Mitt & Ted, a healthcare story

Part 3: Save The Money

Ian Coss: I was hoping we could start when you first met Mitt Romney.

Cindy Gillespie: Um, let's see. So…

MUSIC: Transition

NARRATION:  We pick up the story in 1999 -- so five years since Romney ran for Senate, and got trounced by Ted Kennedy. In the meantime, Mitt has been back in the business world, running his company Bain Capital. He’s landed some of the biggest deals of his career, like buying Dominos Pizza for over a billion dollars. But he has also been searching for a way back into politics. And in 1999, the perfect opportunity appeared.

Archival: Two senior officials on Salt Lake City's Olympic organizing committee have resigned amid allegations of vote buying..

Cindy Gillespie: So, the Olympic scandal had broken, was in international crisis mode.

Archival: What's being called the worst ethics scandal in Olympics history.

NARRATION: That year, Cindy Gillespie was working for the Salt Lake Olympic Committee, affectionately known as "SLOC", just as a high level bribery scandal exploded into the news.

Archival: The resignations follow confirmation that money was paid to IOC members to choose Salt Lake as the site for the 2002 Winter Games.

Cindy Gillespie: And the media's all over it. So everybody's slinking in, they're getting in the elevators or going up to their desk. They're going home at night and their kids are crying because the other kids are saying ugly things to them at school because they work for the Evil Olympics, you know, it’s become a negative to be part of it, not a positive.

NARRATION: Gillespie had come to Salt Lake because she worked on the ‘96 Atlanta games. And like most of the staff at SLOC, she had nothing to do with the bidding process that had caused the scandal. Yet they all bore the shame of it. She remembers that cab drivers in the city would even refer to their building as 'the cops and robbers building' -- because the floor above SLOC was the local FBI field office.

Cindy Gillespie: So it was the cops and robbers building. I mean, seriously?

Ian Coss: You were the robbers.

Cindy Gillespie: We were the robbers. Yes. So it's just, it was an incredibly ugly period but it was in the midst of that we got word that they wanted to bring on Mitt Romney from Massachusetts and that's how I first met him.

MUSIC: Enter

NARRATION: Romney began his career in management consulting – that’s how he first made a name for himself. So he knew how to drop into a messy situation, find the problems, make the difficult decisions, and get things moving again. So he was invited -- begged really -- to come in as the turnaround artist for what had become at this point a true national embarrassment. Romney would say later that he really didn't care about the Olympics as a sporting event. He certainly had no interest in curling or luge. And if he was honest with himself, the crisis was the draw. As his wife Ann put it: "He would never have considered doing it if it wasn't a big mess."

But now that Romney had signed on, the scale of the mess was actually dawning on him: a nearly half billion dollar budget shortfall, sponsors racing for the exits, no money even for a torch relay...

Cindy Gillespie: The guy who did opening ceremonies, bless his heart, he's like, my budget, my budget's zero.

NARRATION: By the time Mitt arrived in Utah, a lot of the SLOC leadership had already resigned in disgrace. Cindy Gillespie figured she was probably one of the next to go -- so at the reception event for their new leader, she and the other remaining staff stood huddled together in a small circle, waiting anxiously for the man who controlled their fate.

MUSIC: Out

NARRATION: Finally Romney entered the room: tall, polished, used to being in command. He wore a blue Olympic jacket, not a suit, with the white interlocking rings on the back. And in typical Mitt Romney fashion, he already knew who every single staff member was. He had done his homework. So he went around the circle and rather than asking for introductions, he introduced himself.

Cindy Gillespie: And he surprised me by shaking my hand and saying, ‘Cindy, I understand your, the person I need to put on these games that you have the experience from Atlanta. And I understand you may be thinking of going, so I just wanna ask you to stay. Give me a chance. Stay.’

NARRATION: Romney was right, far more than he realized, that Cindy Gillespie was the person he needed. In Salt Lake City, and beyond.

Cindy Gillespie: And I was like, great. Now I gotta stay. You know? But, that actually turned out to be the best decision of my life.

MUSIC: Theme

NARRATION: My name’s I’m Ian Coss. From GBH News, this is The Big Dig Season 4: Mitt & Ted.

There is something most people don't understand about the landmark Massachusetts health reform known as 'Romneycare' -- certainly something I didn't understand going into this series. And that is: it did not really happen by choice. It happened because underneath the healthcare system of this state, there was a ticking timebomb. If the bomb went off, the whole system collapsed. It was a crisis waiting to happen -- a crisis that Mitt Romney would have to manage.

This is Part 3: Save The Money.

MUSIC: Out

NARRATION: Boston is a city of many hospitals -- many legendary hospitals in fact. Mass General, Brigham and Women's, Boston Children's, Beth Israel. But when Doctor Ray Hammond was a young resident doing his training, there was one place he wanted to be.

Ray Hammond: Boston City Hospital.

NARRATION: Boston City.

Archival: …pushing down…She has not herniated,

NARRATION: It wasn't the fanciest hospital, or the newest, or the most high tech. But at Boston City -- a public hospital -- you experienced everything.

Ray Hammond: You had to do things you didn't do in other places. You had to spin your own urines. You had to spin your own hematocrits. Take it up in a little pipette and put it on a centrifuge at the end of the hall.

Archival: …Let’s go… [ambient sounds from hospital]

Ray Hammond: You drew your own bloods 'cause there were no phlebotomists except maybe a few hours a day.

Archival: Cardio, underlying cardiac. [ambient sounds from hospital]

Ray Hammond: You did everything.

MUSIC: Enter

Archival: Boston City Hospital is not a hospital like any other it is unique.

NARRATION: Boston City Hospital is where the strange chain of events leading to Massachusetts healthcare reform began.

When Ray Hammond studied there decades ago, the walls inside were beige and egg-shell blue. When it rained, there were pools of water in the underground tunnels. Upstairs, the beds were packed together, divided only by curtains. And the waiting room was always crowded. It was and is our city's so-called 'safety-net hospital'.

Archival: 40% of the patients here receive free medical care. That means they have no insurance and no Medicaid.

NARRATION: Other hospitals were still required to treat you in an emergency, and at least get you stabilized. But that was it. Boston City’s mission went much farther: to catch people who fell through the cracks, to turn no one away.

Ray Hammond: That's what a safety-net hospital is. When you gotta go there, they gotta take you in.

NARRATION: And so for many people in the Boston area with no health insurance, this is where they came, for everything.

Archival: Say, ah, good girl.

MUSIC: Out

NARRATION: One night during his residency, Hammond was making his rounds and met an older gentleman who suffered from a condition called pancreatitis -- probably from years of heavy drinking.  He had dark skin, thin hair, and a thin face.

Ray Hammond: You could see his face. And you know, he'd had one of those bouts and for some reason we ended up sitting down and talking.

NARRATION: It was a rare quiet night in the hospital, so Hammond sat for a while at the man's bedside. There he learned that the man was a mechanic, that he ran his own shop nearby in Dorchester -- the same neighborhood where Hammond lived. The man was a veteran, but he'd never managed to get his VA benefits. And since he was self-employed he never had insurance through his work. So the man came here to Boston City -- and for Hammond -- his story captures what the hospital could and couldn't do for people in need of care.

Ray Hammond: He didn't have a primary care doctor. I kind of ended up being his primary care doctor. And it started, because every time he would get sick the people at Boston City knew him.

NARRATION: Hammond found himself following up with the mechanic after hours, stopping by his shop, trying to get him connected with a social worker -- even though Hammond himself was just an ER resident, still in his training. This is not how the system is supposed to work. In an ideal world the mechanic would have a primary care doctor, someone to do regular check-ups. But an ER is no place to worry about the ideal world.

Ray Hammond: And then, you know, we met my wife. And then he offered to help us take care of our cars and seemed like a fair deal. If you'll help me take care of my car, I'll try to help you take care of your body. It looks like a…you know, we'll work on that together and uh,

Ian Coss: So he would just come back to City Hospital again and again anytime he got sick.

Ray Hammond: Yeah, absolutely. Yeah, I didn't have an office, no clinic for him to come to, but at least he could talk to somebody, had a little medical background and could give him some advice.

Ian Coss: I think it speaks to the personal nature and the value of a primary care doctor. Somebody who knows your name, who knows your history, who can–you can just call when you're not sure what to do.

Ray Hammond: As someone, as I say, who understands you as a person, not just as a patient, knows the kinds of food you tend to eat, and whether they're good for you or not. Right? The person who understands the cultural pressures you face. Makes all the difference in the world.

Ian Coss: And if you just walk into an ER, even if they have your record and your chart, they don't have that context.

Ray Hammond: They don't have the context and they don't have the time.

MUSIC: Enter

NARRATION: Put a pin in that thought, because it will come back later. The hospital ER is a miraculous place, but it’s not the best place to provide basic healthcare.

MUSIC: Post

Archival: We have reported more AIDS cases in the past six months than any of the other institutions in the Boston area.

NARRATION: By the 1990s, Boston City Hospital -- like a lot of safety-net hospitals -- was struggling to stay afloat...

Archival: There's just not enough to go around,

NARRATION: ...struggling to be what Ray Hammond was for that mechanic, but for hundreds and hundreds of patients all over the city.

Archival: That simple fact puts the hospital on a harrowing course into the future, how to maintain an old mission at the same time it meets a new mandate: cutting costs.

MUSIC: Transition

NARRATION: Which is how Boston City Hospital found itself mixed up in a much larger political story -- involving the state's Medicaid program.

MUSIC: Out

NARRATION: Now if you've followed the health policy debates of the last quarter century -- even loosely -- you know Medicaid is right there at the heart of it. Because what is Medicaid: it's a way to get government health insurance to people who can't afford private insurance. It's a tool, a vehicle really, that can be used in all kinds of different ways.

And this part is a bit complicated, so bear with me.

Archival: Runaway Medicaid costs have been considered the state's biggest budget buster since its fiscal soundness hit the skids.

NARRATION: Now the key thing to keep in mind for this whole story, is that Medicaid is a joint federal and state program. The cost is shared, and at this time in the 90s, Massachusetts had a 50/50 split. For every dollar spent, the state put in 50 cents, the feds kicked in 50. But even at that rate, the cost of the program to the state was rising very fast.

Archival: If the Medicaid budget continued to grow at the rate that is projected in this fiscal year…

NARRATION: So fast that people on the right and the left thought it was time for reform.

John McDonough: And in 1996…

NARRATION: People like John McDonough who, at that time was in the state legislature and co-chairing the Health Committee..

John McDonough: We came up with a bill to reinvent Massachusetts Medicaid into what is now Mass Health

NARRATION: And the reform was more than just a fresh name. I won't get into the technical details, but this new agency, Mass Health,  was going to be totally restructured with the goal of both expanding access to healthcare and controlling costs at the same time. But doing all that would require bending the usual rules of Medicaid, which meant it was only possible with something called an 1115 waiver.

John McDonough: An 1115 waiver.

NARRATION: And getting one would require some help from Washington.

John McDonough: And we would deal, we would talk a lot with Senator Kennedy as this was going on.

NARRATION: One of Ted Kennedy's top aides told me that after the failure of Clinton-care, the Senator shifted his strategy to focus more on the state and local level, to see what could be done there. This Medicaid reform was a perfect example of that. And the good news was that the Clinton Whitehouse was eager to help too. They were also defeated and demoralized and also looking for some other way to make a difference on this issue.

John McDonough: So the Clintons loved it.

NARRATION: In fact, not only did the Clinton administration sign onto this waiver, they pushed it one very fateful step further.

MUSIC: Enter

NARRATION: As John McDonough recalls, what happened is that some state leaders went down to Washington to meet with the Clinton people in the healthcare finance administration.

John McDonough: And the healthcare financing administration in those days was very concerned in the financial security of safety-net institutions

NARRATION: And this is how Boston City Hospital enters the picture. Put simply, there was a real fear that if Massachusetts went through with all these Medicaid reforms, it would put increased pressure on the safety-net hospitals -- the ones actually delivering much of that care. So the Clinton administration said, ‘Look’.

John McDonough: We love what you guys are doing. We are concerned about how your safety-net institutions led by Boston City and Cambridge City will survive under this. And so we would like you to ask us for more money.

MUSIC: Out

NARRATION: Ask us for more money.

John McDonough: To make sure that your safety-net institutions will thrive out of this.

NARRATION: The state delegation was a little incredulous. This is not how these conversations with the federal government usually go.

John McDonough: Wait a minute. You're asking me to ask you for more money?

NARRATION: But yes, that was the message.

John McDonough: And so a load of money, a load of money came into the state for creating Mass Health and providing a whole new level of financial support for the safety-nets.

MUSIC: Enter

Archival: Last week a plan to phase in a managed care system for Medicaid recipient.

NARRATION: That first waiver was signed in 1997. With that new federal support to our Medicaid program, the uninsured rate in the state dropped to around 10% -- one of the lowest rates of any state in the nation. And on top of that, hospitals like Boston City started to get a check.

So going forward, don't worry about what rules exactly are being waived – what matters is the money. Just to put a number on these federal payments to the hospitals, it started at about $100 million a year, but then it grew. Within a few years we're talking  almost $400 million dollars a year of direct federal support. This was highly unusual. Federal Medicaid dollars like this are all supposed to be based on a specific formula, for specific uses, but this was just unmatched 100% federal money straight to hospitals. One state bureaucrat I talked to said the 1115 waiver was like a secret printing press in the basement of the state house that just churned out federal dollars. It was an incredible deal.

MUSIC: Out

NARRATION: But eventually the sweet sweet music of the 11-15 would stop and someone would have to deal with it. Luckily, it was someone who loved a good crisis.

Archival: Good evening, will he or won't he? MIT Romney says he's 99% certain of what he's going to do, but he just hasn't told us yet.

NARRATION: The 2002 Winter Olympics instantly rebooted Romney's political career.

His performance was so impressive that while Mitt was still in Utah, the Massachusetts Republican Party commissioned their own poll of how Romney would do in that year's upcoming Governor's race, and the party chair brought the results to Mitt in person, to convince him to run.

Cindy Gillespie -- the Olympics staffer -- remembers Mitt took the meeting, but said nothing.

Cindy Gillespie: No, yes, no, no, no. Nothing. You know, I mean, I'll call you later. Bye.

Ian Coss: But he did call back?

Cindy Gillespie: Not till after it was over.

Archival: At a welcome home celebration on the Belmont Town Green today, Mitt Romney started cashing in his Olympic goal Bill,

What a thrill it is to be back home.

NARRATION: So truly, the moment his plane touched back down in Boston in March of 2002, Romney was already a leading candidate for governor. He hadn't even declared yet. But he was the guy who had rescued the Olympics, who had straightened out the finances, reeled in new sponsors, managed all the politics expertly, and pulled off a global event just as the United States was staggering from 9/11.

Archival: Turning what was a five ring circus into a financial and artistic success. Romney says it was a challenge he relished.

I love the Olympic heroes.

Brian Wheelan: And he came back and ran as a hero.

NARRATION: This is Brian Wheelan -- he worked in the Romney administration.

Brian Wheelan: People don't remember that because he was a bad presidential candidate, but in 2002, he was a hero. And he won by a landslide. A landslide. It was not even close.

Archival: In the end, it was not as close as almost everyone predicted. And Mitt Romney is here. Welcome and congratulations.

Thank you. Good to be here.

MUSIC: Enter

NARRATION: Joining him back here in Massachusetts, was the person who Mitt had come to rely on for so many things during the Olympics: Cindy Gillespie. She had no background in this state, but she took on one of those unofficial advisor-type roles that doesn't look impressive on a letterhead, but was actually very important within the administration. In particular, Gillespie would work with the Governor on any issues involving the federal government, a world she knew pretty well from running two Olympic games.

And of course, working with the federal government would also mean working with Romney's one-time adversary, Ted Kennedy -- the tired old war horse who Romney once accused of being out of touch, of failing the state.

So Gillespie remembers on election night, as soon as the race was called, just as the congratulations were pouring in, the governor elect made a phone call of his own.

Cindy Gillespie: Mitt called Senator Kennedy election night and Senator Kennedy was very, ‘Mitt, I'm supposed to call you,’ you know, 'cause Mitt beat him to it. Um, but he did it. He made the call very quickly, to tell him, you know, ‘I look forward to working with you in this role.’

MUSIC: Out

Archival:  I – I, Mitt Romney. Do solemnly swear. Into the glory and into the fire. Just after noon today, Mitt Romney became the 70th governor of the Commonwealth of Massachusetts.

NARRATION: So after this truly whirlwind of a year in 2002, Mitt Romney finds himself the governor of Massachusetts, his very first elected office.

Archival:  All the duties incumbent on me as... All the duties incumbent upon me as-

NARRATION: But the victory lap did not last long.

Brian Wheelan: In 2002, you had dot com crash.

NARRATION: Again, Brian Wheelan.

Brian Wheelan: So Mitt walked into a budget deficit, If you go back and look at his first year, he was dealing with a crisis.

Archival: We're facing some very difficult economic times in Massachusetts and throughout the country.

NARRATION: And of course a parallel crisis was unfolding down in Washington DC. On top of the dot com bust you had all this new military spending in Afghanistan, then Iraq. Plus the Bush tax cuts.

John McDonough: Things began to change in DC

NARRATION: Again, John McDonough.

John McDonough: All of a sudden, budget surpluses as far as the eye can see, switched to growing deficits and there was so much more concern we gotta ratchet down on healthcare spending in a serious—we gotta get really serious about this. And so the guy running Medicaid was a hard right guy named Dennis Smith.

MUSIC: Enter

NARRATION: Enter, Dennis Smith.

Brian Wheelan: Really interesting guy who's kind of a zealot.

NARRATION: Everyone remembers Dennis.

Brian Wheelan:  All about Medicaid, but he was Medicaid sustainability.

Dennis Smith: I would prefer passionate, but, uh, zealot is fine too.

NARRATION: That would be Dennis himself. A man with a burning passion for the financial health of Medicaid.

Dennis Smith: So yes, I was very passionate on the financing side.

NARRATION: In the vast pantheon of people who can take some credit for creating the first attempt at universal healthcare in America, Dennis Smith is not one of the first two or three or even ten names most people would think of. But this bureaucratic zealot did as much as anyone to set the whole thing in motion.

MUSIC: Out

Ian Coss: Do you remember how you first uncovered what Massachusetts had done with its medicaid program?

Dennis Smith: It was kind of a series of events. And one of the triggers for me was, the backlog of state plan amendments.

NARRATION: Dennis came to Washington in the summer of 2001 to run Medicaid. He worked in a giant, blocky, concrete building right across the street from the Capitol Dome, called the Humphrey Building. It was a classic Brutalist structure, with concrete borders around all the windows so thick that there was basically no natural light and no views. You had to actually open the window and crane your neck out to even see the Capitol. The running joke was that the building was deliberately created to be unpleasant -- so that Congresspeople wouldn't be tempted to take it over for their own office space. And that's where Dennis Smith discovered this backlog of state Medicaid plans.

Dennis Smith: Pending for years, literally years. And at that time it was all on paper, just sitting there.

NARRATION: Each of the documents could run over a thousand pages long, elaborating all the quirks of that state's program. And as Dennis recalls, there were hundreds of these documents left unprocessed by the previous administration.

Dennis Smith: So we started looking through the state plan amendments, clearing out the backlog. And we started asking what are referred to as the famous questions.

MUSIC:  Enter

NARRATION: Questions like: Where is all this federal money going? Who is handling it along the way? Questions that a zealot for Medicaid financing would ask. And pretty quickly, one state in particular caught Dennis Smith's attention. A state that had taken the routine exercise of trying to maximize their federal dollars, and elevated it to an artform.

Dennis Smith: Oh we’re talking billions of dollars. This is serious money.

NARRATION: That state, of course, was Massachusetts. Dennis had found the printing press.

Dennis Smith: And that's really when we sort of put the brakes on it and said we really need to figure this out.

NARRATION: So he did what bureaucrats do: he sent a letter.

MUSIC: Post

Brian Wheelan: And one day in 2004 when we were in fiscal affairs, we got this letter from the federal government

NARRATION: Brian Wheelan was in the Romney administration budget office, when this letter arrived. It was a very ominous letter.

Brian Wheelan: That basically accused us of having over a billion dollars of illegal financing into our Massachusetts Medicaid program known as Mass Health. And nobody knew what it was.

NARRATION: Wheelan was part of a whole crop of young business and finance people who Romney recruited into government with him. People who did not understand the nuances of an 1115 waiver, but were about to learn fast.

Brian Wheelan: And that was how I got involved in healthcare. We were not healthcare people. I was not working in healthcare. It was literally just being in the budget office and a budget problem arrived and somebody said, ‘Hey, help us understand this.’

NARRATION: On the surface the letter looked like a lot of technical nonsense about uncompensated care and federal matching. But as Brian Wheelan and then Cindy Gillespie and others came to understand it all, they realized this letter was a ticking timebomb that had just landed in their laps.

Cindy Gillespie: It's like, okay. That's gonna be a problem.

MUSIC: Out

NARRATION: And it wasn’t just a problem for one or two hospitals. Because over years since that original waiver, one of the leaders of the old Boston City Hospital had done something very savvy. He had gone out around the state and started to make alliances.

Brian Wheelan: He would actually take some of the money and he would divvy it out.

NARRATION: Using this pot of federal money.

Brian Wheelan: Like, Lawrence General, you need some money? Hey, let's work together. Baystate, you're out in Springfield. Let's work together. They had gotten in on the scheme.

NARRATION: That meant virtually every hospital in the state that served a low-income population was now relying on this extra money.

Assaad Sayah: And if that went away, those organizations would've had to go outta business.

NARRATION: Dr. Assaad Sayah worked in the ER of one of those smaller hospitals -- Good Samaritan, in Brockton.

Assaad Sayah: They were already at the brink. They're always at the brink. It only takes a small push to get them over the cliff. And that would've been the end of it.

MUSIC: Enter

NARRATION: So that was the true timebomb. About a billion dollars of highly irregular federal funding threaded through the most vulnerable and essential hospitals in the entire state. The waiver money was everywhere. It was systemic. It was too big to fail.

Brian Wheelan: And we all had the same goal: save the money.

MUSIC: Out

NARRATION:  Back when Romney was running the Olympics, he got a taste of the federal health bureaucracy. He couldn't know it at the time, but this brief encounter would prove to be quite valuable for his future.

So in the run-up to those 2002 Winter Games, Romney needed some help from the CDC, in Washington. 9/11 had just happened, the Olympics was the first major event in our new yellow, orange and red alert world, so they had to be ready for anything -- a flu outbreak, bioterrorism -- anything.

Cindy Gillespie: But we’re not getting any response from them around whether or not they will put the resources in. Will they work with us? Will they do what we need done? Couldn't get an answer. So we go to see Secretary Thompson. That was their first meeting.

NARRATION: That would be Health and Human Services Secretary, Tommy Thompson.

Dennis Smith: Tommy Thompson was a huge sports fan, a huge Wisconsin Badger fan.

NARRATION: Who was also the boss of our friend, Dennis Smith, the Medicaid zealot. They’d come into office together, and they both have roots in Wisconsin.

Dennis Smith: He actually had a stuffed badger outside his office, which made for a great conversation piece.

Ian Coss: When you say stuffed, you're talking like a taxidermied, like a real animal, not like a toy stuffed animal.

Dennis Smith: No,no. It had been alive at one point.

NARRATION: So again the clock is ticking down to the Olympic Games. And Gillespie and Romney went together to that office, with the three foot tall stuffed badger outside, to try and get some help.

Cindy Gillespie: And, uh, he was so funny.

NARRATION: Now I should note that Tommy Thompson had earned his local Wisconsin pride. Before taking over HHS, he had served four consecutive terms as the governor of the Badger State. So like Romney, Thompson was used to being an executive, not a bureaucrat.

Cindy Gillespie: He's like, ‘okay, I'll handle it, Mitt.’ He turns around, picks up the phone, says, ‘Gimme the head of CDC.’

MUSIC: Enter

Cindy Gillespie: Then he's like, ‘It'll take him a minute.’ And then he gets on the line with someone and he's like, ‘uh, yeah, no, I don't care. This is the secretary. I wanna talk to him now.’ So a few minutes later, ‘Hi. I'm sitting here with the Olympic Committee, with Mitt Romney. This is what they're saying. Is there any reason why we wouldn't do this? Okay, good. Well then just get me a plan. Get it up here. I wanna see it tomorrow. And then we will get it on out to them, let's say…Well, we'll have it out to 'em in two days. Okay. So get it to me tomorrow. No, tomorrow, yes, tomorrow. Okay, thanks. Bye.’ And he hung up and he started laughing. He says, ‘They're not used to dealing with a governor.’ So that's how he was.

MUSIC: Post

NARRATION: Now, barely two years later, Gillespie and Romney would have to go back to HHS once again, pass the badger sentry once again, and get the blessing of Tommy Thompson, once again.

MUSIC:  Out

NARRATION:  This time though, in 2004, the ask was much much bigger: can we please keep this boatload of unmatched federal money, at a time when the federal government was running a significant deficit.

Plus, it was an election year.

Archival:  Presidential candidate John Kerry was in the old hometown this weekend.

NARRATION:  And to make matters worse the candidate challenging George W. Bush was from Massachusetts.

Archival:  For weeks now, Democratic presidential candidate John Kerry has issued the same challenge to George W. Bush

Bring. It. On.  

NARRATION:  Now maybe that last point sounds like a stretch. Like, is there really a connection between this Medicaid negotiation, and John Kerry running for president? The answer though, is yes, there was a connection. The connection's name is Ted Kennedy.

Archival:  To my fellow delegates.

NARRATION: Ted Kennedy was impossible to miss that year. He was in Boston, speaking at the party convention.

Archival: Welcome to my hometown. Welcome to my hometown.

NARRATION: He was in Iowa and Wisconsin, stumping for Kerry on the campaign trail. And maybe most visibly, he was in Washington putting the heat directly on the Bush administration for the war in Iraq. Kennedy was one of about twenty senators who had voted against the war at the outset. Now, as the reality of the war was sinking in, he was relentless.

Archival:  Aren't we paying a high price, because the administration's obsession with Iraq?

Our policy in Iraq is failing

NARRATION: In televised hearing after televised hearing he prosecuted the case that the Bush administration had not only failed us, they’d lied.

Archival: Mr. Secretary, I must say I found, uh, your presentation here this morning somewhat disingenuous.

NARRATION: And all of that is happening in the background just as the issue of this Medicaid waiver comes up -- a waiver that requires sign-off from that same Bush administration, and typically was the kind of thing Ted Kennedy could handle on his own…But not this time?

Cindy Gillespie: Senator Kennedy was already incredibly frustrated by the whole issue.

NARRATION: Cindy Gillespie could see there was no way to win this fight by brute force. She had to admit it: the old deal, the printing press in the basement, was dead. But that didn’t mean the money was lost.

Cindy Gillespie: Where we decided to go was rather than try to pressure them, coerce them, whatever, was to figure out how to repurpose the funding.

NARRATION: Remember - the old deal paid out hundreds of millions of dollars a year directly to the safety-net hospitals. To conservatives, that sounded a lot like welfare, a lot like socialized medicine. At one point Romney himself said: “That’s a Democratic approach.” It wasn’t gonna fly in this administration.

So Cindy Gillespie got a core group of people together to brainstorm. Was there some other way to spend this money -- that could serve the same basic need of healthcare, but would be more acceptable to Dennis and company? And could that be enough to make them overlook the dollar figure itself? To save the money.

Tim Murphy: And she's like, I need you guys to really start to dig in here.

NARRATION:  Tim Murphy was another staffer in these meetings -- you can think of him and Brian Wheelan as a bit of a dynamic duo. Two guys in their 30s who were good with numbers but had no specific background in healthcare.

Tim Murphy: It’s a lot of money in the system, it’s a lot of money in the system.

NARRATION: They were like the outside consultants, trying to see the problem with fresh eyes.

Tim Murphy: If we can keep the money in, we can program it better.

NARRATION: And Mitt Romney was right there with them. Cindy Gillespie told me that the governor would always stay at the conference table. He leaned in, he probed. He asked questions:

Tim Murphy: How do I optimize this? Like, I think we, I think, I think there's enough money here, we can redo it. Like how would we do it?

NARRATION: And according to both Cindy Gillespie and Tim Murphy, the aha moment in these meetings came from Romney himself.

Cindy Gillespie: I mean, one day, Mitt was literally in there doing calculations going there is absolutely no reason why if you took that money, you could actually buy insurance for all these people.

MUSIC: Enter

NARRATION: Remember: Massachusetts had one of the lowest uninsured rates in the country, we're talking about half a million people total in the whole state. Universal coverage was already in sight. And everyone agreed that emergency rooms were not the best place to treat those last people without insurance. It's like the ER doc said back at the beginning: we don't have the context and we don't have the time.

So why not use that federal money, to get people out of the emergency room, and into a doctor's office?

Cindy Gillespie: Well, why don't we just buy insurance for all these people? You know? I mean,

Ian Coss: And that started leading you down the road towards...

Cindy Gillespie: What everybody calls now, healthcare reform, Romneycare.

MUSIC: Out

NARRATION: I just want to say real quick, for all the people who are screaming at their listening device: 'Stop calling it Romneycare! This was not all the work of one brilliant consultant who stumbled into the governor's office and cracked the code on American healthcare!'

I'm guessing there are a few of you out there. So please know, I will offer up several perspectives on this story, because there are many of them, and some of them don't like the term Romneycare. But for now, I'm gonna run with the governor's narrative. And yes, I'm going to call it Romneycare.

Brian Wheelan: And this is the anti Hillarycare.

NARRATION: Again, Brian Wheelan, the other half of the wiz kid duo on the governor’s team.

Brian Wheelan: It's about individual responsibility, it's about private plans, it's about innovation Less about poverty, more about a breakdown in the insurance market.

NARRATION: The basic idea was to reframe the whole conversation, from propping up an old hospital for poor people -- which is kind of like the caricature of a Democrat approach to healthcare -- to instead helping people to get private health insurance -- a much more Republican-friendly approach.

As we'll see in the next episode, the actual policy needed to do this was not exactly new or radical. I mean, when it comes to health policy, nothing is really new. It's all been bandied about before. But what you had here in Massachusetts was that rare thing in politics: an alignment of all the right players, plus a catalyst to put them in motion. So if you've ever wondered: why here? Why did the road to national healthcare reform start here? That is why. It was the timebomb of that 1115 waiver -- something that forced people to act, to do something, and do it fast.

Cindy Gillespie: So we began to have discussions with Dennis around if the money were to instead go this way would you be more open to it? Yes.

NARRATION: Dennis was open to it.

Tim Murphy: If you're telling me you can get everybody covered on insurance, then I'm listening. I'm listening.

Cindy Gillespie: But there's always a lot of devil in the details, right?

MUSIC: Enter

Cindy Gillespie: I do remember Senator Kennedy.

NARRATION: The first detail to consider, was Ted Kennedy himself.

Cindy Gillespie: When we explained that to him early on, it was not all developed yet. Him making the comment back that it wasn't the way he wanted it done.

NARRATION: I mean, no one had been more committed to public hospitals than Ted Kennedy, no one had been more committed to government insurance programs than Ted Kennedy. Now Gillespie was asking him to back away from that and focus instead on helping to funnel that public money into private, for-profit health insurance. It was not the way he wanted it done.

But in 2004, Ted Kennedy was now 72 years old. That year a reporter for the Washington Post wrote:

“He wears his mileage plainly: His purply-red cheeks have gone puffy, his hair a bright white. He suffers from chronic back pain, hunches and grimaces while he walks, and his breathing is labored after just minimal exertion."

The lion of the Senate knew he was running out of time, and he also knew what had happened thirty years before, when Richard Nixon had reached out to him with a compromise, and Kennedy had been the one to walk away. So between those heavy breaths, he said to Gillespie.

Cindy Gillespie: It wasn't the way he wanted it done, but he was getting older and he'd rather see it happen than waiting on it to be done his way.

MUSIC: Out

Cindy Gillespie: So he said it more eloquently than that, as you can imagine. But that openness was important at that time.

NARRATION: Kennedy’s blessing of this reform was important, and would become even more important. And so in that moment, the core of the Romneycare alliance was forged. It was the oldest of old school Democrats looking at possibly his last chance to do something big on healthcare, and the rising star Republican looking to make his own mark on history. They were opposites in almost every way you could imagine, rivals of course, but both at heart were pragmatists. And in this case, they shared a common goal:

Brian Wheelan: Which is how do we keep the money. It wasn't this evangelical do good, oh, we gotta cover more people, or whatever the case is. It was: how do I keep the money, right? Save the money.

MUSIC: Enter

Ian Coss: So what did Dennis Smith want from Massachusetts and from you?

Brian Wheelan: He wanted 50 cents for every dollar,

NARRATION: With team Massachusetts now in lock step, Brian Wheelan the 31 year old Bain alum, sat down with Dennis Smith the bureaucratic zealot, to try and make the numbers work. The goal was to find state money to match all the federal money, because that, remember, was the handshake deal of Medicaid.

Brian Wheelan: Just straight you put in 50 cents and I match.

NARRATION: The difference was that now, instead of fighting them over every cent, Dennis was more inclined to be helpful -- creative even -- to make the numbers work.

Brian Wheelan: It's ironic because that was the type of stuff that Dennis Smith was actually trying to eradicate was the creativity in the program. But once they had something they wanted to accomplish, all of a sudden the tables turn and they're getting creative. And Washington is saying, no, no. What about this?

NARRATION: Together, Brian and Dennis cooked up this artful little mechanism called "C-NOM"

Dennis Smith: The cost not otherwise matchable, C-NOM.

Brian Wheelan: C-NOM.

NARRATION: That phrase: "Costs Not Otherwise Matchable," shows up all over the final waiver documents -- it was a shortcut for finding state dollars to match federal dollars.

Brian Wheelan: He would be like, well, have you thought about people who are in jails?

Ian Coss: Oh, so like, if the state is spending money on a school nurse or healthcare in a jail, you could say, oh, well that's a matching dollar.

Brian Wheelan: Correct.

NARRATION: Dollar, matched.

Brian Wheelan: And so it was a new set of structures whereby essentially the unmatched monies were deemed matched.

Ian Coss: So that was really the secret sauce.

Dennis Smith: It was key. It was key, yes.

NARRATION: They worked like this through hundreds of millions of dollars in funding, finding creative ways to match every dollar.

Brian Wheelan: Honestly, we were, we were scrapping.

NARRATION: But they were also running out of time.

MUSIC: Post

NARRATION: Secretary Tommy Thompson, with his stuffed badger, had been in the loop about the waiver negotiations through all of 2004. Like Dennis Smith, he was open to the idea of the state getting creative as long as the math penciled out and the focus was on a private market solution. And like I said before, he had been a governor once too, so he could empathize with the situation. He was in many ways, the ideal negotiating partner for this. The problem was he and the stuffed badger would not be in that office for long. Thompson was retiring in January of 2005. And the joint Romney/Kennedy team would have exactly one chance to make their pitch to him.

MUSIC: Out

NARRATION: By the end of January, 2005, the basic waiver documents were ready. All they needed was a signature from the secretary. A billion dollars hung in the balance.

Cindy Gillespie: Tommy Thompson. We went to see him his last day in office.

MUSIC: Enter

Dennis Smith: It was a very emotional day.

NARRATION: Naturally Dennis Smith was there. Partly to take care of this final piece of business, but mostly to celebrate his boss’s last day.

Dennis Smith: There's a big auditorium on the ground floor of the Humphrey Building.

NARRATION: So picture it: down inside the concrete block of the Humphrey Building they'd set up a temporary stage for the party, and rows of chairs. Banners read: "Farewell Secretary Thompson."

Dennis Smith: Every chair was filled.

NARRATION: There was cake.

Dennis Smith: People were, hanging on the walls,

NARRATION: Some people wore party hats.

Dennis Smith: Just a very very special day.

NARRATION: And into this scene, walk Ted Kennedy and Mitt Romney – in person. The backslapping pol and the power point professional; the last son of Camelot and the hero of the Olympics; the liberal lion and the rising star Republican. The reason I keep emphasizing their differences, is that together, Romney and Kennedy were very powerful. No matter the room, no matter the audience, no matter the party, as a pair they could not be easily written off.

Romney brought with him Cindy Gillespie; Kennedy brought his staff director, Michael Myers.

Michael Myers: And I can remember meeting in the conference room but there was a farewell party for the secretary going on down the hall. We could hear it.

NARRATION: Now you might think with all this hoopla going on, Thompson would want to get this Medicaid waiver thing over with quickly. The joke was that he had a Harley motorcycle parked outside the Humphrey Building that he was going to ride back to Wisconsin as soon as he was free.

Cindy Gillespie: But this was a huge ask.

MUSIC: Out

NARRATION: But no. Thompson wanted to really think this thing through. I mean the waiver was real money, a billion dollars. And more than that, it was a potentially dangerous precedent that other states might want to follow with their own Medicaid programs. That made Thompson anxious.

Cindy Gillespie: So it becomes, why don't y'all talk with Dennis and see if you can work your way through any of this.

NARRATION: So Thompson would voice his concerns, then go back to the party. And with the music booming in the background, Dennis and the staff would dig back into the technical language, to see if there was something they could do to make it work. They had no choice at this point, but to make it work.

MUSIC: Enter

NARRATION: They went round and round like this with the secretary for two hours.

Michael Myers: Thompson was going back and forth from the party to the conference room, to the party, to the conference room, and finally he just dragged Senator Kennedy and Governor Romney into the Farewell party so that they could enjoy the fun. And, give him a hardy farewell.

NARRATION: Ted Kennedy was never one for the deep technical details -- that was more Romney's strength. But there at the party Kennedy's powers were on full display. According to one of his staff, the senator managed to get Romney up on the temporary stage with him -- the first time they had been on any stage together since their fateful debate a decade earlier. Kennedy introduced them as "The Odd Couple."

MUSIC: Out

NARRATION: That same week, a new letter arrived in Boston from the Department of Health and Human Services. It read, quote: "We are pleased to inform you that the Massachusetts Section 1115 Medicaid demonstration project No. 11-W-00031/1, has been approved"

Cindy Gillespie: So it was a big win for us at the time, but it was not okay, we're over and done at all. And now we gotta figure out how we're gonna actually do this.

MUSIC: Transition

NARRATION: Around the time of that 1115 waiver, Kennedy and Romney made another public appearance together, at Good Samaritan Hospital in Brockton, Massachusetts. This was one of the many smaller safety-net hospitals around the state that was always on the brink of financial collapse. Dr. Assaad Sayah worked there.

Assaad Sayah: It was an open meeting. It was probably about 50 people.

Ian Coss: And were Kennedy and Romney actually presenting together, like as a team?

Assaad Sayah: Yes. Both were talking on the same page. And actually Senator Kennedy, God rest his soul, did most of the speaking. You couldn't miss it. But you could see all of them glowing. That's what stuck in my mind. There was hope, there was purpose. There was commitment to do something innovative, first in the country, that stuck in my mind for years.

NARRATION: Dr. Sayah remembers one of the people in the room raising their hand and asking a question: how are you going to actually make this work? If the goal is to get people out of the ERs like ours and into more stable care, primary care, how will you make sure this new health insurance is truly affordable -- both for the state, and for the individual.

Assaad Sayah: Where's that sweet spot? And the opposing part is if you can't find that sweet spot, how long it's gonna last before it goes away?

NARRATION: At that moment, the Odd Couple did not have the answer.

Assaad Sayah: That's, that was their concern too. I mean, they were saying, well, I mean, you guys are on the frontline. What do you think we should do? I mean, where is the input your thoughts about where do we go from here?

MUSIC: Theme

NARRATION: And in Part 4, a new idea enters the conversation -- something no state had ever tried --that might just be the key for making the whole plan work. But it's controversial.

Ian Coss: What did you think of the individual mandate?

Assaad Sayah: Well, it's a double-edged sword.

NARRATION: That's next time.

The Big Dig is produced by Isabel Hibbard and myself, Ian Coss. It’s edited by Lacy Roberts. The editorial supervisor is Azita Ghahramani with support from Ryan Alderman. And the Executive Producer is Devin Maverick Robins. 

As always, find everything this fantastic team has ever made by searching for The Big Dig, wherever you listen. 

A very special thanks to Elaine Ullian and Tom Traylor – two titans of the old Boston City Hospital, who helped me understand this story on so many levels. And as our series rounds the corner into the 21st century, I also want to give a special shout out to Emily Rooney and John Caroll, the longtime host and reporter for GBH’s Greater Boston. You will continue to hear a lot of their voices in the old news clips, and I am of course indebted to the work that they and all their colleagues did to capture this story as it unfolded.

The artwork is by Bill Miller. Our closing song is “Things Will Be Different,” by The Shods. The Big Dig is a production of GBH News and distributed by PRX.