Several weeks after the disastrous October 1, 2013, launch of Healthcare.gov, I had dinner with friends who also happened to be reporters on the health-care beat. “We knew it was going to be bad,” one person at the table remarked grimly. “But did we know it was going to be this bad?”
On the first day that the federal insurance exchange was online, just six people were able to register for coverage. The site struggled to work for months. But when open enrollment finally ended in April 2014, after several extensions from the Administration, more than eight million people had found coverage through the state and federal insurance exchanges, surpassing projections from the Congressional Budget Office.
In America’s Bitter Pill, Steven Brill deftly chronicles this disaster and recovery with a depth of reporting that day-to-day coverage didn’t provide. With the benefit of hindsight and the space of 455 pages of text, Brill is able to trace the stubborn and complex confluence of pressures, inescapable trade-offs, and fallible actors that brought us the nation’s most sweeping health reform in half a century.
But Brill, the celebrated investigative journalist, proves to be fallible, too: Rather than stick to reporting, he chooses to play pundit and issue ill-informed prescriptions for our health-care system. His recommendations demonstrate a certain hubris about our understanding of the system’s failures—a hubris that is all too commonplace in political rhetoric around health reform.
America’s Bitter Pill has its roots in the journalist’s famously long 2013 Time cover story with a similar name. In that feature, Brill, whose numerous books have covered topics from the Teamsters to how the United States grappled with the September 11 attacks, wrestled with the exorbitant prices that have come to be associated with U.S. health care. Woven throughout the book are tales of individuals facing outrageous and often inexplicable charges for badly needed medical services, such as one patient who was hospitalized for pneumonia and hit with dozens of charges between $84 and $134 for saline solution—a product that can be bought online for $5.16. But these stories serve mostly as color for a book that is predominantly about policy and politics.
Brill walks his reader through the history of health insurance and reform in the United States, starting with early events that are critical to understanding why America’s health-care system is so idiosyncratic: “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.”
More than a decade later, World War II cemented employers’ role in the world of insurance. Franklin D. Roosevelt’s National War Labor Board imposed wartime wage freezes; however, the board determined in 1943 that fringe benefits, including health coverage, were not wages and thus were exempt from restrictions. The IRS amplified the importance of the labor board’s policy with another consequential determination: If health insurance did not constitute “wages,” it would not be taxed as such. Today, that tax break represents about $250 billion in forgone revenue each year. The largest exemption written into the federal tax code is widely considered an accident of history.
The long-entrenched employer-based system has frustrated reformers for decades. Economists of all political stripes have noted that employer provision of coverage distorts wages and makes workers insensitive to—and often ignorant of—the cost of their insurance. The tax exemption is regressive; it benefits wealthy employees more than their low-income counterparts. Since a dollar goes further if applied to untaxed benefits than taxed income, it also encourages insurance that is excessively generous, motivating overutilization of care.
Whenever reformers eye the tax exemption, these economic arguments struggle to overcome one immovable political reality: About half of Americans receive health insurance through an employer, rendering interference all but impossible. Indeed, one of the greatest political achievements of the Affordable Care Act (ACA) is the inclusion of the “Cadillac tax,” an excise tax on high-cost, employer-sponsored insurance plans. However, that tax does not go into effect until 2018, and observers are fond of speculating about whether the provision will be delayed as a matter of political expedience.
This tension—economics versus politically feasible policy—was a recurring theme in the design of health-care reform. Brill notes that Obama’s health reform advisers quickly splintered into two camps: “the policy camp personified by [Jeanne] Lambrew, and the economics camp led by [Peter] Orszag and Larry Summers.” Bob Kocher, then a partner at McKinsey & Company, and University of Pennsylvania professor Ezekiel Emanuel were also prominent figures on the economics team.
The economists had lofty notions about using health reform as a vehicle for economic recovery. Their priority was to embed measures that could “bend the curve” of health spending by slowing its inexorable growth. Ambitions ranged from malpractice reform to penalties levied against hospitals with high readmission rates to “bundled payment.” These ideas would eventually find their way into the law, though in watered-down form. Meanwhile, Lambrew, director at the Department of Health and Human Services’ Office of Health Reform, was focused on expanding a minimum standard of coverage, expecting that certain spending trade-offs would be required. Brill writes:
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.
In the end, Lambrew and her allies won: The health law emphasized coverage over cost control. But this rift had implications beyond which measures made it into the law—it also affected messaging. One of the ACA’s most enduring controversies concerns the grandfathering clause that protected noncompliant plans from cancellation in 2014, as long as the beneficiary had enrolled prior to 2010. But many people enrolled in noncompliant plans after 2010—plans that would cease to exist once the ACA was in full force. Despite this policy fine print, the President touted reform with the now-infamous pledge, “If you like your health-care plan, you can keep it.” The line would go on to be named PolitiFact’s Lie of the Year for 2013, but Brill’s investigation suggests that this was naïveté more than duplicity:
The president was blindsided. He had never been briefed on the grandfathering issue . . . Obama had not known that Larry Summers’s and Peter Orszag’s staffs had been rebuffed as early as 2009 by the communications team, when they warned that the president should qualify his “keep your insurance promise” with language about how some plans would need to be canceled because they weren’t good enough. It complicated the message, they were told.
The communications team also contorted projections put forward by the economists. The carefully hedged calculation, “For every 5 percent we can reduce health care growth over the next ten years, we will save families $2,500,” lost its nuance and evolved into a sweeping promise about the savings an average American family might expect under the reform plan. As with “like it, keep it,” this promise still haunts the Administration.
Although the law was passed amid partisan bickering and with middling public support, leading Democrats had believed that the ACA would grow more popular over time. But with the law perpetually plagued by discouraging polls, the White House spent years focusing on the political campaign to win over key stakeholders and ordinary Americans.
In Brill’s telling, the mundane process of actually implementing the law became a casualty of this campaign, as politics subsumed management. By the end of 2013, the health reform push that began in the early days of Obama’s first Administration would threaten to sink his second.
It seems the troubles can be tracked, at least in part, to a gaping absence of leadership in the implementation process. In May 2010, Harvard economist David Cutler urged Larry Summers, then an adviser to Obama, to reexamine the organizational structure behind implementation. “For health reform to be successful, the relevant people need a vision about health system transformation and the managerial ability to carry out that vision,” Cutler wrote in his memo. “The President has sketched out such a vision. However, I do not believe the relevant members of the Administration understand the President’s vision or have the capability to carry it out.”
The demands of the project called for private sector expertise, Cutler believed, a sentiment that was shared by Kocher, the former McKinsey executive, and Todd Park, chief technology officer at the Department of Health and Human Services.
Those exhortations went unheeded. Not only did the federal exchange lack a CEO from the private sector; it seemed that nobody could name the real leader in this massive endeavor. Brill asked eight people who was in charge of launching HealthCare.gov; he received seven different answers. When he asked a spokesman for the Centers for Medicare and Medicaid Services about the leadership structure, Brill was told that it was complicated. “Whereupon he had taken my notebook and drawn a diagram with four diagonal lines crossing one another and forming a kind of lopsided triangle. It was incomprehensible,” Brill writes.
The procurement process suffered from a similar absence of hierarchy. Multiple firms had been contracted to build different pieces required to make the federal exchange work. Those firms acted as functionally independent entities while scaling up the fundamentally interdependent tech infrastructure that would sell health insurance to millions of Americans. There was no “general contractor” to which each of the firms was responsible. This diffusion of leadership would manifest as a circular round of finger-pointing in congressional hearings throughout late 2013.
When the website launched, “disaster” was an apt term. Traffic wildly surpassed the site’s capacity. Among those who were getting through to the application, some comically large proportion were hitting a dead end because they were mistakenly reporting that they were currently in jail—due to a question during the sign-up process about incarceration status that had been worded as a double negative.
But as technical problems and negative headlines mounted, the Administration started calling in a support team from outside the Beltway. Within weeks, Jeffrey Zients, a CEO with 20 years of management experience in the private sector, was enlisted to oversee the “tech surge” that would attempt to resuscitate the beleaguered marketplace. Other recruits included Mikey Dickerson, a “site reliability manager” at Google, and Jini Kim, a health data analytics entrepreneur who became the team’s superstar for troubleshooting site errors. “I was never, like, worried,” Dickerson would say to Brill. “It’s just a website. We’re not going to the moon.”
Whether or not their mission was comparable to a moon landing, the team performed admirably. A massive hike in traffic was expected on December 23—the deadline for people who wanted coverage starting on the first of the year, though this would be extended by an additional day—and no one was quite certain whether the improved infrastructure was ready to handle it. On that day, the website processed 129,000 enrollments, five times more than the activity during the entire month of October. By the end of open enrollment the following spring, more than eight million people had enrolled in coverage through the federal and state marketplaces.
In his final chapter, Brill laments that we are “stuck in the jalopy” of our present system—that recent reform is a veneer that fails to address the real issues calling the system’s sustainability into question.
One theme that Brill returns to several times throughout his book is that the law does not go far enough to contain costs. “The battles and closed-door deals of 2009 and 2010 emasculated the efforts by the White House economic team to use reform to ‘bend the cost curve,’ ” Brill writes. “Like its Romneycare predecessor, Obamacare was the product of a choice—most would say a choice forced by political reality—to increase coverage first and deal with costs later, if ever.”
There’s likely some truth in that. Health spending—including “wasteful” health spending—is revenue to someone in the industry. Powerful interest groups would have resisted reform that upset an entrenched status quo by tightly constraining that revenue before coverage expansion guaranteed new customers. Defined provisions in the health law will trim spending on private Medicare Advantage plans and encourage insurer competition on the new exchanges. The Cadillac tax is also expected to curb spending growth in employer-sponsored coverage. These are insurance reforms, not health-care reforms, however, and that limits the law’s potency in confronting costs.
But Brill’s suggestion that the ACA is simply a product of toxic politics ignores an uncomfortable reality: We have legions of ideas about how to contain health spending, but very little confidence about which, if any, of these ideas will succeed. As political scientist Jonathan Oberlander wrote in 2011, “An ever-increasing list of abbreviations (HMOs, HSAs, HIT, P4P, and so on) bear witness to Americans’ elusive, and now four-decade-long, search for magic bullets.”
Health reform emphasized coverage expansion over cost control because we know how to broaden insurance coverage. On the health spending front, to some extent we’re still fumbling around in the dark. Electronic health records are perhaps the quintessential example of this—it was widely believed that such technology would wring billions of dollars out of the health-care system by cutting waste and making providers more efficient. A 2005 study suggested that digitizing patient information could save the nation upwards of $81 billion annually on health expenditures—but experts debate whether we’ve realized any net savings related to government incentives for providers to adopt electronic health records. Our efforts to “bend the cost curve” require a few more shades of humility—but politics rarely tolerates humility.
The ACA recognizes these limitations: It created space for experimentation instead of prescribing largely untested spending reforms, cognizant that some efforts might fail. The new Center for Medicare and Medicaid Innovation is dedicated to testing new forms of health-care financing and delivery. Put plainly, the center aims to identify strategies to reduce expenditures in public insurance programs while preserving or enhancing quality—to experiment with cost-containment strategies about which we aren’t quite confident yet. To this end, the law created the Innovation Center and provided a budget of $10 billion between 2011 and 2019, and $10 billion every decade thereafter, allowing for rapid implementation and evaluation of “demonstration projects.” This marks a major improvement in support: Less than $1 billion was provided for similar pilot programs between 2000 and 2010.
Brill overlooks the importance of the Innovation Center completely. He prefers, instead, to offer what in his view are surefire policy prescriptions. If we could just get health-care providers to consolidate so that they could provide the full spectrum of care, and if those providers also functioned as insurers, he argues, incentives would be aligned and everything would be peachy. This form of financing is called an integrated delivery system, and it isn’t new. Brill mentions Kaiser Permanente and Geisinger Health System, two of the nation’s most prominent integrated care providers, but doesn’t spend any time examining evidence about whether these providers outperform their less integrated competitors in a way that would lead us to believe that they are the silver bullet we’ve been searching for.
What is especially perplexing about this proposal is that Brill spends passages of his book painting consolidation as a troubling phenomenon, using mergers that have been happening in Pittsburgh under the intense scrutiny of the Federal Trade Commission (FTC) as an example. But by the book’s end, he’s ready to embrace consolidation, as long as it’s tightly managed:
The first regulation would require that any market have at least two of these big, fully-integrated provider-insurance company players. There could be no monopolies, only oligopolies, as antitrust lawyers would call them. The larger markets, such as New York, Los Angeles, and Chicago, might have four or five or even more players to make sure the competition is real and to make sure, with accompanying regulatory requirements, that their footprints were big enough and their marketing plans robust enough to serve patients throughout their regions, not just in the wealthier areas.
Brill also wants to set caps on various things, including operating profits, prices charged to the uninsured, and executive salaries. For some reason that he never fully articulates, he also stipulates that only licensed physicians should be able to hold chief executive positions at these provider-insurer oligopolies.
Even as he extols the complex system of regulations necessary to carry out his proposal, however, Brill pays little heed to questions about program management. The oversight is remarkable given the significance he (rightly) imputes to the managerial failures that dogged the ACA’s implementation. In his estimation, his plan can be achieved through the FTC or through state regulators. His suggestion that the FTC could deploy “smarter use of federal antitrust law” to oversee a complete transformation of how our nation organizes and finances health care is like a nebulous dream. The agency is presently struggling to find the fine line between appropriate consolidation of health-care providers to provide more integrated care, and inappropriate monopolies that stifle competition. The agency is ill-equipped to shoulder an array of new responsibilities.
The role of state regulators only merits a fleeting mention, which seems to ignore the reality that hospital regulation is still mostly the legal province of states—a strange oversight coming from a lawyer. Just as states have fractured on Medicaid expansion, we would likely see patchy implementation of any reform requiring concerted state action. Maybe that’s okay; federalism is a cornerstone of politics in the United States. But it’s a limitation that needs to be acknowledged.
While I find the scheme outlined by Brill fanciful, he latches onto one question that merits further discussion: whether health care should be regulated as a public utility, or more like a public utility than it’s currently treated. The need for this pivot has been recognized by scholars: In a recent law review article, University of Michigan professor Nicholas Bagley writes, “Now that the Affordable Care Act has eased concerns about the uninsured, a stubborn set of economic problems in the medical industry—supply imbalances, access restrictions, and abusive and discriminatory pricing—may spur renewed interest in laws reflecting the principles of public utility regulation.” Like other public utilities, medicine serves an important human need. And, increasingly, industry actors possess enough market power to exploit consumers. The regulatory landscape needs to confront the fact that we’re dealing with large health-care systems with monopolistic tendencies rather than the hospitals and independent physician practices of yore.
Brill’s precise prescription may be off, but he’s diagnosed the problem accurately. Referring to the New Haven, Connecticut, health system, which has rapidly consolidated in recent years, he writes, “Put simply, Yale New Haven was becoming either a poster child for market abuse or for real reform of the healthcare economy. One man’s antitrust conspiracy was another man’s trailblazing Accountable Care Organization.”
When large health systems consolidate, we worry they might gain too much leverage in the local market, giving them the power to strong-arm insurers and patients. But when patients split their care across different hospitals, we lament fragmentation and inefficiency. The recent proliferation of “accountable care” models, where a set of providers coordinates patient care, creates incentives for hospital systems to snap up physician clinics and other small practices. It remains unclear whether this trend is worrisome or encouraging. It may be both.
That’s the trouble with real health-care reform in our Byzantine system: Balancing one set of incentives often destabilizes the incentives somewhere else. It’s a game of tug-of-war, only there are hundreds of players, dozens of ropes, and everything is a tangled mess. Sooner or later, the game is going to need new rules.