office was clear. “Don’t bring us your problems,” Valerie Jarrett, the President’s gatekeeper, was known to say. “Bring us your solutions.” From that Saturday evening through the following Thursday, the two sides battled. Then came the showdown:
On April 30, 2009, a large group gathered with the president in the Roosevelt Room to review a PowerPoint about health-care reform. This was the meeting that DeParle’s April 25 memo had been meant to prepare the president for. But this time, the PowerPoint had been prepared jointly by the economic team and DeParle’s healthcare policy people. Peter Orszag and Larry Summers had insisted on that. In fact, Kocher, who prided himself on his McKinsey-bred PowerPoint skills, controlled the document.
Kocher controlled the document.
Near-history, the journalistic reconstruction of contemporary events, has come to be dominated by two schools. The first is represented by Michael Lewis. Lewis wrote about the 1996 Presidential election through the story of a Republican candidate no one had ever heard of, the eccentric millionaire Morry Taylor. “The Big Short” was an account of the financial crisis told through the eyes of four obscure short-sellers. Lewis’s interest is psychological and moral. His books have won him many admirers (including me) because they offer deceptively simple narratives in the service of a grand canonical theme. “Liar’s Poker,” which recounts the young Lewis’s stint in the Wall Street of the nineteen-eighties, is Daniel in the lion’s den. “Money Ball,” about the strategies of small-market baseball teams, is David and Goliath. “The Blind Side” is the Good Samaritan. “The Big Short” is Noah’s Ark, and “Flash Boys” is Jesus casting the money changers out of the temple.
The second school is associated with the Washington Post reporter Bob Woodward. Woodwardian history is kaleidoscopic. The reporter makes many telephone calls and office visits, and reads many documents. All key players are represented and events detailed. The approach is sociological: the great theme of the Woodward school is the interaction of institutions and vested interests. In a Lewis, if you remove the titles of the characters and simply identify them by their first names, nothing is lost: an individual’s character, not his position, is what matters. In a Woodward, the opposite is often true. Names may be irrelevant; titles tell you what you need to know. That is what makes Woodward and Carl Bernstein’s “All the President’s Men” a masterpiece: its great achievement was to show how the institutional power of the White House led to the President’s personal corruption. The Lewis brings drama to what we thought was prosaic. But when the underlying subject is inherently dramatic, and when the heart of the story lies behind doors that only dogged reporting can unlock, the Woodward is what we need. You don’t want Michael Lewis on Watergate. He’d get distracted by Rose Mary Woods and would never make it into the Oval Office.
“America’s Bitter Pill” is Brill’s attempt at a Woodward. The book is wrapped in the presumption of controversy: reviewers who received early copies had to sign a nondisclosure agreement. The reporting is exhaustive. Brill tells us that he interviewed “243 people—many of them multiple times—over twenty-seven months.” When Brill informs us that Valerie Jarrett likes to use the common managerial adage “Don’t bring us your problems; bring us your solutions,” he states that his source for this fact is the testimony of “three senior members of Obama’s staff.” Next comes a footnote:
Although Jarrett declined comment, assistant press secretary Eric Schultz denied this account offered by these senior Obama advisers, saying, “Valerie doesn’t use this phrase and regularly reminds our staff that the president and our senior team don’t like surprises, to further encourage staff to bring to their attention both problems and solutions.”
Then, in an appendix, Brill presents the text of questions that he submitted to Obama, including:
I am told by five people who have served in senior capacities in the Administration that Ms. Jarrett often told them that “the President wants you to bring us your solutions, not your problems.” . . . I feel compelled to ask you to comment on that.
Note how the three sources he interviewed in the text have now grown to five. Between the writing of the main text and the completion of the appendix, apparently in the belief that he had not fully explored the issue of Jarrett’s directive, Brill kept on going, enlisting one senior Administration official after another—up to and including the President—in his quest to resolve the Solutions vs. Solutions and Problems conundrum. Brill wants to take us behind the locked door.
“America’s Bitter Pill” consists of a series of parallel stories. Brill gives us case studies of Americans whose lives have been devastated by outrageous medical bills. He describes the launch of Obamacare in Kentucky; the early days of Oscar, a health-insurance startup in New York City; and his own terrifying experience with a life-threatening aortic aneurysm. Each of these stories orbits his central narrative, “the roller-coaster story of how Obamacare happened, what it means, what it will fix, what it won’t fix, and what it means to people.”
Brill’s intention is to point out how and why Obamacare fell short of true reform. It did heroic work in broadening coverage and redistributing wealth from the haves to the have-nots. But, Brill says, it didn’t really restrain costs. It left incentives fundamentally misaligned. We needed major surgery. What we got was a Band-Aid.
One of Brill’s examples is drug prices. While he was working on his book, he writes, “a drug called Sovaldi burst onto the scene.” Sovaldi is used for hepatitis C, and its manufacturer, Gilead Sciences, has priced it at a thousand dollars per pill—which comes out to eighty-four thousand dollars for a course of treatment. Brill quotes Sarah Kliff, who writes on health-care policy, pointing out that California might well end up spending more on Sovaldi for its Medicaid patients than it does on all K-12 and higher education. “The exact price Gilead chose for Sovaldi said something in and of itself about the nonexistent regulatory environment drug companies knew they faced in the United States,” he writes. “Rather than set the price at, say, $989 or $1,021—at least to create the impression that it was based on some calculation other than ‘Let’s charge whatever we want’—the company had chosen a simple round number, $1,000.”
How can we have a solution to the health-care crisis without making any attempt to curb runaway drug prices? Medicare isn’t even allowed to negotiate directly with drug companies. “Should we be embarrassed and maybe even enraged that the only way our country’s leaders in Washington could reform healthcare was by making backroom deals with all the interests who wanted to make sure that reform didn’t interfere with their profiteering?” Brill writes, in a section structured around a series of italicized questions. “Of course. We’ll be paying the bill for that forever.”
Brill devotes fifty pages to another Obamacare shortcoming, the early malfunctioning of the Web site. He originally thought that the site would be a showcase for what government could do. But, on the train back from his initial round of interviews in Washington, he glanced at his notes and realized that he had been given seven different answers to the question of who was in charge of the launch of the federal exchange, including an “incomprehensible” organizational chart with four diagonal lines crossing one another and forming a “lopsided” triangle:
Should we be amazed, and disappointed, at how Obama treated the nitty-gritty details of implementing the law as if actually governing was below the pay grade of Ivy League visionaries?
Absolutely. This failure to govern will stand as one of the great unforced disappointments of the Obama years.
At the end of “America’s Bitter Pill,” Brill offers his own solution to the health-care crisis. He wants the big regional health-care systems that dominate many metropolitan areas to expand their reach and to assume the function of insuring patients as well. He talks to Jeffrey Romoff, the C.E.O. of the University of Pittsburgh Medical Center, who is about to try this idea in the Pittsburgh area, and becomes convinced that the same model would work throughout the country. “The [hospital’s] insurance company would not only have every incentive to control the doctors’ and hospitals’ costs, but also the means to do so,” he writes. “It would be under the same roof, controlled by Romoff. Conversely, the hospitals and doctors would have no incentive to inflate costs or over-treat, because their ultimate boss, Romoff, would be getting the bill when those extra costs hit his insurance company.”
Brill talks through his idea with several other prominent health-care-system C.E.O.s (“doctor-leaders,” he calls them), whose résumés are helpfully elaborated: “Glenn Steele, Jr., a former cancer surgeon and professor at Harvard Medical School,” and Gary Gottlieb, the head of a Boston group “formed by the merger of the area’s two most highly reputed hospital brands, both of which were affiliated with Harvard Medical School.” A system like this, Brill estimates, based on a few back-of-the-envelope calculations, could slice twenty per cent off the private-sector health-care bill.
It’s at moments like this that Brill’s book becomes problematic. The idea he is describing is called integrated managed care. It has been around for more than half a century—most notably in the form of the Kaiser Permanente Group. Almost ten million Americans are insured through Kaiser, treated by Kaiser doctors, and admitted to Kaiser hospitals. Yet Brill has almost nothing to say about Kaiser, aside from a brief, dismissive mention. It’s as if someone were to write a book about how America really needs a high-end electric-car company that sells its products online without being the least curious about Tesla Motors.
In a Lewis, this wouldn’t matter so much. “Flash Boys” was criticized by some on Wall Street for mischaracterizing the world of high-frequency trading. But “Flash Boys” explicitly set out to tell its story through the eyes of a renegade trader named Bradley Katsuyama, and the test of the book’s success was whether it captured Katsuyama’s view of high-frequency trading. In a Woodward, the goal is different. A book like Mark Bowden’s “Black Hawk Down”—a Woodward that outdoes even Woodward—sets out to describe things as they actually happened, not things as filtered through one person’s idiosyncratic perspective. The currency of the Lewis is empathy. The currency of the Woodward is mastery—and nothing is more corrosive to the form than the suspicion that the author doesn’t grasp the full picture.
Does the botched launch of the Web site deserve fifty pages? Maybe so. This certainly was something that felt significant at the time. But what we want to know is how much it ultimately mattered, and there is little in Brill’s reporting that sheds light on that question. The Administration built a Web site in order to give Americans access to one of the most complex pieces of legislation in history. The site had lots of bugs, in the beginning, as complicated pieces of software often do. Then the Administration fixed the bugs quickly, and the response was such that the Affordable Care Act reached its enrollment targets. “I was, like, never worried,” Brill quotes Mickey Dickerson, an expert from Google whom the Administration brought in to get the Web site on track, as saying. “It’s just a website. We’re not going to the moon.” Brill wants the Web-site saga to stand for something larger, but in the end what it seems to stand for is the fact that Web sites, in the beginning, sometimes crash a lot.
The Sovaldi example is equally puzzling. A thousand dollars for a pill sounds like a lot of money. But hepatitis C is a costly disease. It’s the leading reason for liver transplants, which are among the most expensive of all medical procedures. A 2013 study published in the journal Hepatology estimated the lifetime health-care costs of the average hepatitis-C patient (when medical inflation was factored in) at more than two hundred thousand dollars. The drug regimens that came before Sovaldi didn’t work very well and had terrible side effects. Brill quotes Sarah Kliff on how much the drug will cost the state of California, but what he doesn’t mention is that Kliff followed up on her initial analysis with another that was headlined, above a picture of Sovaldi capsules, “EACH OF THESE HEPATITIS C PILLS COSTS $1,000. THAT’S ACTUALLY A GREAT DEAL.”
The problem with the pharmaceutical industry is not that it makes too many drugs like Sovaldi. It’s that it makes too many drugs that aren’t like Sovaldi, drugs whose costs vastly outstrip their benefits: cancer treatments that cost tens of thousands of dollars and extend life only minimally, or expensive me-too drugs that perform no better than cheap generics. We certainly need to be smarter about the drugs we use, and Medicare should be relieved of the congressionally mandated restrictions that make it impossible to bargain directly with drug companies. But Sovaldi targets a painful and costly disease with a substantially cheaper, safer, and more effective one-time cure. This is what we want drug companies to do. Of all the examples that Brill could have used to bolster his argument, why did he pick that one?
On May 2, 2009, Brill writes, the domestic-policy group at the White House blindsided the economic team with a second memo. It concerned something called the medical loss ratio, or M.L.R. The medical loss ratio compares what an insurer earns in premiums with what it pays out in benefits. An insurer who takes in a dollar and gives back eighty-five cents has a loss ratio of eighty-five per cent. Jeanne Lambrew wanted to place a floor on every insurer’s loss ratio: if a company kept too much of that dollar—if its M.L.R. fell below eighty-five or eighty per cent, say—it should have to refund the difference to its customers.
“Lambrew was certainly on firm political ground,” Brill writes. One senior White House aide called the proposal a “winner.” The rule would make it impossible for one of the economy’s least liked sectors to make excess profits. The feeling was, Brill says, that “it might end up being the single most politically appealing piece of healthcare reform.”
The economic team, however, wasn’t so sure:
Summers called it a “stupid idea,” and told his people to try to kill it. It was “dumb for us to cap anyone’s profits,” he said, dismissing the idea much the way the legendarily blunt Summers might have taken down a freshman economics student at Harvard who said something in class that he thought was “dumb.”
Summers’s point was that an M.L.R. floor distorted the insurer’s incentives. The argument goes like this: Suppose your doctor sends you to an imaging center to get a thousand-dollar MRI. But then your insurance company calls you and says that it’s found an equivalent provider just down the street that charges two hundred dollars. This, presumably, is what we want insurers to do. The market for medical procedures lacks price transparency and competition, and it’s scandalous that insurers routinely pay thousands of dollars for an MRI scan when the true cost of the procedure, by any metric, is a fraction of that. By taking steps like this, Summers thought, insurers could finally rein in, or even reduce, health-care premiums, which had been rising faster than inflation for years. But it is also highly likely that the insurer will keep a chunk of that eight-hundred-dollar savings for itself, in the form of higher profits. The prospect of higher profits is an insurer’s incentive for going to the trouble of looking for a cheaper MRI. In other words, if insurers do what we want them to do—cut costs and rein in premiums—it is likely that their loss ratios will fall. Why, Summers wondered, would you want to penalize them for doing that?
The economic team felt that health-care could use a good dose of market incentives. The Lambrew-DeParle view, on the other hand, was that health-care is different: the complex nature of the relationship between patients and their health-care provider is so unlike ordinary economic transactions that it can be governed only through cost controls and complicated regulatory mechanisms. When the two sides argued, they weren’t just reflecting a difference in tactics or emphasis. Their disagreement was philosophical: each held a distinct view about the nature of the transactions that take place around medical care.
Brill sides with the DeParle camp. His solution for the health-care problem is to treat the industry like a regulated oligopoly: he believes in price controls and profit limits and strict regulations for those who work within the health-care world, restrictions that he almost certainly thinks would be inappropriate for other sectors of the economy. A patient, he explains at the beginning of his book, is a not a rational consumer. That was the lesson he took from his own heart surgery. “In that moment of terror,” he writes, of blacking out after his surgery, “I was anything but the well-informed, tough customer with lots of options that a robust free market counts on. I was a puddle.”
But Brill spends very little time examining why he thinks this means that the market can’t have a big role in medicine, where most care is routine, not catastrophic. He just takes it for granted. And because he is not much engaged by the philosophical argument at the heart of the health-care debate, he can never really explain why someone involved in health-care reform might be unhappy with the direction that the Affordable Care Act ended up taking. He tells us who controlled the PowerPoint. But he can’t tell us why it mattered.
It is useful to read “America’s Bitter Pill” alongside David Goldhill’s “Catastrophic Care.” Goldhill covers much of the same ground. But for him the philosophical question—is health-care different, or is it ultimately like any other resource?—is central. The Medicare program, for example, has a spectacularly high loss ratio: it pays out something like ninety-seven cents in benefits for every dollar it takes in. For Brill, that’s evidence of how well it works. He thinks Medicare is the most functional part of the health-care system. Goldhill is more skeptical. Perhaps the reason Medicare’s loss ratio is so high, he says, is that Medicare never says no to anything. The program’s annual spending has risen, in the past forty years, from eight billion to five hundred and eighty-five billion dollars. Maybe it ought to spend more money on administration so that it can promote competition among its suppliers and make disciplined decisions about what is and isn’t worth covering. Goldhill writes:
Medicare is cheaper to run than private insurance. So what? Cheaper doesn’t mean more efficient. It may be cheaper to run banks without security guards, hotels without housekeepers, and manufacturers without accountants, but that wouldn’t make those businesses more efficient.
Many state Medicaid programs have, similarly, a rule that says health-care providers cannot charge Medicaid more than the lowest price they give to anyone else. If you run an MRI machine and allow a privately insured patient to get a scan for two hundred dollars instead of a thousand dollars, you have to give all your Medicaid patients MRI scans for two hundred dollars. That’s a classic “health care is different” solution to the problem of excess health-care costs: pass a law guaranteeing the “sale price” to publicly funded patients. So what’s the result? Goldhill asks. Health-care providers behave the way any market participant would under the circumstances. They don’t have sales. What incentive would the Gap have for holding a Boxing Day blowout if, by law, it would have to offer those same low prices every other day of the year?
Goldhill takes a far more radical position than the economic team at the White House does. He believes that most of our interactions concerning health care are actually no different from our transactions concerning anything else: if we trust people to buy cars and houses and food and clothing on their own, he doesn’t see why they can’t be trusted to do the same with checkups, tonsillectomies, deliveries, flu shots, and the management of their diabetes. He thinks that the insurance function—inserting a third party between patients and providers—distorts incentives and raises prices, and has such an adverse impact on quality that health insurance should be limited to unexpected, high-cost occurrences the way auto insurance and home insurance are. These ideas are unlikely to make their way into policy anytime soon. But, in elaborating the market critique of the health-care status quo, Goldhill helps us understand what the argument we’re having right now is about. It is not just a political battle over Obama. It’s a battle over whether health-care deserves its privileged status within American economic life.
The frustrating thing about “America’s Bitter Pill” is that Brill could have taken us one step further. He has introduced us to the policymakers, to Summers and DeParle, Kocher and Lambrew. He has taken us to the Roosevelt Room, where the two sides battle for the President’s attention. But, just at the point where “America’s Bitter Pill” could have become illuminating, exploring the conceptual gulf behind all the wrangling, Brill gets restless. He wants to get on to the next page in his notebook—to the next meeting that Obama had in the Roosevelt Room, to the briefing paper about such-and-such that was sent to So-and-So, and then, of course, to the debacle of the Web site, which had bugs until those bugs were fixed.
“Do you recall a memo that Peter Orszag wrote to you just after the law was passed urging you to put in charge someone with experience launching and running ventures as complicated as healthcare.gov?” Brill asks the President. He’s trying to be Woodward. It’s not as easy as it looks. “What were your reasons for not doing so? If you do not recall the memo, do you recall Peter and Larry Summers advising you to do this? . . .”