Obamacare Shouldn't Have Been Managed Like a Campaign

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of “The Up Side of Down: Why Failing Well Is the Key to Success.”
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Another Sunday, another amazing reported piece on the rather amazing history of the Patient Protection and Affordable Care Act's health insurance exchanges. You'll have to read the whole thing, because summary won't do it justice. But here are a few highlights:

  • David Cutler, one of the top health-care economists in the U.S., wrote a memo to Larry Summers in 2010 warning him that the team in charge of implementing Obamacare was not up to the job. The memo makes it clear, though not quite explicit, that Cutler was writing to Summers, rather than someone on the health-care policy team, because the team had ignored his concerns. The memo is eerily prophetic: The key people were analysts with no experience in project management, technology, startups or the insurance business; responsibility was too diffused; the staff didn't understand either the magnitude or the urgency of what they had taken on; and neither the Department of Health and Human Services nor the Centers for Medicare and Medicaid Services, to which most of the job had been delegated, had the personnel or technical experience to manage it well. The job of shepherding the project was given to Nancy-Ann Min DeParle, the director of the White House Office of Health Reform and a very wonky wonk who happens to be married to one of my favorite writers. According to one official, the president believed that "if you were to design a person in the lab to implement health care, it would be Nancy-Ann."

  • Parts of the implementation were hamstrung by the assumption that all the states would build their own exchanges, and because it was a draft bill that no one had expected to pass, it didn't contain funding for federal exchanges or, apparently, for the policy wonks needed to put the law together. The Republicans, who continued to oppose the law to the apparent surprise of its architects and supporters, declined to provide funds on top of the nearly $1 trillion that had already been allocated (and, as I understand it, also restricted the ability of HHS to transfer funds from other areas). Funding instead had to be jerry-rigged and the job run out of CMS, which could get bureaucratic authority for the spending.

  • But many of the bad decisions were designed to avoid Republican criticism. There was another reason that the exchanges' architects were tucked away inside CMS: to try to stay out of the public eye. Other such decisions followed. CMS carefully obscured the unwillingness of a large number of states to build exchanges -- despite the fact that this would greatly increase the complexity of the job -- lest Republicans seize on that fact. Then CMS kept extending the deadline to declare, in the hopes that some states would decide to build exchanges after the 2012 elections. The agency also refused to issue a bunch of regulations until after the election. But this is by far the most incredible:
According to two former officials, CMS staff members struggled at "multiple meetings" during the spring of 2011 to persuade White House officials for permission to publish diagrams known as "concepts of operation," which they believed were necessary to show states what a federal exchange would look like. The two officials said the White House was reluctant because the diagrams were complex, and they feared that the Republicans might reprise a tactic from the 1990s of then-Sen. Bob Dole (R-Kan.), who mockingly brandished intricate charts created by a task force led by first lady Hillary Clinton.

In the end, one of the former officials said, the White House quashed the diagrams, telling CMS, instead, to praise early work on those state exchanges that matched the hidden federal thinking.
  • The chief operating officer of CMS was nominally in charge. However, "implementing the exchange was one of 39 things she did. There wasn't a person who said, 'My job is the seamless implementation of the Affordable Care Act.' "

  • The White House was heavily focused on regulations, rather than exchange design, for the first two years. President Barack Obama, the article reports, kept reminding people that the website had to work. But people didn't seem to understand this as an urgent priority. They didn't even begin writing the specifications for the contracts until spring of 2011. Then they kept changing deadlines and requirements, seemingly oblivious of the havoc they were wreaking on an already impossibly late system.

  • Congressional Democrats were not given as much information as you'd expect, which is one reason that Max Baucus started worrying about a "train wreck"; apparently, they found out that the employer mandate was being delayed just a half-hour before the rest of us.

  • Reading between the lines a bit, I think that with 55 contractors and diffuse responsibility, the administration got into the kind of bad equilibrium that can affect big, unwieldy projects: Everyone was hoping that someone else would point out the obvious and say "We can't go live by the deadline."
A month earlier, on Sept. 5, White House officials visited CMS for a final demonstration of HealthCare.gov. Some staff members worried that it would fail right in front of the president's aides. A few secretly rooted for it to fail so that perhaps the White House would wait to open the exchange until it was ready.

Yet on that day, using a simplified demonstration application, the Web site appeared to work just fine.

This has, rather predictably, triggered opposite reactions from left and right. The response from the right is somewhere between schadenfreude and slack-jawed amazement. The response from the left is, I think, summed up by Kevin Drum in "The Lesson of Obamacare: Sabotage Works":

Now, one obvious question is why the law failed to finance the federal exchanges. That was pretty clearly a mistake. Still, under normal circumstances, even an opposition party would end up cutting a deal eventually to shore up the missing funding. Not this time, though. As one White House official told the Post, "You're basically trying to build a complicated building in a war zone, because the Republicans are lobbing bombs at us."

There are plenty of other examples of this, and Sprung outlines them in his post today. No federal program that I can remember faced quite the implacable hostility during its implementation that Obamacare has faced. This excuses neither the Obama administration's poor decisions nor its timidity in the face of Republican attacks, but it certainly puts them in the proper perspective.

Andrew Sullivan echoes this interpretation.

You will perhaps be unsurprised to hear me say that this response is overblown. Let's remember what this "sabotage" consists of:

  1. Many states not building their own exchanges, as permitted under the law.
  2. Republicans did not join together with Democrats to pass extra funding for a law that was already spending nearly a trillion dollars over 10 years.
  3. Criticism.

The first is based on the false premise that state exchanges would now be going swimmingly, a premise belied by true-blue states such as Vermontand Oregon. The second is also pretty weak tea: HHS did, after all, find a way to spend hundreds of millions of dollars on software contractors. And neither of these things really forms the crux of the problem: Moving the administrative offices to HHS no doubt made things more difficult, but a competent manager whose sole job was to ensure that Obamacare happened could have overcome these difficulties.

But Obamacare's biggest problem, as I have written, was that the architects of the law demanded an enormously ambitious software project on an impossibly hubristic deadline. Whatever slim chance this had of working was ultimately doomed -- not by Republicans, but by the administration's own paranoid and self-destructive decisions to manage a software project as if it were a top-secret campaign strategy rather than a mission-critical component of the most ambitious federal entitlement expansion in almost 50 years.

Remember that when Cutler wrote that devastating memo, Democrats still had control of both houses of Congress. The administration failed to rectify the shortcomings he identified because itdid not understand that making a program happen is very different from writing out a description of it.

The administration did not refuse to issue key regulations and guidelines, or to announce the final number of states that would be building their own exchanges, because Republicans used secret mind-control rays or stole the notebooks they had used to write the draft memo. They delayed because they did not want Republicans to be able to tell the public about them before Barack Obama was safely re-elected to a second term.

In other words, most of the damage was done not by lack of funding, but because the administration was either incompetent or trying to insulate itself from the perfectly ordinary, natural, legitimate and, dare I say, patriotic function of an opposition party, which is to point out to the public when the party in charge is doing something that the public wouldn't like. Reframing "criticism of the administration" as "sabotage" deserves an Oscar for outstanding lifetime achievement in the field of political spin.

Which is why I think that "the lesson of Obamacare" is something very different from Kevin Drum's lesson. It's not enough to win elections. To pass a major piece of legislation, you also need to have the political and institutional support to make it happen. If you pass a law without these things, you will likely come to regret it -- as I think some Democrats already have, and more probably will.

Barack Obama -- and Democrats more generally -- read his election as a mandate to make sweeping changes in the U.S. economy, particularly in health care. (From my Twitter feed that night: "It's 1932!") But as they got into the weeds, it turned out that a bill that can get scored as deficit-neutral by the Congressional Budget Office is considerably less fun than a bill that is getting scored by campaign reporters; they had to add the individual mandate, Medicare cuts and new taxes. With those measures attached, the law wending its way through Congress started unpopular and stayed unpopular. You can argue about how individual provisions poll really well, but this is like saying I want to go to heaven as long as I don't have to die. When you bundled in the very unpopular stuff, then threw in the fact that folks generally thought the Affordable Care Act would raise the deficit, the approval ratings never topped the disapproval ratings, much less 50 percent.

The administration could probably have expanded Medicaid pretty easily and gotten more than half of the coverage expansion. Republicans would probably have voted against it, yet in the long term, it would be about as much of a hot-button political issue as the expansion of the State Children's Health Insurance Program under George W. Bush. But Democrats wanted universal coverage and a major overhaul of both the insurance market and the American social contract.

Unsurprisingly, the massive and unpopular transformation failed to attract any Republican votes. When Republicans had faced similar electoral math on Social Security reform -- an opposition party implacably opposed, and the electorate clearly against it -- they'd abandoned their efforts. That is what parties do when they reach such an impasse; it's what Democrats did on Clintoncare. No program this large had ever passed on a party-line vote, because this was correctly viewed as political suicide. Nancy Pelosi managed to get it through the House anyway, which should go down as one of the most impressive political achievements in history, and Harry Reid shepherded another version through the Senate. When Republicans protested, they were rather smugly told that "elections have consequences."

Then Ted Kennedy died. Massachusetts -- Massachusetts! -- elected Republican Scott Brown in an election that often seemed to revolve around the health-care bill. Democrats still pressed forward. Without the votes to overcome a Republican filibuster, they had the House pass a draft Senate bill that had never been meant to become law and used some procedural tap-dancing to push some fixes through the Senate. Such maneuvering wasn't unprecedented, but it wasn't popular, either. And the limitations of the method they used left the bill with all sorts of problems, many of which we are dealing with now.

Democrats read this as a lesson on the evils of the filibuster. As it happens, I like the idea of minorities having a check on majorities. But that's sort of irrelevant, because this would have been a bad idea even if Democrats could have passed a cleaner bill with 59 votes in the Senate.

Democrats believed that the unpopular bill they had just rammed through on a party-line vote would not only get more popular, but also make them more popular, thereby giving them the political support they needed to pass more fixes -- fixes that would have been needed even on a less messy draft bill, because anything this complicated is unlikely to work as written. As I noted at the time, this seemed borderline delusional. Democrats lost the House and some Senate seats in the 2010 election, and Obamacare was a major contributor to that loss. Whereupon Democrats learned what apparently didn't occur to them in 2009: that there might be other elections, with different consequences.

There is a point to this history review, and it's not to laugh at Democrats -- I've made plenty of my own sizable analytical blunders. No, the point is this: Political support matters. Not an election mandate after beating the party of Iraq, Katrina and the financial crisis -- popular support for your law. If the bill had actually been popular, Republican opposition would not have been a problem; they would have folded, or the voters would have kicked them out.

Democrats have been complaining -- loudly and repeatedly -- that Republican opposition tactics on the Affordable Care Act are unprecedented. This is true, but not for the reasons that Democrats are telling themselves. No political party was ever foolhardy enough to pass such a big bill, with such sweeping consequences for so many people, without the support of a majority of their countrymen and at least a few members of the opposite party. Once they had done this unprecedented thing, the unprecedented reaction was predictable -- and indeed predicted by myself and others.

The mistake that Democrats made is akin to that made by a brash new outsider who is brought in to make over a government agency or turn around a company. Occasionally, folks in these roles think their job is just to come up with top-notch orders to give to their subordinates, and maybe have some meetings with key "constituents" like politicians or board members or customers. What happens next is generally a spectacular crash and burn, because they alienate the folks they need on board to make their new program work.

A smart leader knows that big strategic thinking and giving orders are the smallest parts of her job. The biggest is persuading people who are not invested in her agenda to carry out her grand plans -- and, equally important, figuring out which plans to abandon because they can never get enough support to work.

This is the constant danger of any law whose political foundations are built on sand. Any flaw in the structure atop them is likely to bring the whole thing crashing down. The architect may blame the wind or the rain or, well, sabotage. But that won't put the house back together.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net