President Barack Obama has often said that his proudest domestic achievement is the passage of the Patient Protection and Affordable Care Act (commonly known as the ACA or Obamacare). The sprawling law, pushed through Congress in 2010 in the face of fierce Republican resistance, made numerous important changes to the U.S. health-care system -- a system so big that, on its own, it represents an economy about the size of France’s.
Thanks to the ACA, which took effect on January 1 of this year, the U.S. government has finally joined most other industrialized nations in offering its citizens health security. The reform, by many estimates, will save tens of thousands of lives as Americans reap the benefits of such provisions as greatly expanded preventive medicine and a prohibition on insurance companies’ discriminating against those with preexisting conditions. The era when millions of Americans were bankrupted by medical expenses will end. If the law works as planned, it will also contain health-care costs, reducing the U.S. budget deficit. And by freeing employees from the perpetual fear of losing their health insurance, the ACA should, in theory at least, make it easier for them to leave their jobs to start new businesses, boosting domestic and global growth.
Given such stakes, and the intense Republican opposition Obamacare still faces, the disastrous manner in which the White House allowed its signature program to be rolled out last fall presents a great mystery: Why didn’t the administration pay more attention? For the debut of the plan and its website, HealthCare.gov, was nothing short of a fiasco. In early 2013, the Congressional Budget Office had estimated that once the ACA got going, seven million Americans would enroll in the new national health exchange in the first six months. Yet in the six weeks following the ACA’s October 1 launch, only a few thousand managed to do so. More than a quarter of a million more, meanwhile, were prevented from even beginning to enroll by glitches and error messages on HealthCare.gov. On several occasions in October and November, the system crashed altogether. (The results have been much better on the websites of the 14 state exchanges that are up and running.) Americans accustomed to using the Internet fairly seamlessly in almost every aspect of their lives were brought face-to-face with glaring incompetence, and on an issue that couldn’t have been more important to them: their health.
Making matters worse, many people who already had insurance felt that the president had lied to them about how the ACA would affect their existing coverage. Over the previous five years, Obama had repeatedly insisted that under his plan, “if you like your health-care plan, you can keep it.” But this claim turned out not to be strictly accurate. True, many people with coverage on the day of the law’s enactment in 2010 had their coverage grandfathered in. But more than a million individuals who bought new plans after that date found them at least temporarily canceled last fall when the government determined that they didn’t meet the minimum standards of the new law. The president was forced to make a humiliating apology, telling NBC News on November 7, “I am sorry that they [those with canceled policies] are finding themselves in this situation based on assurances they got from me.”
Americans were angry, and they showed it: support for both Obamacare and Obama himself plunged in most late-autumn polls. But more than just the future of the ACA and the fate of the Democrats in this November’s midterm elections are now at stake. American liberalism is based on the faith that an active government can improve the lives of people -- that the government possesses the core competencies necessary to implement an ambitious agenda. But if Obamacare isn’t fixed soon, that faith could be seriously undermined, making it much harder for progressives to advance any social reform in the foreseeable future.
Figuring out how exactly things could go so wrong will take time; the Obama administration, which originally promised unprecedented transparency, has refused to answer questions about the botched rollout in any detail. That said, it is already possible to offer a few preliminary explanations. Part of the problem, obviously, stemmed from the president’s failure to communicate clearly and honestly. But much of it resulted from his flawed management style. Despite being advised to do so, Obama refused to compensate for his lack of management experience by hiring business leaders who had started or run large organizations with complex information technology (IT) systems. He also failed to take into account the normal bureaucratic imperative that keeps bad news from being transmitted up the chain of command. It’s too early to know whether problems with the ACA will turn out to be bumps in the road or an enduring indictment of the Obama presidency. But they do offer some uninspiring insights into the culture of the administration and present an object lesson in how flaws in a president’s operating style can have terrible consequences for public policy.
A STIFF HEADWIND
Getting health-care reform passed and implemented was never going to be easy. Seven presidents before Obama had tried and failed. The idea of universal health insurance was first introduced in the United States by the Progressive Party, which nominated Theodore Roosevelt for president in 1912. Two decades later, President Franklin Roosevelt seriously considered adding health coverage to his New Deal, but the idea was killed by opposition from doctors nationwide and from southern racists who didn’t want blacks in white hospitals. In 1948, President Harry Truman’s national health insurance plan was blocked by the American Medical Association, as was a less ambitious effort by John F. Kennedy later on. Lyndon Johnson did manage to win coverage for seniors and the poor in 1965 (Medicare and Medicaid), but Richard Nixon was stymied when he tried to extend that coverage a few years later. In 1994, President Bill Clinton, with the help of First Lady Hillary Clinton, proposed a large-scale reform and failed epically. And even George W. Bush offered a plan to offset the cost of insurance during his 2000 campaign before abandoning the attempt in favor of an expansion of Medicare to cover prescription drugs.
What doomed all these efforts was resistance from entrenched interests and, in later years, a rightward shift in U.S. politics. In recent decades, many Americans covered by insurance -- an overwhelming majority of voters -- have been disinclined to see their tax dollars go to those who aren’t. Unfortunately for progressives and the uninsured, Americans without insurance -- some 48 million, by recent counts -- tend not to vote.
In 2009, Obama sought to break this losing streak by pushing a more moderate plan than those offered by most of his predecessors. It included neither a single-payer approach nor a public option (hallmarks of earlier failed Democratic-sponsored reforms) and bore a striking resemblance to a plan put forward in the 1980s by Republican Senators Bob Dole and Howard Baker; in fact, the individual mandate in the new law, requiring that all adults buy insurance (with help if they cannot afford it), was an idea first developed by the Heritage Foundation, a conservative think tank. Democrats hoped that building on the existing employer-based system would make the ACA seem less threatening. But it also ensured that the result would be monstrously complex.
In retrospect, the enactment of the ACA was something of a political miracle. In deciding to push for its passage in 2009, Obama ignored the objections of Joseph Biden, his vice president; Rahm Emanuel, then his chief of staff; and David Axelrod, then his senior adviser. All three believed that the middle of a global economic crisis was the wrong time to attempt what they called “a heavy lift.” When I asked the president in late 2009 why he had chosen to go ahead anyway, he answered, “I remember telling Nancy Pelosi [then Speaker of the House] that moving forward on this could be so costly for me politically that it would affect my chances if I were to run for reelection.” But he also said that he had told Pelosi that if they didn’t move in 2009, “it was not going to get done.” And he seems to have been right. Passing the bill required every bit of the new president’s political capital, which he knew would be depleted in later years. And sure enough, after many months of squabbling, Congress adopted the ACA in early 2010 on a narrow party-line vote. But that November, unhappiness with the new law was at least one factor in the Republicans’ gaining control of the House of Representatives.
In light of this history, one might reasonably have expected Obama to be especially attentive when it came to the execution of his pet program -- or at least to have appointed people with enough stature and the right kind of experience to oversee it. Instead, a president who had come into office having run nothing larger than a Senate office staff of 30 or so employees failed to correct for this shortcoming on his resumé. He neglected to hire experienced managers or top-notch technology experts for the ACA in particular and his administration in general.
Obamacare’s intellectual godfather, the Harvard economist David Cutler, saw the problem coming. “I do not believe the relevant members of the administration understand the president’s vision or have the capability to carry it out,” Cutler wrote in a May 2010 memo to Lawrence Summers, then the president’s chief economic adviser. Cutler told Summers that the president especially needed officials with experience in health-care IT start-ups. Obama hired exactly one: Todd Park of Castlight Health, a health-care management company, who eventually became Obama’s chief technology officer. For more than three years after the ACA’s passage, Obama escaped the consequences of his failure to staff up properly for his signature program. But in the fall of 2013, they all came crashing down.
SHADING THE TRUTH
Obama was only the third person in a century to advance directly from the Senate to the presidency. Many American presidents have also spent time as governors, where they learned how to deal with legislators, supervise large agencies, and oversee new initiatives. Some have also held administrative jobs in the federal bureaucracy. Before becoming president, both Roosevelts worked not just as governors but also as assistant secretaries of the navy. Johnson spent two years as the Texas director of the National Youth Administration, a large Depression-era federal agency. Such experience gave these presidents the reflexes to spot when a contractor tried to pull the wool over their eyes. It also gave them firsthand experience in how bureaucrats often shade or avoid the truth when reporting to their superiors.
Although he lacked such job training himself, Obama could still probably have managed the ACA’s rollout well -- if only he had properly compensated for his inexperience. But here Obama was hurt by his self-confidence and much-discussed reluctance to reach out to other politicians or business leaders. There was plenty of help available had Obama only asked for it: for example, his good friend Deval Patrick, the governor of Massachusetts, spent the last seven years successfully implementing a statewide health-care system, passed under his predecessor, Mitt Romney, that is quite similar to the ACA. Yet neither Obama nor his aides ever contacted Patrick or his people for advice.
Instead, the president resisted efforts to bring experienced managers into his administration, as he had from the very start. It isn’t that Obama dislikes businesspeople, as some critics have charged; his best friend, Martin Nesbitt, runs a Chicago-based parking company, and the president has plenty of other friends and supporters in the business community. But Obama does feel that business experience is rarely transferable to government, and on a personal level, he simply feels more comfortable with advisers whose backgrounds mirror his own. The president did consult with groups of business leaders throughout his first term. But he rarely found their suggestions helpful; they mostly just complained about taxes or other business-related challenges. Obama nonetheless tried to recruit a few of them, but most rejected his job offers, often because of the onerous vetting process required for all federal appointees.
So corporate America was largely excluded from the administration in the first term. In December 2008, shortly after Obama’s first election, a retired Wall Street CEO who had been a major campaign donor complained to the president-elect that his top half dozen economic advisers didn’t include anyone who had ever met a payroll, much less managed a big corporation. They were all either academics or former Clinton administration officials.
Obama responded by telling the donor the same thing he said any time this issue arose: I have Valerie Jarrett, and she’s a former CEO. That was technically true. But Jarrett, a confidante whom Obama describes as like an older sister, had been a chief executive (of a Chicago-based housing company) for only a year and a half -- and had spent most of that time working on the 2008 campaign. (The company was mostly run by its founder.) Besides Jarrett and Park, the only White House official who had any real corporate management experience was Jeffrey Zients, a successful entrepreneur who was appointed chief performance officer in 2009 and who would later be brought in to fix HealthCare.gov. It took until year three of the administration before Obama even hired a corporate executive (John Bryson of Edison International) to run the Commerce Department.
Two other factors make Obama’s refusal to hire experienced managers to handle the ACA especially perplexing. The first is that HealthCare.gov more closely resembled a business project than a government project. And the second is that Obama took a very different attitude when it came to another major piece of legislation in his first term. In 2009, Congress passed a $787 billion economic stimulus package, the largest-ever infusion of government money into the U.S. economy. Obama knew from reading about the New Deal that spending so much money so fast would offer a dangerous opportunity for waste and corruption; it’s no coincidence that the word “boondoggle” dates to that era. The White House also knew that the news media and conservative critics would be looking hard for any sign of mismanagement.
So Obama assigned Biden the task of supervising the spending of the stimulus money, and Biden hired Earl Devaney -- a tough former Secret Service agent and former inspector general of the Department of the Interior -- to lead the newly created Recovery Accountability and Transparency Board, which gave frequent updates directly to the vice president. These moves paid off. While plenty of critics took issue with the size of the stimulus and the spending choices, no major stories of scandal or waste ever surfaced.
Yet no similar efforts were made when it came to the ACA. In fact, only a few White House officials even spoke the same tech language as the contractors who would build HealthCare.gov. The sole Silicon Valley executive hired by the White House in 2009 was Andrew McLaughlin, who was brought in from Google to serve as deputy chief technology officer. McLaughlin was appalled by the government’s ancient technology and frustrated by the slow pace of change, and he ended up quitting in frustration in 2011.
The irony is that there were plenty more where McLaughlin came from: Obama initially enjoyed huge support in Silicon Valley and could have easily hired a dozen or more of his fans in the tech community. White House aides now admit that not doing so was a mistake, but they say that in the early days of the administration, with an economy in free fall and two wars to unwind, they just had too many other, more pressing priorities. Still, even that rationale doesn’t explain why the mistake was never corrected. After all, in 2012, Obama’s campaign team hired several brilliant young data scientists and software designers to help them reengineer U.S. politics. Yet not a single one was brought onto the White House staff once the race was over.
THE CMS MESS
When it came time to set up HealthCare.gov, rather than follow the successful precedent set by the economic stimulus and oversee the project from the White House, Obama delegated it to the bureaucracy. He dumped most of the responsibility on a powerful but little-known agency spread over several locations in Washington, D.C., and Maryland called the Centers for Medicare and Medicaid Services (CMS). CMS has long had a reputation as a cumbersome bureaucracy with weak controls over programs that affect more than 100 million Americans. (In 2007, I wrote a story for Newsweek about how CMS inexplicably refused to reimburse patients for a cancer treatment that had an indisputable record of success.) In September 2011, the agency hired a large Canadian company, CGI Federal, as the lead contractor on the ACA website. The company also had a mixed record. It had performed well in 2009 and 2010 helping design the website for Biden’s recovery board, but it was fired by the Ontario government in 2012 for missing deadlines and otherwise mismanaging a $46.2 million medical IT project.
CCMS also faced political problems. In November 2011, Republicans in Congress blocked the permanent appointment of Donald Berwick, an expert on health-care systems who had been serving as acting administrator of CMS since July 2010, because he had once said something favorable about the British national health-care system. Meanwhile, starting in early 2012, the White House quietly sent unofficial word through all federal agencies that because Republican critics would seize on anything controversial to distract the public from the Obama campaign’s carefully crafted message, no new initiatives should be launched until after the election. This informal directive also had the effect of squelching bad news, preventing officials from acknowledging anything problematic or embarrassing, lest it be leaked. Obamacare, of course, was a particularly sensitive subject. The White House knew that the slightest problem with the program would be immediately exploited by the Republicans.
Such caution may have been politically understandable -- between 2011 and 2013, Republicans in Congress tried to repeal the ACA more than 30 times -- but it doesn’t explain why the problems with the website weren’t flagged after the election; indeed, this question remains one of the enduring mysteries of the whole misadventure. The answer likely lies in an old-fashioned bureaucratic fear about delivering bad news to higher-ups. The White House now says that had it been told sooner that the website wasn’t ready, it could have easily pushed back the October 1, 2013, launch date and used call centers and human “navigators” to help Americans enroll while the website went through beta testing.
White House officials have claimed in congressional testimony that they were kept in the dark about the extent of the website’s problems until August 2013. But there were warning signs as early as late March, when a report prepared for the Department of Health and Human Services by the consulting firm McKinsey criticized the “insufficient time and scope of end-to-end testing.” The report’s description of “significant dependency on external parties/contractors” was code for “no one in the government has a handle on what CGI Federal and the other contractors are actually doing.”
Around the same time, the CMS unit charged with implementing the website warned superiors in the agency that the system could not be properly tested by the time of the October launch, in part because of difficulties in simulating the heavy load the website would face when so many people logged on at once. But the warnings went unheeded, and it remains unclear if they were forwarded to the White House. CMS is housed inside the Department of Health and Human Services, and so at the very least, these red flags should have caught the attention of Secretary Kathleen Sebelius, a former governor of Kansas. But Sebelius, out of her depth, clearly didn’t exercise rigorous oversight. While many details of her contacts with the White House -- as well as with Marilyn Tavenner, a registered nurse and former hospital CEO who became acting administrator of CMS in December 2011 -- remain undisclosed, no evidence has yet surfaced that either woman ever advised the president to delay the rollout.
Full details of the fiasco won’t be public for months, but at the very least, it seems clear that no one in an influential position urged delay because no one with technical knowledge had an overview of the entire system. On August 17, for instance, CGI Federal told CMS that its part of the system was only a little more than half finished. With less than six weeks to go before the launch, this should have rung alarm bells. Instead, at this point the bureaucratic bamboozling began in earnest. Each subcontractor, not wanting to jeopardize its job, reported that its bugs were fixable. Individually, this may have been true; taken together, the punch list of necessary fixes (which eventually exceeded 500) doomed the launch.
By the middle of October, two weeks after the launch of the site, the president realized he had a crisis on his hands and announced a “tech surge,” bringing in experts from Google, Oracle, and Red Hat and placing them under Zients, the only one in Obama’s circle with anything close to the right experience for such a project. But much of the damage had already been done.
All major American social reforms -- from Social Security in 1935 to welfare reform in 1996 -- have required subsequent tinkering to get them right. Social Security was originally a thoroughly racist piece of legislation: in order to win southern votes in Congress, Roosevelt initially excluded all occupations (such as domestics and farm hands) likely to be held by African Americans. Similarly, welfare reform, the result of a compromise between Clinton and House Speaker Newt Gingrich, was especially burdensome at first for immigrants and food-stamp recipients. But both laws were changed in the years after their passage to make them more equitable.
The ACA needs legislative fixing, too, on issues from allowing more patient flexibility in choosing doctors to providing greater price transparency. But the program’s botched launch will make such changes harder to accomplish. The missteps have strengthened already intense Republican opposition to Obamacare and weakened public support for it. Had the rollout gone well, Republicans might have felt pressure to try to fix the law. Instead, the administration now fears that opening up the ACA for improvement will only risk the passage of crippling amendments by its many opponents in Congress.
After two straight months of round-the-clock repairs, HealthCare.gov finally began to improve in December. Waiting times were cut, and enrollment accelerated. By year’s end, about two million people had signed up for private plans (either online or by phone), roughly four million had found new coverage through the expansion of Medicaid, and another three million under the age of 26 had joined their parents’ plans, as allowed under the new law. Recent polls have shown that as the website has improved, the ACA has regained some of its lost popularity, although neither the new law nor the president has found approval with more than half the public.