THE STRATEGY

In 2009, both the president and Congress knew that legislation should be a product of the legislative branch and not the White House. Importantly, this approach would give moderate Republicans and health care interests greater ability to influence the contents of the bill, and they therefore would be more likely to support it. Though the media refer to “Obama's health care plan,” the president has not produced any legislative proposal. Rather, he has set out eight guiding principles of health care reform, held private meetings with members, conducted public town halls, and delegated the details.

Obama's approach is quite similar to the successful one used by President Johnson to pass Medicare. Johnson applied “relentless personal pressure to his staff and congressional leaders” while deflecting credit to Congress, and largely to Ways and Means chairman Wilbur Mills (Blumenthal and Morone Reference Blumenthal and Morone2009). Like Obama, Johnson acknowledged a short period of time—in his case 60 days—in which passing the bill was possible. As Johnson's Social Security expert Wilbur Cohen recalled, Johnson told him: “… every day while I'm in office, I'm going to lose votes. I'm going to alienate somebody … We've got to get this legislation fast. You've got to get it during my honeymoon” (quoted in Blumenthal and Morone Reference Blumenthal and Morone2009, 2386).

Under President Obama, most pro-reform members of Congress agreed that the Senate Finance Committee (SFC) should be the first author, for several reasons. First, as the only committee in the Senate that pays for what the government wants to do, the SFC has greater jurisdiction than any other committee in Congress. Financing health care reform is no easy task as early estimates by the Congressional Budget Office (CBO) scored the bill as high as $1 trillion.

Second, the SFC is known for its bipartisanship. A bipartisan bill would go far in getting public “buy in” on legislation—without jeopardizing either party in the next election. Moreover, pivotal moderate-leaning Republicans such as Senators Snowe and Grassley are on the SFC, and their votes are critical to “get to 60”—the new norm for passing bills in the SenateFootnote ¹. Al Franken's victory in July does not guarantee 60 votes, because Senators Byrd and Kennedy are away due to serious illness, and because party discipline in the Senate is far from absolute.

The other committee in the Senate with jurisdiction over health care is the Health, Education, Labor and Pensions (HELP) committee. But HELP is missing its chairman, Ted Kennedy, who has made health care the hallmark of his career. His deputy and friend Chris Dodd, who already chairs the banking committee and is gearing up for reelection, was called to serve as surrogate chair without the same long engagement on the issue. Moreover, Kennedy has a reputation for his circumspect political and negotiating skills, and in his absence, Republicans on HELP were not deterred in voicing objections—especially because they knew Republicans in the SFC would already be making compromises with Democrats. After 50 hours of marking up the bill, HELP voted out the bill without a single Republican vote.

Third, the House Democratic leadership faces the same problem in 2009 as it did in 1994: internal division. Progressive House Democrats, who would prefer a European-style single-payer system, want to “put a stake in the ground” and pass a bill before the Senate does in order to maximize the chances that the final bill contains a strong public option modeled on Medicare. Conservative Democratic Blue Dogs have raised concerns about high costs, increased taxation, and the potential burden on business. Meanwhile, the Speaker has coordinated and overseen the efforts of the chairmen of the “Tri-Committee”—the three committees of jurisdiction in the House consisting of Ways and Means, Education and Labor, and Energy and Commerce. House leadership even put together a one-page health fact sheet for each member showing how the bill would specifically benefit the representative's district. Although the institutional rules of the House grant leadership considerable power, especially relative to the Senate, to pass a bill the Speaker needs the support of at least some of the 51 Blue Dogs and 86 “Medicare for All” cosponsors.

Thus the strategy became clear: let the moderate Senate Finance Committee go first, granting influence to key moderate Republicans. House leadership would work toward passing a Democratic bill that might include a public option, assuring Blue Dogs that the legislation would become more conservative in conference compromises with the Senate. SFC chairman Max Baucus's guiding principles were three: put all options on the table, involve everyone so as to minimize push back from stakeholders, and compromise with Republicans to reach a bipartisan consensus. The resulting bill would need to be merged with the HELP bill before being passed on the Senate floor, while the House leadership made compromises with the Blue Dogs necessary to pass the bill in that chamber, and all this would have to be done before the August recess to meet Obama's deadline.

THE PROCESS

Chairman Baucus's actions matched his principles. Shortly after the presidential election Baucus released an SFC white paper proposal outlining his ideas for reform. The SFC grouped reform ideas into three buckets, or areas, starting with the easiest elements and ending with the most difficult. On each topic the committee held a novel open roundtable hearing with invited experts followed by a closed-door walkthrough for members and staff, and presented publicly available options books that ruled no proposals out or in.

In the first area, delivery system reform, there was consensus across party lines that health care payments should shift from fee for service, which creates an incentive for unnecessary procedures, drugs, and treatment, toward pay for performance, which rewards providers for better health outcomes for their patients, such as avoiding hospital readmissions. As individual categories of Medicare providers were threatened with cuts, the delivery system reform negotiations grew tenuous. Groups made the case for why their services should not be cut, often framing their requests as wanting a seat at the table. Skittish Republicans touted employer wellness programs and eliminating fraud and abuse as the best ways to cut costs.

The second area, coverage, was more difficult because of fundamental disagreements between Democrats and Republicans on the proper scope of government. Yet the perverse effects of health underwriting—basing insurance premiums on health status—combined with the sharp increase in health costs led most members to believe that every American should be required to have health insurance. The “shared responsibility” of an individual mandate leads to the conclusion that if government requires everyone to buy health insurance, then government must help those who cannot afford to pay for it—and these subsidies would be expensive.

A necessary part of shared responsibility involves requiring employers to contribute to the cost of insuring their workers by providing insurance or by paying a fee. This “pay-or-play” proposal accomplishes two goals: it offsets the costs of subsidies for the government and encourages greater employer-sponsored insurance. Many Republicans argued that an employer mandate would stifle or bankrupt small businesses, which create 70% of all new jobs. This concern is significant in light of the current economic recession. While the SFC may be persuaded by this argument, the HELP and House bills both include pay-or-play requirements, although some small businesses will receive exemptions.

Objections to progressive Democrats' desire to have a government-run public option were raised by Republicans and exaggerated in the media and the public. Chairman Baucus asked the chairman of the Budget Committee Kent Conrad to come up with an alternative. The “co-op,” modeled on rural electric cooperatives and inspired by German “sickness funds,” would be run by its members, who together with their elected governing board would make all coverage and cost decisions. Although progressive Democrats say the co-op does not go far enough, its appeal for Republicans and the Blue Dogs suggests it will be the closest thing to a public option in the Senate Finance bill and perhaps in the final health reform legislation.

The third area of reform, financing, would go beyond controlling costs. The economists consulted by the SFC focused on limiting the tax-free status of employees' health benefits, which would also bend the cost curve by disincentivizing overspending on health care. CBO found that a high cap on tax-excluded benefits would produce hundreds of billions of revenue dollars, and the SFC proposal rested on capping the exclusion as the largest “pay for” in health reform. However, President Obama had used Senator McCain's proposal to limit the tax exclusion against him in the presidential race, and the proposal was challenged by labor unions that had negotiated for benefits enhancements and Senators in high-cost states who would be disproportionately affected. Around the time when the original SFC markup had been slated to occur, the number-one source of revenue to pay for health reform was off the table.

This bump in the road for Senate Finance allowed both HELP and the House to go first. Feeling pressure from the White House, the Senate majority leader, and Senators on both sides of the aisle, Baucus created a small bipartisan group of Senators Baucus, Bingaman, Conrad, Enzi, Grassley, and Snowe nicknamed the “coalition of the willing” (or COW, as a skeptical staffer joked). This group spent hours each day hammering out compromises over controversial provisions. Reporters camped out waiting for these meetings to end so they could get an update, but Baucus and the other willing members would say only that progress was being made. Many members—even those on the Finance Committee—complained that they did not know what was going on behind closed doors. This secretive activity reminded some in the press of earlier battles, such as immigration reform in 2007, in which back-room deals caused resentment and eventually resulted in no bill. Still, COW's small size and its inclusion of pivotal moderate Republicans Grassley and Snowe made negotiating easier, and the group became the Senate's best hope for passing a bill.

THE DEALS

In 1993–94, interest groups tended to lobby for or against the entire health bill. In 2009, groups wisely focused on individual pieces of the package. When the House bill was introduced, a new phase of lobbying began, as groups zeroed in on how the bill would affect them. Radiologists complained about changes in the assumed utilization rate of imaging equipment; nurse-midwives wanted to be reimbursed at the same rate as other obstetrics providers; pharmacists asked for compensation for time they spent managing patients' medication usage; podiatrists and optometrists wished to be included in the definition of “physicians.” Even in the Finance Committee, which does not require legislative language prior to markup, members and staff were lobbied on every aspect of health reform. These staff examined costs, consulted experts, assessed the politics, and made decisions subject to the members' approval. Their choices were ultimately aimed at obtaining the support of the moderate Senate Republicans.

Politicians knew that if groups got something they wanted, they would be more willing to accept something they didn't want. Members and staff in both chambers talked of getting the endorsement or the sign off of the AHA, PhRMA, and the AMA. The support of these hospital, pharmaceutical, and doctor groups (respectively) was so great that the White House and congressional staff made deals with each group. The American Hospital Association agreed to Medicare and Medicaid cuts of $150 billion but raised concerns about creating an independent commission to set Medicare rates that would make it harder for the industry to lobby against payment reductions. The drug manufacturers offered to discount Medicare drugs by $80 billion and to invest another $80 billion in the Medicare drug rebate program—but these discounts would apply only to brand-name drugs, which would actually cost patients and the government more. Physicians, who stand to benefit from universal coverage, object to basing a public option on historically low Medicare rates; they also want medical malpractice tort reform and a repair of the sustainable growth rate (SGR) of Medicare reimbursements. Each year the AMA lobbies successfully for Congress not to implement the growing cuts that the SGR would mandate. While no tort reform is currently included, the “doc fix” is in the House bill.

In many cases the interests were not present on the Hill as lobbyists but were in the members' minds as they considered how health reform would affect their districts and states. Senators from rural areas such as North Dakota, Montana, New Mexico, Wyoming, Iowa, and Maine—the states represented in the coalition of the willing, and prominent Blue Dogs from rural districts including Representatives Ross, Hill, and Shuler—were sensitive to the low reimbursement rates those states' Medicare providers received. Likewise, members in poorer areas with hospitals that provide a large amount of uncompensated care (the so-called disproportionate share hospitals or DSHs) were concerned about cuts to Medicaid despite the promise of universal health insurance.

Further, some members are guided by ideological beliefs with which they assume their constituents generally agree. House Blue Dogs feared the bill would not sufficiently “bend the cost curve” and would put jobs in jeopardy with a pay-or-play policy for employers. Many Republicans were resistant to government involvement in health care, calling it “socialized medicine” and warning the public about “rationing.” Democratic freshmen, having faced a tough vote on the climate change bill, were concerned about the electoral consequences of supporting health reform legislation, which polls were showing did not have widespread support. In some instances these differing convictions can be reconciled, as proposals are altered or eliminated. In other instances, appeasing one side means risking losing the support of others. Energy and Commerce chairman Waxman's compromise with the Blue Dogs, for example, caused progressives to warn that they would not support the bill if it were watered down to get the Blue Dogs' support.

As of this writing, the outcome of health care reform is still unclear. Our experience in the front row persuades us that the efforts to secure the support of important interest groups and moderate Republicans are the best chance reformers have of passing comprehensive health reform. President Obama, the five committee chairs, and Democratic leadership have made a concerted effort to avoid the mistakes made in 1993–94. With the stakes so high, the president and congressional leadership have carefully navigated the stakeholders' and members' interests to minimize strong, organized opposition to the bill. However, the fate of health care reform will ultimately rest on the preferences of members of Congress, especially the three Republican “COW” senators, and the organized—and unorganized—interests they serve.