Now the CEO of Lazard, Peter Orszag served as Director of the Office of Management and Budget (OMB) in the Obama administration from January 2009 – July 2010. Before that, he was Director of the Congressional Budget Office (CBO). Throughout his tenure in these positions, he had a notable impact on the direction of U.S. policy at the time. His work informed the development of the American Recovery and Reinvestment Act of 2009 and the Patient Protection and Affordable Care Act of 2010 (colloquially known as Obamacare).

In a November 2020 interview for the Obama Presidency Oral History Project, Orszag spoke with Dov Weinryb Grohsgal about these roles. He discussed his work in the White House, as well as the budgetary concerns at the time and how they contributed to U.S. healthcare policy into the next decade. Here are some highlights of the discussion.

Early Meeting with Future President Barack Obama

Orszag served as the director of the Hamilton Project, part of the Brookings Institution, in 2006, and then-Senator Barack Obama was invited to speak at the official launch of the project. Prior to the event, the two men had met in Obama’s office. Orszag was struck by the lack of pretension in the senator, who engaged him in what felt like an authentic, unscripted conversation driven by Obama’s interest in and knowledge of the policy issues at hand. Orszag had met with many other senators and found his introduction to Obama to be refreshingly genuine, with the senator coming across as humble and full of curiosity.

Success with the CBO

During the confirmation hearings for Orszag’s appointment to the OMB, Representative Paul Ryan noted that Orszag had “brought a sense of fairness to the Congressional Budget Office” and had given Congress “the cleanest answers we could have asked for.” These accolades reflected his efforts at making CBO processes more transparent; his other accomplishments included improving the CBO’s analytical capabilities. Orszag worked to prepare the CBO ahead of time for major Congressional debates. For example, in anticipation of the healthcare debate, he increased healthcare staff and directed the office in producing volumes of analysis on what policies might move the needle” in terms of reducing healthcare costs and expanding coverage.

Orszag also spoke about CBO scores and how they are often misinterpreted. For instance, a “little impact” score is often thought to mean there will be no economic impact from a proposed program, when in reality it means that there is “not a high enough degree of confidence that it will have any significant effect to score budgetary savings.” In the case of the CBO’s analysis of the Medicare Commission in 2009—after Orszag had departed the CBO—the official finding was that it would only result in “modest savings” Orszag asserted at the time that it would be “a game-changer, not a scoreable offset.” The difference is an important one to understand.

Challenges and Accomplishments with the OMB

While leading the OMB, a large part Orszag’s focus was on the American Recovery and Reinvestment Act of 2009. The act included $150 billion for healthcare spending, including $20 billion for health information technology. These provisions were quite important for Orszag because they set the stage for what was to come with healthcare reform via the Affordable Care Act (ACA). Orszag noted that many people think these provisions were in the ACA, but they were in reality part of the Recovery Act. Moving to a digital-based system was integral to preparing the country for what would come over the next decade, and the ability to digitize healthcare records was largely facilitated by those provisions.

In terms of the ACA, Orszag stated that, in retrospect, it has performed better than predicted when it comes to cost containment and delivery system reform. Medicare costs per capita decreased in real terms (i.e., inflation-adjusted terms) for several years over the next decade. He noted that, had he predicted this in 2009, as the debate over the ACA raged on, he would have been laughed at by the press.

Orszag also discussed what he saw as misrepresentations in the press about the Independent Payment Advisory Board and the “Cadillac tax” on very high-cost insurance plans. He acknowledged that even though these provisions ultimately failed, the administration’s approach in crafting the ACA was correct. Though some at the time criticized the approach as “throwing lots of stuff against the wall” to see what would work, Orszag argued that this was better than betting everything on one policy without knowing if it would work.

He noted that ultimately, the worst, most alarmist fears about the ACA being thrown about at the time—e.g., that it would break the healthcare system, that no one would be able to see a doctor—never came to pass. Although he believes the system still needs change, he thinks it is in much better state than it was in 2007-08.

The Obama White House’s Focus on Healthcare

In 2009, President Obama quoted the late Senator Ted Kennedy in a speech to the joint session of Congress, stating that healthcare was a “moral issue” in which “fundamental principles of social justice were at stake.” Orszag had also asserted during the ACA debate that there “was a moral imperative for expanding (health) coverage.”

In the interview with Grohsgal, Orszag reflected on the Obama administration’s messaging around the ACA and the balance between moral and economic arguments for its passage. When issues such as these are painted only in the context of moral imperative, those who are suffering economically tend to react angrily, believing that the government is out of touch with the real-life experience of constituents. Looking forward, finding a way to balance moral imperative with financial benefit in policy marketing may help prevent the type of nonproductive fighting around legislation like the ACA, which has proven to have been both necessary and successful.

See Peter Orszag’s LinkedIn profile for more details about his career, including his work in the Obama administration and his subsequent career with Lazard.