WASHINGTON -- In May 2010, two months after the Affordable Care Act squeaked through Congress, President Barack Obama's top economic aides were getting worried. Larry Summers, director of the White House's National Economic Council, and Peter Orzag, head of the Office of Management and Budget, had just received a pointed four-page memo from a trusted outside health adviser. It warned that no one in the administration was "up to the task" of overseeing the construction of an insurance exchange and other intricacies of translating the 2,000-page statute into reality.
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Summers, Orzag and their staffs agreed. For weeks that spring, a tug of war played out inside the White House, according to five people familiar with the episode. On one side, members of the economic team and Obama health-care adviser Zeke Emanuel lobbied for the president to appoint an outside health reform "czar" with expertise in business, insurance and technology. On the other, the president's top health aides -- who had shepherded the legislation through its tortuous path on Capitol Hill and knew its every detail -- argued that they could handle the job.
In the end, the economic team never had a chance: The president had already made up his mind, according to a White House official who spoke on the condition of anonymity in order to be candid. Obama wanted his health policy team -- led by Nancy-Ann DeParle, director of the White House Office of Health Reform -- to be in charge of the law's arduous implementation. Since the day the bill became law, the official said, the president believed that "if you were to design a person in the lab to implement health care, it would be Nancy-Ann."
Three-and-a-half years later, such insularity -- in that decision and others that would follow -- has emerged as a central factor in the disastrous rollout of the new federal health insurance marketplace, casting doubt on the administration's capacity to carry out such a complex undertaking.
"They were running the biggest start-up in the world, and they didn't have anyone who had run a start-up, or even run a business," said David Cutler, a Harvard University professor and health adviser to Obama's 2008 campaign, who was not the individual who provided the memo to The Washington Post but confirmed he was the author. "It's very hard to think of a situation where the people best at getting legislation passed are best at implementing it. They are a different set of skills."
The White House's leadership of the immense project -- building new health insurance marketplaces for an estimated 24 million Americans without coverage -- is one of several key reasons that the president's signature domestic policy achievement has become a self-inflicted injury for the administration.
Based on interviews with more than two dozen current and former administration officials and outsiders who worked alongside them, the project was hampered by the White House's political sensitivity to Republican hatred of the law -- sensitivity so intense that the president's aides ordered that some work be slowed down or remain secret for fear of feeding the opposition. Inside the Department of Health and Human Services' Centers for Medicare and Medicaid, the main agency responsible for the exchanges, there was no single administrator whose full-time job was to manage the project. Republicans also made clear they would block funding, while some outside IT companies that were hired to build the website, HealthCare.gov, performed poorly.
These interwoven strands ultimately caused the exchange not to be ready by its Oct. 1 start date. It was not ready even though, on the balmy Sunday evening of March 21, 2010, hours after the bill had been enacted, the president had stood on the Truman Balcony for a champagne toast with his weary staff and put them on notice: They needed to get started on carrying out the law the very next morning. It was not ready even though, for months beginning last spring, the president emphasized the exchange's central importance during regular staff meetings to monitor progress. No matter which aspects of the sprawling law had been that day's focus, the official said, Obama invariably ended the meeting the same way: "All of that is well and good, but if the website doesn't work, nothing else matters."
The White House was in charge, but the on-the-ground work of carrying out the law fell largely to HHS. At first, a new unit responsible for building the statute's insurance marketplaces was created inside the office of Secretary Kathleen Sebelius.
Soon, however, it became evident that the office -- with more than 200 people -- would not survive on its own. It lacked tools, such as the ability to award grants and outside contracts, that were vital to its mission, said Richard Foster, Medicare's chief actuary for nearly two decades before he retired early this year. So the office, with a slightly new name, moved in early 2011 into the Centers for Medicare and Medicaid Services (CMS), a large agency spread among locations in the District of Columbia, Bethesda, Md. and Baltimore.
The move had a political rationale, as well. Tucked within a large bureaucracy, some administration officials believed, the new Center for Consumer Information and Insurance Oversight would be better insulated from the efforts of House Republicans, who were looking for ways to undermine the law. But the most basic reason was financial: Although the statute provided plenty of money to help states build their own insurance exchanges, it included no money for the development of a federal exchange -- and Republicans would block any funding attempts. According to one former administration official, Sebelius simply could not scrounge together enough money to keep a group of people developing the exchanges working directly under her.
Bureaucratic as this move may sound, it was fateful, according to current and former administration officials. It meant that the work of designing the federal health exchange -- and of helping states that wanted to build their own -- became fragmented. Technical staff, for instance, were separated from those assigned to write the necessary policies and regulations. The Medicaid center's chief operating officer, a longtime career staffer named Michelle Snyder, nominally oversaw the various pieces but, as one former administration official put it: "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.' "
In the West Wing, the president had put his trust in DeParle, who joined the White House two months after Obama took office in 2009 and had overseen the health-care legislation from its infancy. Earlier in her career, she had been a health-care administrator under President Bill Clinton and worked on the issue at the Office of Management and Budget.
Well-versed as she was, DeParle immediately recognized that she needed help, according to a former senior administration official. She tried -- but failed -- to lure to the White House one of the nation's top experts, Jon Kingsdale, who had overseen the building of a similar insurance exchange in Massachusetts.
DeParle convened meetings twice a week in the Old Executive Office Building, bringing together representatives of agencies as far-flung as the Internal Revenue Service, the Centers for Disease Control and Prevention and OMB's regulatory office -- all of which had a role in putting the law into practice. They pored over spreadsheets and hashed out difficult policy questions. The work was "highly specific," recalled Donald Berwick, who was CMS's administrator through 2011 and now is a Democratic gubernatorial candidate in Massachusetts. "There was an implementation chart. Regulation by regulation, we would say, where is it now, who was developing it?"
A higher-level monthly meeting, intended to work through tough regulatory questions, was attended at first by Sebelius, Treasury Secretary Timothy Geithner, Chief of Staff Rahm Emanuel and Domestic Policy Council Director Melody Barnes. By late summer and early fall of 2010, the meetings petered out after some of participants stopped attending, according to a former senior administration official.
At the White House and inside CMS, the initial focus was not on building the online marketplace but rather on rules to let young adults stay on their parents' insurance policies and new insurance pools for Americans who were being rejected by insurance companies because they were ill.
The exchange "was in the future," Berwick said, explaining that the website was, during his tenure, a matter of "conceptualization," along with "the many other regulations we were batting out."
From the beginning, the administration worked in a venomous political climate. "You're basically trying to build a complicated building in a war zone, because the Republicans are lobbing bombs at us," the White House official said.
White House officials contend that the political sensitivities did not influence the substance or pace of the work. But others who were involved say otherwise.
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.
By then, DeParle was no longer directly in charge, since she had been promoted in February 2011 to be the president's deputy chief of staff for policy. Her successor, Jeanne Lambrew , worked on the law's passage in Sebelius' office and, years earlier, had worked on health reform under the Clinton White House.
That spring, CMS had begun writing specifications for the IT contracts to build the federal exchange, but the White House again insisted on caution. A larger number of states than expected were signaling that, under Republican pressure, they would refuse to build their own online insurance marketplaces and would rely on the federal one. The more states in the federal exchange, the more complex the task of building it. Yet, according to several former officials, White House staff would not let this fact be included in the specifications. Their concern, one former official said, was that Republicans would seize on it as evidence of a feared federal takeover of the health-care system.
So that September, when the administration issued the "scope of work" for the largest IT contract, the specifications skirted the question -- saying only that "CMS will not know for certain how many states will apply" to run their own insurance exchanges.
After the contract was awarded to CGI Federal, the administration kept giving states more and more time to decide whether to build their own exchanges; White House officials hoped that more would become willing after the 2012 election. So the technical work was held up. "The dynamic was you'd have [CMS' leaders] going to the White House saying, 'We've got to get this process going,' " one former official recalled. "There would be pushback from the White House."
Meanwhile, the White House also slowed down important regulations that had been drafted within CMS months earlier, appearing to wait until just after Obama's re-election. Among the most significant were standards for insurance coverage under exchanges. The rules for these "essential health benefits" were proposed just before Thanksgiving last year and did not become final until February. Another late regulation spelled out important rules for insurance premiums.
Such delays were "a singularly bad decision," said Foster, the former Medicare chief actuary. "It's the president's most significant domestic policy achievement," he said, and the very aides who had pushed the law through Congress were risking bad implementation "for a short-term political gain." After the election, Cutler, the Harvard professor, renewed his warnings that the White House had not put the right people in charge. "I said, 'You have another chance to get a team in place,' " he recalled.
Last Dec. 19, Obama met with roughly a dozen senior White House and HHS officials, including Sebelius. They discussed important policy issues, such as how to persuade more young, healthy Americans to sign up for insurance. But the president had a deeper message. The health-care law, he told the gathering, according to participants, was "the most important thing" in his presidency. "We've got to do it right."
Yet by early this year, White House allies on Capitol Hill were deeply frustrated by how little administration officials would tell them about how the work was going.
On Valentine's Day, Senate Finance Committee Chairman Max Baucus, D-Mont., convened a hearing on the federal and state marketplaces. The HHS office in charge of the federal exchange was on its third director in as many years, Gary Cohen, who testified that "we are on track and we will be ready" on Oct. 1.
Baucus pressed him: "I want data here, I don't want just goals." The next week CMS provided a one-page "marketplace timeline," showing 16 items left to be accomplished, such as finalizing a few rules and a streamlined application.
This unwillingness to share information extended to private discussions, as well, according to congressional aides.
For three years, roughly two dozen Democratic aides have gathered in Washington to discuss health care each Monday at 1 p.m. in House Minority Whip Steny Hoyer's conference room, under a ceiling featuring images of winged cherubs and wheat harvesting in Constantino Brumidi's fresco "The Four Seasons." The gathering includes White House officials, who set the agenda, along with HHS officials and aides to Hoyer, Senate Majority Leader Harry Reid of Nevada, House Minority Leader Nancy Pelosi of California and seven relevant committees.
During the regularly scheduled meeting June 24, Lambrew from the White House gave no hint that the administration might delay a requirement that businesses with more than 50 employees provide insurance. Instead, administration officials informed Reid, Pelosi, Hoyer, Baucus and Sen. Charles Schumer, D-N.Y., by phone about a half-hour before the news became public eight days later.
One White House official blamed the secrecy on the climate of GOP hostility to the law. "It's very hard for a staffer to talk to a member of Congress about a decision that's not made yet," the official said.
Inside CMS, meanwhile, some staffers were aware by late 2011 that the work of building the federal exchange was lagging. According to a former HHS official, a much earlier timeline than has been previously disclosed. Some employees in the main office involved with building the exchange repeatedly warned at meetings late last year and in early 2012 that so many things were behind schedule that there would be no time for adequate "end to end" testing of how the moving parts worked together, the former HHS official said.
"People were just like, well . . . it's a dynamic we can't change," the former official said. "There wasn't a way to push back or challenge it up the line. You had the policy people, largely at the White House, pushing the deadlines and tinkering with the policy, rather than the people who had to run the critical operating path design and program the system."
By late summer, CMS officials were frustrated with the main contractor, CGI Federal, which repeatedly said that certain features of the exchange were ready when they were not, several officials said.
CGI was issuing warnings of its own. On Aug. 17, about six weeks before the launch date, a company employee sent an e-mail to a CMS staffer -- with copies to more than a dozen other CMS staff members -- detailing an "updated schedule" for work on the exchange. The email, obtained by The Washington Post, said that, for the tasks that CGI was responsible for, the exchange was 55 percent complete.
White House officials say they were focused on whether there would be enough insurance plans for sale in the new marketplaces and on whether enough people would enroll. They say they didn't have a clue how troubled the website's operation was.
Only during the weekend after HealthCare.gov opened Oct. 1 would the president's aides begin to grasp the gravity of the problems, the White House official said. Obama soon began getting nightly updates on the performance of the website, which has still been unavailable to Americans for hours at a stretch over the past week.
But that was still to come. 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 website appeared to work just fine.