America's Bitter Pill Read online

  Even when it’s not an emergency, even those who would otherwise be the toughest customers lose their leverage.

  “When I went in for knee surgery, I couldn’t have cared less about healthcare policy or cost containment,” Marna Bargstrom, the CEO of the giant Yale New Haven Health System told me. “I was just scared.”

  That is the perspective that anyone’s encounter with a scalpel provides—the “How can I think about the cost at a time like this?” element.

  Most of the politicians, lobbyists, congressional staffers, and others who collectively wrote the story of Obamacare had some kind of experience like that, either themselves or vicariously with a friend or loved one. Who hasn’t?

  Montana’s Max Baucus, the chairman of the all-important Senate Finance Committee, had a picture on his desk of a constituent he had befriended who had died after a long fight against a disease stemming from an industrial pollution disaster, the court settlement of which, Baucus believed, had not sufficiently provided for his medical care.

  Billy Tauzin, the top lobbyist for the drug industry had, he said, “a cancer where they told me I had a one percent chance of living, until a drug saved my life.”

  The staffer who was more personally responsible than anyone for the drafting of what became Obamacare had a mother who, in the year before the staffer wrote that draft, had to take an $8.50 an hour job as a nightshift gate agent at the Las Vegas airport. She worked every night not because she needed the $8.50—her semiretired husband was himself a doctor—but because a preexisting condition precluded her from buying health insurance on the individual market. That meant she needed a job, any job, with a large employer. Her daughter’s draft of the new law prohibited insurers from stopping people with preexisting conditions from buying insurance on the individual market.

  And then there was Senator Edward Kennedy, for fifty years the champion of extending healthcare to all Americans. Beyond his brothers’ tragic visits to two hospital emergency rooms, Ted Kennedy’s firsthand experience with healthcare began with a sister’s severe mental disabilities, extended to a three-month stay in a western Massachusetts hospital following a near-fatal 1964 plane crash, and continued through his son’s long battle with cancer.

  Although their solutions varied, these four—as well as most of the dozens of other Obamacare players, who to some degree had these kinds of personal stories—saw and understood healthcare as an issue not only more urgent and more emotionally charged than any other, but also bedeviled by one core question: How do you pay for giving millions of new customers the means to participate in a marketplace with inflated prices—and with a damn-the-torpedoes attitude about those prices when they’re looking up from the gurney? Is that possible? Or must the marketplace be tamed or tossed aside? Or must costs be pushed aside, to deal with another day?

  As we’ll see, even the seemingly coldest fish among politicians—the cerebral, “no-drama” Barack Obama—drew on his encounters with people who desperately needed healthcare to frame, and ultimately fuel, his push for a plan.

  “Everywhere I went on that first campaign, I heard directly from Americans about what a broken health care system meant to them—the bankruptcies, putting off care until it was too late, not being able to get coverage because of a pre-existing condition,” Obama would later tell me.*1

  But as Obama’s campaign began, he had not yet met many of those Americans victimized by the broken healthcare system. And it showed.

  * * *

  *1. President Obama agreed to answer questions put to him in writing. Written answers risk being filtered by the president’s communications apparatus, and many of the president’s answers deserved the kind of follow-up that only a conversation can facilitate. I was assured by his press office that the president had read all of my questions and personally signed off on the answers. A full text of the questions and the president’s answers, as well as those questions that he declined to answer, is included as an Appendix at the back of the book.

  CHAPTER 2

  CENTER STAGE

  March 2007–February 2008

  “OBAMA WAS DEFINITELY NOT READY FOR PRIME TIME,” RECALLED Andy Stern, then president of the two-million-plus-member Service Employees International Union (SEIU). “He thought he knew the issue incredibly well—and he didn’t.”

  Stern was referring to Barack Obama’s performance in a Democratic presidential candidates’ forum on Saturday night, March 24, 2007, in Las Vegas, Nevada. (Obama declined to answer a question I put to him about his performance that night.)

  Coming less than six weeks after he had plunged into the race, it was the long shot candidate’s first appearance with those thought to be the leading contenders, Hillary Clinton and John Edwards. Also on the stage were candidates Joe Biden, Bill Richardson, Chris Dodd, Dennis Kucinich, and Mike Gravel.

  The Illinois senator’s Las Vegas flameout didn’t even come at a real debate. It was a one-at-a-time speaking forum sponsored by Stern’s union and the Center for American Progress, the center-left Washington think tank that housed refugees from the administration of President Bill Clinton who were considered, at least by each other, as a staff-in-waiting for the next Democratic president. There was to be no give-and-take among the candidates. Each would make an opening statement of three to five minutes to a crowd in the Cox Pavilion auditorium at the University of Nevada, Las Vegas, filled with members of Stern’s union and local and national political junkies. The White House hopefuls would then answer fifteen minutes of questions put to them by Time magazine’s Karen Tumulty and by the audience. Then he or she would exit the stage and the next contestant would be up.

  Moreover, it wasn’t to be a general debate about the various issues facing the country as the 2008 election season approached. It was about one topic only: healthcare.

  Before the candidates were introduced, John Podesta, the former Clinton chief of staff who ran the Center for American Progress, explained the unusual focus this way: “We hope that what happens in Las Vegas today will … set the tone for the entire presidential campaign. It’s simply time to make affordable, quality coverage for every American a reality.”

  Podesta offered statistics, the ones that by 2007 had become a mantra for the cause that would roil the country for the next seven years.

  Today 45 million Americans are uninsured, including 9 million children. Since 2000, health care premiums for workers have increased four times faster than wages.…

  What kind of value do we get for all that money we spend on health care in the United States? Not much. The U.S. currently ranks 31st in the world in terms of life expectancy, and 28th on infant mortality.… Our health care system today violates America’s deep commitment to human dignity for all and fairness for all, and it hampers our nation’s economic competitiveness.

  Co-host Stern put it this way to the candidates, still waiting behind the curtain:

  Polling in the four early primary states shows the cost of health care is the number one pocketbook concern for voters of both parties.…

  So what … are we missing? Leadership. Leadership in Washington, D.C.

  And for the next president here’s the final point of our poll: Voters are saying they’re not hearing from you enough about health care. And in a minute we’re going to start solving that problem.… It’s up to us voters … to … demand detailed answers about what they’re going to do.

  Barack Obama did not answer the call. He had come to Las Vegas knowing that this would be his first appearance with his opponents on the presidential stage. He knew that his only job would be to talk about healthcare, nothing else. Yet he winged it. He spent the first two of his three minutes sucking up to Stern’s union (recalling how he had worked with the SEIU as a community organizer in Chicago) and complaining generally about the plight of the middle class. Then he talked vaguely about the need to tackle costs while providing coverage for all.

  But he concluded forcefully: “I want to be held accountable for getting it done,�
�� he declared. “I will judge my first term as president based … on whether we have delivered the kind of health care that every American deserves and that our system can afford.”

  Tumulty and the rest of the audience didn’t seem to buy it. That this junior senator would make sweeping healthcare reform a priority and deliver on it just didn’t jibe with his going-through-the-motions presentation. “You gave a speech in January,” Tumulty began, “where you said that the time for half steps and the time for half measures in health care is over.… But thus far we haven’t seen a plan from you.”

  She turned the microphone over to a young man in the audience, who complained that “when it came to addressing the health care issue” the only content on Obama’s website “was things like HIV, which is very important, and issues like lead poisoning.”

  “Right,” Obama answered, relaxing on a stool. “Well, keep in mind that our campaign now is, I think, a little over eight weeks old. And so we will be putting a very detailed plan on our website.”

  The other candidates were crisp, knowledgeable, and specific, especially John Edwards, who freely acknowledged that he would end the Bush-era tax cuts for both the middle and upper classes in order to pay for expanded healthcare.

  And then there was Hillary Clinton. The New York senator stole the show. Her standing, strolling presentation was a tour de force of personal stories, sophisticated detail, easily understandable data, and great one-liners: “The insurance companies make money by spending a lot of money and employing a lot of people to try to avoid insuring you, and then, if you’re insured, to try to avoid paying for the health care you received.”

  A SWAMP OF CORRUPTION

  Most of the candidates aimed similar, if less pungent, attacks on the insurers—an industry whose profit margins are dwarfed by those of the drugmakers, device makers, and even nonprofit hospitals. And except for vague promises to promote efficiency through electronic medical records, Clinton, Edwards, Obama, and the others said little about how they were going to deal with the elephant in the room: costs.

  Yet all promised in one way or another to attack every politician’s favorite targets—“fraud and abuse.” Here, too, they were not specific. However, they would have had plenty to work with had they tried. By 2007, a healthcare system that sucked up as much money as the gross domestic product of France—but whose consumers had little knowledge of what they were consuming and often weren’t the ones paying for it, anyway—had metastasized into a swamp of corruption.

  As Clinton, Obama, and the others took their turns on the stage, federal prosecutors were deep into fraud investigations against bad actors trolling that swamp, ranging from a high-profile retailer of wheelchairs and motorized scooters to a giant international drug company.

  The Scooter Store, based in New Braunfels, Texas, was allegedly using millions of dollars in television ads to get people over sixty-five—which meant that the federal Medicare program paid their bills—to ask their doctors for prescriptions for its scooters and wheelchairs. At the same time, it was deploying salesmen across the country to push doctors to write those prescriptions, even for people who could get around without the scooters or chairs. Investigators were about six weeks away from settling a fraud suit that would require the retailer to pay $4 million in cash and give up more than $43 million in bills that were pending at Medicare.

  Meantime, another team of federal prosecutors was pursuing a far bigger target—the Aventis unit of Sanofi, a Paris-based pharmaceutical giant suspected of systematically overbilling Medicare.

  “Aventis Pharmaceuticals Inc. has paid … over $190 million to resolve allegations that the company caused false claims to be filed with Medicare … as a result of the company’s alleged fraudulent pricing and marketing of … Anzemet, an antiemetic drug used primarily in conjunction with oncology and radiation treatment to prevent nausea and vomiting,” the Justice Department would announce in August 2007.

  Like the Scooter Store, Sanofi signed a Corporate Integrity Agreement calling for five years of strict government monitoring. There were, in fact, so many of these agreements that in the Washington healthcare bureaucracy “CIA” had become a favorite acronym having to do with renegade drug companies or other suppliers, not spies.

  THE DEMOCRATS MOVE RIGHT

  Barack Obama, the former Harvard Law Review president and boy wonder senator, was not used to not being the smartest guy in the room.

  “It wasn’t that Obama didn’t care,” said a former senator who had been close to Obama and recalls the Las Vegas forum well. “It’s just that he had been able to wing it most of his life because he’s so smart, and he thought he could here.… He tends not to buckle down and do the work until he sees that he absolutely has to.

  “But I know he knew he blew it. He told me after that debate that he knew he had made a jackass of himself, and it was not going to happen again.”

  Beyond Obama’s poor performance—which was not that noticeable at the time because, after all, he was supposed to be the inexperienced, quixotic underdog—there was something else striking about the Democrats’ forum.

  Aside from Kucinich, the Ohio congressman who was unabashedly the most left-leaning contender, the other candidates seemed to agree on an approach to healthcare reform more reminiscent of Richard Nixon than of Harry Truman, who had proposed government-sponsored health insurance for all in 1949. The 2008 Democratic contenders outlined reforms that followed the lead set by a Republican governor of Massachusetts, which would give all Americans insurance coverage within the current system.

  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.

  Kucinich, the liberal, was having none of that. He stuck to what had been Democratic Party orthodoxy before most of those on the stage had been born. “Today at this forum the sub-message is that you can’t break the hold that the insurance companies have,” he began. “Not a single candidate up here has challenged the underlying problem with our health care system, and that is insurance companies are holding our health care system hostage and forcing millions of Americans into poverty with unconscionable premiums, co-pays, deductibles.

  “So I ask you,” he continued, “is it constant with America’s greatness that candidates step away from the one solution that could change it all?”

  For Kucinich, as with most Democrats in years past, that “one solution” was the way most other developed countries had dealt with healthcare, beginning with Kaiser Wilhelm in late nineteenth-century Germany: “A not-for-profit health care system is not only possible,” Kucinich declared, “but … a bill that I introduced … actually establishes Medicare for all, a single-payer system, and it’s a not-for-profit system. It’s time we ended this thought that health care is a privilege. It is a basic right.… Think for a moment,” Kucinich concluded, “if Lincoln had decided, well, you know, there’s just too much resistance to this idea of emancipation.”

  That, in fact, was exactly what the major Democratic candidates had decided—that there was, indeed, too much resistance to upending a status quo that was consuming a sixth of the entire American economy. There was no way that they could, as Obama would later put it in speeches about healthcare, “put the toothpaste back in the tube,” by scrapping the uniquely American system under which private, profit-making insurance companies sold protection to those Americans who could afford it, whereupon the insurers and their customers chipped in to pay unregulated prices in a private marketplace for drugs, hospitals, doctors, diagnostic tests, and other healthcare.

  There were multiple analogies that people used for the entrenched, sorry state of the American healthcare system. One man’s toothpaste tube was another man’s tangle of legacy programs and delivery systems that, piece by piece, had
been patched together into an unworkable mess that provided substandard care at exorbitant prices. Trying to tack new programs and systems onto that was a recipe for frustration. It was, to use yet another metaphor, like deciding to fix up a hopelessly dilapidated house, instead of saving time and money by building a new one, because so many people had so much invested in preserving the irredeemably defective plumbing, wiring, and floors in the old house.

  AMERICA TAKES A DIFFERENT PATH

  The toothpaste had started coming out of the tube slowly, beginning in 1929. That year, a group of Dallas, Texas, schoolteachers signed up to buy health insurance from the local Baylor University Hospital. For six dollars a month they would get all of their care covered for up to twenty-one days in the hospital. The plan was called Blue Cross.

  At the time, healthcare costs were not much of a concern—because there was not much healthcare. Hospitals were convalescent homes or places where people went to die, not the high-intensity, high-tech centers of complicated medical cures that they would become. For example, in the early twentieth century—before, for example, the invention of penicillin—the forerunner to New York–Presbyterian, where I had my open-heart surgery, was in a quaint building in lower Manhattan with about fifty beds, and services that featured bloodletting, some surgery, and “lying-in” facilities for the mentally disabled and for women who had given birth. By the time I checked in, it was a 1,483-bed colossus, with more than $3.6 billion in annual revenue, spread across six campuses, some with towering facilities that dominated the skylines of upper Manhattan.