Romneycare

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    Tom Stemberg   Founder of Staples, Inc.

    (Text only) Tom Stemberg founded Staples and served as CEO for 16 years. Under Mitt Romney, Bain Capital helped finance the first Staples, which opened in Brighton, Mass. in 1986. Staples was one of Bain’s earliest investments. This is an edited transcript of an interview conducted on June 15, 2012.

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    The story of health care now. So the way the story goes, you come to Mitt with an idea, or he asks you, "What would you do?"

    I strongly encouraged Mitt and Ann to have Mitt run for governor of Massachusetts. I really thought the state was in trouble and needed his leadership. Mitt, in fact, comes back, runs for governor and wins, and he asks me to be on his transition team.

    And after one of the meetings, he says, "Why don't you just come by my office?" So I came by his transition office, and we start talking, and he says: "Let me ask just a crazy question. If there are two or three things I should do as governor that make a difference, what do you think they should be?"

    And the first, I says: "Mitt, you should blow up Logan Airport and start all over again. That place is a mess." He said, "We're not going to do that." "OK," I said. "And the second thing I would do, I would provide health care to everyone in this state. The uninsured are creating a crazy burden on our system. They're going to emergency rooms. It's the most expensive form of health care. The hospitals through insurance companies end up getting paid for it anyhow. It just ought to be made more efficient, and you can't do that unless you get everybody covered."

    He listened politely and mumbled something about, "Gee, that would be very difficult to do." And that was the end of it. I never thought I'd hear from him again, until a little over a year later -- it may have been longer -- the phone rings. It's Mitt, and he says: "Hey, Tom, remember that idea about health care? We're going to go with it."

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    Tom Stemberg   Founder of Staples, Inc.

    (Text only) Tom Stemberg founded Staples and served as CEO for 16 years. Under Mitt Romney, Bain Capital helped finance the first Staples, which opened in Brighton, Mass. in 1986. Staples was one of Bain’s earliest investments. This is an edited transcript of an interview conducted on June 15, 2012.

    Read the full interview »

    Why did you pick health care?

    Health care has been a hobby of mine for a long time. I've been involved in helping start the Tufts Health Plan here; I'm on the President's Council at Mass General Hospital; I'm on the Partners HealthCare; I teach steering committees. So I just have a real interest in health care.

    If you think about it, it's kind of like retailing and providing a service, except you're helping fix somebody's wrist as opposed to give them a haircut or selling them Pinkberry yogurt.

    So how bad was the state of health care financing in Massachusetts when you first suggested it?

    The system was basically a mess, because tens of thousands of people every month would show up in the emergency rooms looking for very simple primary care that could best be dispensed in a medical office or even by a nurse practitioner in one of these drug stores as opposed to having it done at the emergency room, meanwhile clogging out, in some ways making it difficult for the true emergencies to get access. So the solution in terms of what your objective had to be, at least to me, was pretty obvious.

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    Eric Fehrnstrom   Romney political adviser

    Eric Fehrnstrom has worked for Romney for a decade, first as his press secretary in Romney’s 2002 run for governor of Massachusetts. Prior to his work in politics, Fehrnstrom worked in public relations and as a reporter for the Boston Herald. This is an edited transcript of an interview conducted by producer Gabrielle Tenenbaum on Aug. 21, 2012.

    I want to talk about health care. ... By all accounts, Gov. Romney receives the data and the analysis and he looks at all of it and he decides that the individual mandate is critical. ... Take me into those meetings and help me understand how he came to those decisions.

    Well, I think the governor decided to turn his attention to health care following a conversation he had with a friend and supporter, Tom Stemberg, from the Staples company. And Tom told him in a private meeting, "Mitt, if you really want to help people, you'll find a way to get more of them covered by insurance." So the governor took that as a challenge and decided to dive into the issue of health care.

    In Massachusetts, we're fortunate in that most of our residents already have insurance through their employer, but there was still that stubborn 7 or 8 percent of the population that was uninsured, some by choice. So the governor began to consider how can we, using existing resources, not by raising taxes or by imposing a mandate on employers to cover people, how can we find a way to bridge that gap and finally get everybody covered by health insurance, again, using money that is already in the system?

    So he came up with his health care reform. It worked for Massachusetts. Certainly wasn't designed to be a national plan. In fact, the governor said very early on in this debate that what we did here in Massachusetts works for the people of Massachusetts, but our insurance market is different than Texas, Oklahoma, California. And each state under our federalist system should be free to pursue their own solutions.

    But he's proud of what he got done in Massachusetts. The people of Massachusetts like what we did here. And unlike the federal plan that Barack Obama put in place, it did not require a tax increase, and it did not require us to cut care to seniors.

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    Jonathan Gruber   Helped develop Romney and Obama health care plans

    A professor of economics at MIT, Gruber specializes in health care. He was involved in the development of Mitt Romney's Massachusetts health care plan -- aka "Romneycare" -- as well as the Affordable Care Act, or "Obamacare." This is the edited transcript of an interview conducted by producer Michael Kirk on June 13, 2012.

    What brings him to this moment where he's prepared in any way to look at it, to think about it, consider it, take it on? Because it doesn't seem like the kind of thing a CEO-style governor would embrace or mount as an issue to take on.

    Actually, that's wrong. I mean, what really appeals to him as a CEO-style governor was that the pieces were aligned to make this work. And the pieces were the following: First of all, we had a relatively low uninsurance rate, so it would not be as expensive to cover the uninsured as in other states.

    Second of all, we had already done one of the hardest steps, which is we reformed our insurance market to not allow insurers to discriminate against the sick. Now, we had done that doing nothing else, and the result was we had destroyed our insurance market, and we can come back to that. That's why you need a mandate. But in some sense we had already taken that step. But as a result we had this sort of destroyed insurance market.

    Third, we had a major source of financing in place, which we had formerly had a pretty powerful senator named Ted Kennedy who had been delivering about $400 million a year in slush funds to our safety-net hospitals that the Bush administration was threatening to take away.

    The Romney administration, to their credit, went to Washington and said, "Can we keep this money if we use it to cover the uninsured?" And the Bush administration, to their credit, said yes.

    So those pieces pulled together made a really interesting opportunity to actually cover the uninsured and fix a broken, non-group market on the federal dime. And that was a really unique opportunity, which I think Romney as a kind of management consultant was excited to take advantage of. ...

    And how do you get to the game, Jonathan?

    Well, how does a nerd get in a game like this? Through numbers. Basically what happened was I was hired by the state. In the year 2000, we had this crazy thing called the surplus. You may not have heard of this term recently. And so the federal government actually gave grants to states -- and states were in good fiscal shape as well -- gave grants to states to try to figure out how to expand health insurance coverage.

    The state came to me and asked me to build a model to help understand how alternative ways of expanding health insurance coverage might work, what it might cost the state, etc. And I did that.

    By the time the model was done in 2001, we were already in the tank fiscally, both the nation and as a state. And I sort of did this report that went nowhere.

    Then in 2003, 2004 -- I don't remember exactly when -- I got a call back from Amy Lischko, the woman who hired me to do this report, who ran the policy shop in the Romney administration, saying: "Hey, look! The governor is thinking seriously about doing major health care reform. You've got this model already in place to help understand with Massachusetts. We want to bring you onboard and have you help us figure out if this going to work financially, how many people we're going to cover, what's going to work." So I was sort of the numbers guy.

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    Jonathan Gruber   Helped develop Romney and Obama health care plans

    A professor of economics at MIT, Gruber specializes in health care. He was involved in the development of Mitt Romney's Massachusetts health care plan -- aka "Romneycare" -- as well as the Affordable Care Act, or "Obamacare." This is the edited transcript of an interview conducted by producer Michael Kirk on June 13, 2012.

    So when Romney hears that you've got this model that verifies that "Hey, this is a good idea," and you say it at the meeting, what's he like when he hears it?

    Like a real wonk, just very excited: "Wow! Isn't this cool? We can cover the uninsured. We don't have to raise taxes. We can end the free-rider problem. Isn't this neat?" So that's why I sort of reacted negatively to your idea that it didn't seem like a CEO thing. I don't know about CEO, but he was very much in management consultant mode, like: "Here is a problem. I can solve it. Isn't that neat?" -- sort of engineering almost mode.

    Engineering in what sense?

    Just in a sense of kind of, you know -- I teach at an engineering institute -- in the sense of kind of, that's what engineers do. They are faced with constraints; they try to solve a problem. He seemed excited that faced with the constraints he was facing, he could solve this problem.

    So you could imagine him sitting at Bain & Company and under other circumstances. This was not unfamiliar territory to him.

    Not at all.

    One of those guys who just --

    Exactly.

    -- runs his hand down the thing and says, "Argh, I like that."

    You know, I was very impressed. I came out of that meeting. I went home and told my wife and said: "As a Democrat, I'm very scared. This guy could be president." He was really very smart, well-spoken, and just really seemed to know his stuff and was very impressive in person.

    Did they have good people around the table?

    That's what was very interesting. His financial people were wonderful. Tim Murphy is really the guy you should be talking to, sort of one of the unsung heroes of this. He was his main point person to make this happen. Amy Lischko -- I worked with terrific people.

    His political people were actually opposed. I mean, basically the meeting largely consisted of him arguing with his political advisers. His political adviser was saying, "We don't think this is such a smart thing to do," and Romney is saying: "No. Check it out. I can do this. Isn't this neat? I can make this work."

    So actually, I was not that impressed with his political advisers because I didn't like what they were saying, but he sort of shot them down.

    You keep saying this was "neat." Did he actually use the words, "This was neat"?

    I don't remember. No. But that was sort of -- he had a bit of a "Gee, golly gee" attitude about [it]. "Isn't this cool? We can make this work." ...

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    Jonathan Gruber   Helped develop Romney and Obama health care plans

    A professor of economics at MIT, Gruber specializes in health care. He was involved in the development of Mitt Romney's Massachusetts health care plan -- aka "Romneycare" -- as well as the Affordable Care Act, or "Obamacare." This is the edited transcript of an interview conducted by producer Michael Kirk on June 13, 2012.

    We've heard that he is also a numbers guy, loves them, needs them. They are his life blood. Was he?

    I don't know. You know, once again, I was only in one two-hour meeting with Mitt Romney, so I don't claim to know him well.

    What I saw in that meeting was someone who really felt strongly about the moral case for ending this free-rider problem, someone who really felt strongly of: "Look, there are all these free riders. If we bring them into the system, we can both get them to contribute and lower insurance prices because they are healthy. And we've got this federal money. This seems like a good thing we should make work."

    My job was just to see if the numbers added up, and I think he was excited they did. And in particular, I like to think that I contributed to the case for the mandate. I think he felt strongly the moral case for the mandate. I think I sort of provided the financial case for the mandate, which was to say to him two things: First of all, we can't get to universal coverage or even close to it without a mandate. And second, actually coverage becomes much more efficient with a mandate. To show him that if he did the plan he was considering with no mandate, it costs two-thirds as much as doing it with a mandate but only covered one-third as many people, and that's because the healthy stayed out, and the healthy are cheap.

    So I think that sort of fed into his notion of kind of, "Gee, this is a kind of efficient way to cover the uninsured."

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    Jonathan Gruber   Helped develop Romney and Obama health care plans

    A professor of economics at MIT, Gruber specializes in health care. He was involved in the development of Mitt Romney's Massachusetts health care plan -- aka "Romneycare" -- as well as the Affordable Care Act, or "Obamacare." This is the edited transcript of an interview conducted by producer Michael Kirk on June 13, 2012.

    OK. Let's define mandate.

    The mandate was the requirement that people have to buy health insurance.

    You mean, you've got to do it.

    You've got to do it or pay a penalty.

    And that's a big idea.

    That's a big idea that really grew out of leading conservative thinkers in the early '90s as an alternative to the employer mandate. So the term "mandate" traditionally applied to employers, the notion of requiring employers to offer health insurance. As a conservative alternative to that idea in the early 1990s, Stuart Butler, who is at the American Enterprise Institute, a conservative think tank, and Mark Pauly, who was an academic at Wharton and sort of a conservative health economist, separately and together developed this idea of wouldn't it make more sense to have an individual mandate, to require individuals to take the responsibility for their own health insurance coverage?

    This is a very conservative idea: Let's put the onus on individuals, responsibility. And it grew out of that.

    It briefly was popular in the early '90s and then was kind of something in the background. But it has always stayed around as this sort of this conservative notion of here is the right way to do health care reform.

    And that, of course, presumably would appeal to a Republican governor.

    Oh, it did. It absolutely did. I mean, it was the way -- it tied in directly with his aversion, his free-rider problem. I mean, he said, "Look, we've got --"

    So basically, when I think of what Romneycare was, I like to think of it as a three-legged stool. The first leg is reforming insurance markets, ending the ability of insurers to discriminate against the sick. As I said, we had already done that in Massachusetts. We are one of seven states that tried that in the 1990s. In every state, the same thing happened, exactly what an economist would have predicted -- total disaster, because if you tell insurance companies you can't charge the sick more than the healthy, but you tell people you can buy insurance whenever you want, the insurance companies say: "Wait a second. People aren't going to buy it until they are sick, and I'm going to have to charge a high price." When the price is high, the healthy don't buy, and it becomes a self-fulfilling prophecy.

    And in Massachusetts, the typical individual health insurance policy in 2006 cost about $8,000 a year, and the typical person buying it was about 55 years old. Basically, the market was broken.

    So that's why you need the second leg of the stool, which was the individual mandate, the requirement that people come in and buy health insurance. What that does is by bringing healthy people into the pool, it fixes that problem, brings the prices down. And that was the second leg of the stool. It both had the sort of moral component that Romney seemed very interested in and kind of ending this free-rider problem and the financial component of fixing this broken market by bringing healthy people in and by bringing the price down.

    But you can't have the mandate without the third leg of the stool, which is subsidies. At the time we are considering this, a family health insurance policy in Massachusetts cost about $12,000 a year. The poverty line for a family is about $22,000. You couldn't tell a family making $22,000 you have to spend $12,000 for insurance. That is both inhumane and impolitic. So the third leg of the stool was subsidies, to make health insurance affordable for low-income families. And that three-legged stool became Romneycare.

    And the subsidies came from?

    The subsidies came from rededicating money the feds were already giving us to pay for the uninsured. So it was a neat rededicating of funds so we didn't have to raise taxes. That was sort of another thing in my modeling, was that basically Romney had figured out that for about $700, by rededicating money we're already spending and taking money from the federal government, we could spend about $750 million. And my goal was to say could we do it for $750 million. And my model said we could.

    I'm proud to say when the final bill came in it was about $750 million. I'm pretty pleased that worked out.

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    Jonathan Gruber   Helped develop Romney and Obama health care plans

    A professor of economics at MIT, Gruber specializes in health care. He was involved in the development of Mitt Romney's Massachusetts health care plan -- aka "Romneycare" -- as well as the Affordable Care Act, or "Obamacare." This is the edited transcript of an interview conducted by producer Michael Kirk on June 13, 2012.

    There is a big moment where the bill is signed. Take me there. Describe the environment. I know you were there.

    I was there. I was very excited. I got to bring my wife. That was really neat. I was one of several people Romney actually thanked in his speech, which was really cool, a very proud moment for my wife. That was very exciting. It was this big podium and was all -- Ted Kennedy made a joke about hell freezes over. "I thought hell would freeze over before I would work with Mitt Romney." And Mitt Romney said, "I can't believe I'm working with Ted Kennedy." And they all laughed and hugged. And then they had a speaker from the conservative Heritage Foundation, which is a very conservative think tank, speak about what a wonderful validation of conservative principles this was. And it was all wonderful. And everyone was super-happy.

    Daniel Webster looked down upon it all.

    It was great. It was just an absolutely thrilling moment.

    And the meaning of it? Suddenly does the word spread around the United States in California and other places that, "Hey, something cooked in Massachusetts. Maybe it could work here"?

    Oh, absolutely. I mean, it sort of had the feel of "Nixon goes to China" moment, like here is a Republican governor working with a Democratic legislature to have this bipartisan, middle-of-the-road solution. And almost immediately I was called by Gov. [Arnold] Schwarzenegger's office in California. I spent the next year trying to do the same plan in California that just flounders on fiscal straits and political straits in California. But once again, Schwarzenegger thinking, "I'm sort of a middle-of-the-road Republican; I can do the same thing here."

    And I worked with a number of other states. People were very excited about this idea. But pretty quickly states came to realize that without the leg up Massachusetts had of this federal money, this huge federal slush fund that we had, without that leg up it wasn't going to happen. Then a number of states were interested. They were excited about elements, but they said, "Look, we just can't afford this," just like Massachusetts wouldn't have been able to afford it on our own.

    I think there was a lot of excitement and interest, but it just wasn't going to work fiscally without more federal support. ...

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    Tom Stemberg   Founder of Staples, Inc.

    (Text only) Tom Stemberg founded Staples and served as CEO for 16 years. Under Mitt Romney, Bain Capital helped finance the first Staples, which opened in Brighton, Mass. in 1986. Staples was one of Bain’s earliest investments. This is an edited transcript of an interview conducted on June 15, 2012.

    Read the full interview »

    Why did he walk away from Romneycare now in the campaign?

    ... I think Mitt believes that his health care plan, so-called Romneycare, was the right solution for Massachusetts. In each and every state, the system works totally differently. The insurance provisions are totally different from state to state to state. So this notion of this national, overreaching plan and solving everything is an aborted effort that is never, ever going to work.

    So Mitt's vision is you have to repeal the so-called Obamacare. I do think Mitt will address health care, but he'll do it in a much more thoughtful and intelligent way as opposed to this 2,700 mega loco, loco thing of a bill that just has all kinds of crazy stuff in it. 

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    Douglas Gross   Iowa chairman, Romney 2008

    (Text only) Douglas Gross is a lawyer in Des Moines who has worked on numerous campaigns and held a variety of positions in state government. Prior to his work for Romney, he was a fundraiser for George W. Bush. This is an edited transcript of an interview conducted on August 28, 2012.

    Read the full interview »

    In terms of Massachusetts, I think they're starting to get to the point now that they're in the general-election campaign, of taking his accomplishments as governor and trying to translate them into what that would mean if he were president of the United States, and not taking his health care program in Massachusetts and making it a liability but making it an asset.

    He recently said he was proud of that. So he's starting to make progress associated with that, but he has to do that because that's his public record. And his public record is probably as important or more important than his private record in terms of making the assessment about what kind of a president he would be.

    ... The health care is something that's really quite interesting. I mean, it was a crowning achievement for him.

    Yeah, huge. When I first met with him, [health care] was one thing he talked about. This was a big solution to a big problem, and it was uniquely done to meet the needs of Massachusetts. It was definitely a crowning achievement.

    And so who is the man that sort of takes that and then --

    --forgets it?

    Yeah.

    Talk to me about that, to now be sort of running away from it. It does seem that there are a number of situations in his life where it's the same kind of thing.

    It's this issue about the extent to which Mitt Romney has what most successful politicians have, which is an ability to perceive how other people are perceiving you. I think he tries to do that. I don't think it's natural to him, so he has to learn it, and as a result of that, he makes political mistakes.

    Instead of like a Bill Clinton, where he would intuitively know how people are going to perceive him, even when it comes to terrible issues like Monica Lewinsky and whatever, he still maintained a 60-plus percent popularity, because he understood what was really driving people's views of him.

    Mitt Romney doesn't have that intuition. He's driven by analysis, data, rationality. So he looks at it and says: "OK, Obamacare is unpopular by a majority of the people. It had a mandate in it. My plan has a mandate in it. Therefore, I can't talk about my plan." 

    So that's sort of a deductive reasoning that he would go about looking at that, instead of intuitively knowing that American people are concerned about both the quality and the cost of their health care, and they're looking for solutions to both of those issues in ways that specifically meet their needs.

    Massachusetts was one example of how that could be done in a very creative way, where he brought in consultants. ... He used all of his business skills to develop that, and then in a state that's intensely partisan, intensely political, reached across the aisle to get it accomplished, not precisely the way he wanted, but the bulk of what he wanted to do.

    So that's a great example of using your business skills and matching them with political skills to accomplish big things for the U.S.

    During the course of the general election campaign and the final 70 days that remain, he needs to explain that's the kind of president he would be. If he does, he'll win. …

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