Obama's Deal

>> Fired up!

Ready to go!

>> Tonight on Frontline... >> Your voice can win an election!

>> He promised change.

>> Your voice can create the kind of America we dream about.

>> Then he took on one of Washington's toughest issues.

>> Let's be the generation that says, "We will have universal health care in America."

We can do that.

>> What happened next surprised everyone.

>> The only way they could get it through was to bribe their members.

>> Hundreds of millions of dollars spent on lobbying.

>> Very political, very aggressive at creating deals.

>> Those deals can be pretty smelly.

>> Another day, another headache for President Obama.

>> Is this just the dirty reality of politics?

>> News of a back room deal.

>> All those back room deals, it's just wrong and we can do better.

>> It was a wake-up call that President Obama wasn't everything that they thought he was.

>> The president has staked his entire first term on this.

>> There's always two sides of Obama.

You have to lift up people, but at the end of the day, it is about deal-making.

>> Tonight on Frontline, "Obama's Deal."

>> What's at stake right now is not just our ability to solve this problem, but our ability to solve any problem.

>> It's the inauguration day of the nation's first African American president.

>> NARRATOR: Barack Obama had promised change.

>> He spoke of no less than remaking America.

>> NARRATOR: His signature issue: universal health care.

>> In this effort, every voice has to be heard.

>> This is a huge issue the president is taking on now.

>> Every idea must be considered.

>> Everybody loves the idea of health care reform.

>> Every option must be on the table.

There should be no sacred cows.

>> The question is, could health reform really happen?

>> NARRATOR: From the very beginning, even inside his own West Wing, the issue would test President Obama.

>> The White House had a debate about whether they should actually go forward with it.

>> NARRATOR: No president had ever made headway on comprehensive health care reform.

>> First, it became, "Let's not do health care."

Then it was "scale health care back."

>> Vice President Biden was opposed to do it, absolutely opposed to doing health care.

Biden had seen too many universal health care programs die in his long time in Washington, and he warned Obama and his aides not to do it.

>> The economic team was saying, "Oh, listen, we've got to spend all our energy on fixing the recession.

We can't launch a big spending program at this time."

>> NARRATOR: The president took it all in, and then it was Chief of Staff Rahm Emanuel's turn.

>> He's a brilliant political strategist-- hard-nosed, profane, just a force of nature.

>> Very political, very aggressive at creating deals.

In fact, probably more so than one would anticipate someone from the Obama administration being.

>> NARRATOR: Obama's choice of an inside dealmaker like Emanuel had surprised many of his supporters.

>> He's sort of the opposite of Obama in a lot of ways.

It was an immediate indication that this White House was not going to be about kumbaya and getting along and trying to do everything they could to win Republican votes.

They were going to try and win.

>> NARRATOR: Emanuel told Obama to win, he needed to move fast.

>> He recognized that the moment Obama was going to be at his strongest was the beginning.

>> NARRATOR: In the end, the president decided to go for health care right away to make a larger point.

>> We were sitting in the Oval Office, and we were sort of having a debate around health care at one point, and the president said, "It's about health care, but it's not really about health care.

It's also about proving whether we can still solve big problems in this country."

And this was going to be the test case for that.

(sirens) >> NARRATOR: In his first address to Congress, the president wasted no time putting health care on the nation's agenda.

>> Let there be no doubt: Health care reform cannot wait, it must not wait, and it will not wait another year.

(applause) >> The president has staked his entire first term on this.

>> There's no bigger priority than health care.

>> We can no longer afford to put health care reform on hold.

We can't afford to do it.

(applause) >> NARRATOR: At the time, it looked like an easy victory for the president.

>> Failure to do this would be viewed as a failure to govern, an inability to use the 60-vote majority that we have in the Senate and the significant margin we have in the House.

(applause) >> I don't think anyone in the White House or on Capitol Hill believe that failure's an option here.

They have to be successful in getting health care reform done, or they'll pay a tremendous political price.

>> NARRATOR: Rahm Emanuel knew about the political price an administration pays when it loses the battle for health care reform.

16 years ago, he worked in the Clinton administration.

>> The Clinton effort to do health care was sort of a classic "smart people will solve your problems" approach to an enormously complex, messy political issue.

>> Bill Clinton delivered a, you know, thousand-page plan onto the doorstep of Congress after a year and said, "My wife came up with this.

It's a really good plan.

Pass it."

At which point the chairman, who'd been there longer than them and were going to be there longer than them, basically tossed it aside and killed the bill.

>> I remember Patrick Moynihan, the senator from New York, telling me in his very thick Irish accent that he just got this document-- a 1,273 pages-- describing how health care reform should be done and basically says, "I'm not even going to read it."

>> NARRATOR: The Clinton White House also angered powerful special interests.

>> The AMA opposed them.

The insurance companies opposed them.

The doctors, across the board, hospitals, you name it, they were on the other side, and the Clinton administration understood that there was little hope that they would ever bring them around.

>> But this was covered under our old plan.

>> NARRATOR: They buried the administration in an avalanche of negative TV commercials.

>> The government may force us to pick from a few health care plans designed by government bureaucrats.

>> Having choices we don't like is no choice at all.

>> They choose.

>> We lose.

>> The Harry and Louise ads cost and cost and cost us in the Clinton years.

>> It is clear that health insurance reform cannot be enacted this year.

>> NARRATOR: They were handed a devastating defeat.

Emanuel had seen it all.

16 years later, as President Obama's chief of staff, he would try do things differently.

>> What did he do that's different from what Bill and Hillary did?

Everything.

Everything.

>> The great lesson that everyone shared, both folks like Rahm who were there and historians, is you need Congressional buy-in on the front end.

>> NARRATOR: The White House would hold Congress' hand every step of the way.

Obama and Emanuel had stocked the West Wing with an all-star lineup of former congressional insiders.

>> He's got Pete Rouse, who served as both Daschle and then Senator Obama's chief of staff.

>> The head of Management and Budget, Peter Orszag, was the head of the Congressional Budget Office.

>> Melody Barnes, who is the head of the Domestic Policy Council, was for years a top aide to Ted Kennedy.

>> Phil Schiliro, who was the top staff guy for Henry Waxman.

>> In the communications department, Robert Gibbs, who worked in the Senate, who's now the press secretary.

>> So they had a very, very strong team of people who knew the Hill, knew how to work the Hill, knew how to have success on the Hill.

>> NARRATOR: And to run it, they brought back the quintessential Washington insider, former Senate majority leader Tom Daschle.

>> It was an enormous signal that this really is a priority for the administration.

They're not messing around.

They're bringing in the pros, they're bringing in the big guys to get this done.

>> NARRATOR: Obama decided he would stay in the background.

He would encourage Congress to come up with a plan, fast-track it, relying on good will and personal relationships to get it passed.

But the idea of hiring insiders almost immediately hit a snag.

>> ABC News has learned of problems faced by another of President Obama's cabinet choices, Tom Daschle... >> Tom Daschle is trying to save his nomination to become... >> An unwanted distraction for the Obama administration... >> And I think that just shows a problem with integrity, and we cannot afford that in our government right now.

>> NARRATOR: The once powerful Senate majority leader had made enemies.

The Finance Committee chairman, Max Baucus, a Democrat from Montana, was an old rival.

>> Daschle was not helped by the fact that Max Baucus was not necessarily a close friend or ally.

>> NARRATOR: Baucus allowed Republicans on the committee to tear into Daschle's personal finances.

>> You had a very rigorous Senate Finance Committee staff that was scrubbing the tax returns of the nominees that were going through that committee that's unlike anything that I think we've seen in many years.

>> NARRATOR: Senate investigators found income tax problems.

Daschle had left the government and cashed in, making millions at a Washington law firm.

Along the way, a client had provided a limo for Daschle's personal use.

Eventually, he paid more than $140,000 in taxes and penalties on the gift.

>> To this day, I think there are people in the greater Daschle universe who say that the reason that Tom Daschle did not make it through the confirmation process is because Max Baucus gave him such a hard time dragging out the confirmation, and the details, and all the financial disclosures.

>> There is plenty of drama in Washington at the moment.

>> Republicans talking about "limousine liberals" who don't even pay taxes on their limousines.

>> It's a very bad cloud over this nomination.

>> It's disheartening, obviously.

It frustrates me.

>> Does this really represent the kind of change that Mr. Obama said he would be bringing to his administration?

>> NARRATOR: Daschle had been around long enough to know he had become a liability for the new president.

>> Obama quickly, calmly accepted the resignation offer.

Did not pause, did not look back.

>> NARRATOR: He'd campaigned as a political outsider, but surrounded himself with insiders, and watched as one of them was taken down in a political knife fight.

Seven weeks into his presidency, in March of 2009, the new president gathered in one room at one time, friends and potential enemies alike.

>> You're talking about lawmakers, doctors, nurses, hospitals... >> Bringing together lawmakers and interest groups... >> Cabinet officials, members of Congress, the White House team, conferring on how to overhaul health care.

>> I know people are afraid we'll draw the same old lines in the sand, give in to the same entrenched interests and arrive back... >> Many of these players, for years, if not decades, had a record of opposing any sort of health care reform efforts.

>> NARRATOR: Rahm Emanuel engineered this strategy.

Everyone remembered how special interests had sabotaged the Clinton plan.

>> They want to get people to the table.

They don't want this to be-- at first, at least-- a fight against the insurers, a fight against the medical industry, they want... the pharmaceutical industry.

They want to get buy-in.

>> I'm going to switch gears and get some groups in here.

>> NARRATOR: Obama's advisors had told him that many of the lobbyists in the room were prepared to cut a deal.

>> Ignani?

>> NARRATOR: Karen Ignani is the chief lobbyist for the insurance industry.

>> Why don't you wait for a mic, Karen?

>> We entered this year being committed to change, being committed to restructuring, and committed to actually helping to get this done.

We hear the American people about what's not working.

We've taken that very seriously.

You have our commitment to play, to contribute, and to help pass health care reform this year.

>> Good.

Thank you.

Karen, that's good news.

That's America's health insurance plans.

(applause) >> This was really astonishing.

Here she was, on record, saying, "We're going to help you," and so, too, were the drug companies.

>> Karen Ignani wanted to be sure that she was at the White House representing the industry in its most positive way that she possibly could.

It was part of the industry's charm offensive, as I call it.

The industry knew that it was going to be under attack this year, or at least the legislation would focus very heavily on the insurance industry.

>> And you know, look, they could read the political tea leaves.

You know, the saying in Washington was, "You can be at the table, or you can be on the menu."

>> NARRATOR: Privately, Ignani was playing hardball.

She said she'd support the bill only if everyone was required to buy health insurance.

>> They said, for the first time, they would support universal coverage with one caveat, and that is that we have an individual mandate requiring people to buy insurance, so it's not just the sick that buy insurance, but everybody.

That was the quid pro quo.

>> NARRATOR: Obama had campaigned against the mandate.

Ignani was insisting he reverse himself.

>> They want to make sure that they get a requirement that all of us buy health insurance.

They want to make sure that we are all forced to buy products from them, and they want to make sure that there's no alternative other than the private insurance market.

That's why they're so adamantly opposed to the public option.

>> NARRATOR: Obama had also supported the public option, a government health plan.

And Ignani wanted him to walk away from that, too.

>> It is not wiping out the private insurance industry; it's just creating a public insurance plan that would compete with private insurers.

But they wanted no part of that.

>> NARRATOR: Emanuel would keep Obama away from direct deal-making with Ignani.

But with Tom Daschle gone, and health care's most powerful advocate, Ted Kennedy, dying of cancer, the negotiations would have to be handled by that powerful chairman of the Senate Finance Committee, Max Baucus.

>> Who do they get after losing Tom Daschle and, largely, Ted Kennedy?

Max Baucus.

Not the first choice of most of the people in the West Wing.

>> He's not glamorous.

He's one of the senior-most senators.

Very few Americans know anything about him.

>> He's from Montana, a more conservative Democrat than a lot of people in the White House.

Worked with the Bush administration on things like tax cuts and issues that are an anathema to a lot of the liberal base.

>> NARRATOR: Cutting deals with health care industry groups was right down Max Baucus' alley.

>> In 2008, during his reelection campaign, which is really when this debate began, he raised well over a million dollars only from the health insurance sector.

That's a pretty astounding amount for somebody who's going to have a central role in this debate.

>> NARRATOR: In all, Baucus received more than $2.5 million from special interest groups in the health industry.

>> What the campaign contributions often do is that they open doors.

They give industries entree to important Congressional staffers and lawmakers.

>> NARRATOR: Privately, Ignani pushed Baucus for a bill that would include the mandate to buy insurance and kill the public option.

That didn't sit well with the president's liberal supporters.

>> The Senate bill, you know, frankly, is just an insurance company bill.

The insurance companies, actually, literally, did write it.

There were two senior staffers in Max Baucus's office-- one who used to work for United Health Care and one who used to work for Wellpoint-- who wrote the bill.

It was a great bill from the insurance company's point of view.

It doesn't happen to do a whole lot to change the system and to bring reform.

>> NARRATOR: The Left counterattacked at a hearing in May.

>> Going to take you live to a Senate Finance Committee hearing looking at health care.

(gavel pounds) >> The committee will come back to order.

>> NARRATOR: Liberal outrage arrived in Baucus' own hearing room, as health care activists, one after another, shouted him down.

>> With all respect to Senator Baucus, this hearing is public, but the public is not being heard.

(gavel pounds) >> You're taking millions from the insurance industry, the HMOs and the pharmaceutical companies, and you're denying the people a voice.

>> We want a seat at the table.

>> Why are their voices not being heard?

Every health care lobbyist in America is at the table.

>> Sir, if you'd just... >> NARRATOR: The activists were especially angry that Ignani had a seat at the table but they did not.

>> When we received the list of the dates of the hearings and who was being invited, and we saw who was invited, we requested that we have one person invited in the, you know, the series of the three hearings.

They were inviting 41 people total to testify, and they said no.

>> Committee will be in order.

The committee will stand in recess until the police can restore order.

>> I thought Senator Baucus did a spectacular job of handling that, not getting rattled in any way, handling it in a not only very professional but an empathetic way.

>> NARRATOR: Baucus himself declined to discuss his role with Frontline.

>> Five people were arrested at a Senate Finance Committee hearing on health care reform and charged with disruption of Congress.

>> So, what Chairman Baucus has decided, this option cannot be part of the discussion at a Senate hearing?

I think that's wrong.

I don't think it's fair.

I think it's... >> NARRATOR: That spring, Baucus and the White House were also secretly negotiating another deal, this time, with the pharmaceutical industry.

Their top lobbyist was a classic Washington character.

>> Billy Tauzin is a New Orleans politician-- very colorful, lively figure-- who took over the pharmaceutical industry trade group, PhRMA.

>> Billy Tauzin is a... is a formidable negotiator.

And Billy Tauzin knows how things work on the Hill, and he knows how things work in this town.

>> NARRATOR: His most notorious act took place when then-Congressman Tauzin and Senator Baucus pushed through a Medicare prescription drug bill.

>> We are about to pass a $400 billion insured drug account for these citizens who have no drug insurance today.

>> NARRATOR: In 2003, in the middle of the night, Tauzin kept the House voting machine open until he could scrounge and wheedle just enough votes to pass the controversial measure.

>> It was a payoff to two industries, the drug industry and insurance industry.

There was no question about it.

They did very, very well out of this bill.

>> NARRATOR: It meant hundreds of billions of dollars for the pharmaceutical industry.

>> The Comptroller General said when we passed the Medicare prescription drug bill that it was the worst piece of legislation, fiscally, that he had ever seen.

And he said, over time, it was going to be a disaster.

>> NARRATOR: It continues to be a classic Washington story of money and behind-closed-doors maneuvering.

It made Tauzin's reputation.

>> You know, the smart money's always going to be on Billy Tauzin in a negotiation, because he knows what he's doing.

>> NARRATOR: And just over a year later, Tauzin was hired as the pharmaceutical industry's top lobbyist.

>> Billy got a very good job with PhRMA.

I think he makes around $2 million a year.

At least that's what I've been told.

Many of his staff people went with him or went to work for pharmaceutical companies.

And Billy was the main pusher of the bill.

>> I'm Barack Obama and I approved this message.

>> NARRATOR: In the 2008 presidential campaign, the incident became one of Barack Obama's favorite complaints about the Washington political culture.

>> The chairman of the committee, who pushed the law through, went to work for the pharmaceutical industry making $2 million a year.

Imagine that.

That's an example of the same old game-playing in Washington.

You know, I don't want to learn how to play the game better; I want to put an end to the game-playing.

(applause) >> NARRATOR: But secretly, one year later, at Max Baucus' Senate office, the Obama White House was negotiating with Billy Tauzin.

>> It's a very Rahm Emanuel idea.

Get them at the table, make them agree to something with a threat that something worse could be out there if they don't.

And once you get this buy-in, that should eliminate pockets of opposition.

>> NARRATOR: Billy Tauzin knew that during the presidential campaign, Barack Obama had promised to slash drug prices.

>> PhRMA had some real concerns that there would be an effort by the Democrats to enable the government to negotiate for its prices on Medicare prescription drugs.

And this could be a, potentially, very big hit to the industry.

>> NARRATOR: Tauzin also knew the White House was eager for any early deal that appeared to contain costs.

>> I think he was smart in saying that, "If I get in early, I can make a deal that my members can live with."

>> NARRATOR: He proposed a complicated formula which he said would cut drug costs by $80 billion over ten years.

White House aide Jim Messina took the deal to the Oval Office.

Emanuel and Obama believed there was an implicit threat attached.

If they didn't agree to the deal, Billy Tauzin could do real damage.

>> From the point of Obama and the Finance Committee, it's a huge advantage to have this interest group on your side.

>> PhRMA certainly had deep enough pockets to do some real damage, advertising-wise, if it wanted to.

>> If you can stop $100 million from being spent to attack your plan, that looks very, you know, that's not such a bad deal.

>> NARRATOR: But taking the deal meant the president would back off his campaign promise to dramatically cut drug prices.

>> We talked about it.

It's always been my practice not to reveal conversations I've had with the president or people in the White House.

>> NARRATOR: Tom Daschle continued to visit the Oval Office in an unofficial capacity.

>> The president saw it as an opportunity to seize the moment, you know, to get signatures on the line, to say, "This looks like an opportunity we haven't had before.

"So let's lock them in, to the extent we can.

I'm going to seize the moment."

>> They brought stuff to the table and were willing to work with us.

And the president said that having people at the table is better than having them throwing stuff at the table.

>> INTERVIEWER: But not an easy thing to do?

>> No, certainly not.

Certainly not.

And went in with full eyes open that there are going to be people in our party who would be critical of that.

>> NARRATOR: The president accepted the deal.

>> There's always two sides of Obama.

You have to have the sort of inspirational message, you have to have something to lift up people.

But at the end of the day, when you're passing legislation, it is about deal-making.

There's no other way to do it.

>> NARRATOR: In June, the president announced the broad outlines of the PhRMA deal.

>> Good morning, everybody.

>> NARRATOR: He did not mention what he had given up to get it.

>> This is a significant breakthrough on the road to health care reform, one that will make the difference in the lives of many older Americans.

>> NARRATOR: It didn't take long for the secret to leak.

>> Another day, another headache for President Obama.

>> Is this just the dirty reality of politics?

>> News of a backroom deal riled fellow Democrats.

>> NARRATOR: Once again, it was the liberals in the president's own party who began to criticize the deal.

>> There's also growing concern that the Obama administration secretly made concessions to drug companies.

>> The liberals were watching what was going on with increasing alarm, because what they saw was the new White House getting in bed with the people that they thought they had been fighting against for all these years.

>> Obama's rewarded the drug companies in a big way.

>> What did the pharmaceutical industry get in return?

>> I think people who thought that the pharmaceutical industry was still reaping profits that were excessive were unhappy with that deal, and were particularly unhappy that it got cut behind closed doors.

>> It was a wakeup call, really, to a lot of liberals, that President Obama wasn't everything that they thought he was.

>> NARRATOR: For months, the president had been doing deals-- insurance and pharmaceuticals.

Now, it was time to write a bill, and to fulfill another campaign promise-- to create a Washington beyond partisan politics.

>> A bipartisan outcome, even in a minimalist sense, was certainly a very, very high priority of President Obama.

>> NARRATOR: Again, Max Baucus would have to be the point man.

Getting through his Senate Finance Committee would be the crucial test.

>> If they could get five, ten Republicans, that would have been enough.

And Max Baucus was, they thought, their key to getting that.

>> NARRATOR: Baucus had a close relationship with the ranking Republican, Chuck Grassley.

>> Senator Baucus and I were still working on what we thought ought to be, not just a bipartisan bill, but a kind of consensus bill.

In other words, something that would get 75 or 80 votes.

>> NARRATOR: But others said they saw nothing for the Republican Party in Baucus' proposals.

>> I found myself coming out of those secret meetings, those private meetings, and criticizing virtually everything they were doing.

So I talked to Max, I talked to Chuck Grassley and others and said, "Look, I don't think I can support this."

>> NARRATOR: And from the beginning, Grassley was under intense pressure from his own party.

>> Charles Grassley is in line for a committee chairmanship.

The Republican party plays hardball with its members.

I think the message got through that he was jeopardizing his standing in the party by playing too nice to health care reform.

>> It became clear that the Republican game plan was going to be just to say no, to deny this president any victories.

>> There was enormous pressure from the Republican leadership.

They did not want to be part of this.

They did not want to make a deal.

The word went out.

>> You had the Senate leadership in Mitch McConnell and John Kyl saying, "Don't get involved.

"This is going to be the president's Waterloo.

It's our way to win back the Congress."

>> NARRATOR: And as the summer wore on, winning Grassley over became harder and harder for Baucus.

>> The process, particularly in the Finance Committee, just felt like that race that was being run, starting on January 20, all of a sudden hit some mud, and people's shoes got pretty... pretty soggy and pretty heavy.

>> Everything kind of bogged down.

I mean, here we were on this... this march to produce this bill and at least get it through the House floor before the August recess, and all the wheels came off.

>> NARRATOR: Impatient, Emanuel began a campaign to convince the president to change course, to scale back their ambitions.

>> Rahm Emanuel is all about, as he says, putting points on the board.

Just get a deal and get it over with.

>> Rahm was the guy who was skeptical about trying to go for major comprehensive health care reform.

He saw what happened... he was there during the Clinton debacle.

He knows how much it takes out of a presidency.

>> It was entirely a conversation of feasibility.

Option A: pass the comprehensive bill; Option B: smaller bill; and Option C, which no one would entertain, would be to do nothing.

>> NARRATOR: The president made the final decision.

>> Obama weighed in and said, "No, I want to try and get what I campaigned on.

I want to try and get the full bill."

>> NARRATOR: But Congress was in no hurry.

>> Some members of Congress telling the president to slow down, don't push so hard.

>> They don't like timetables over there at the finance committee, Rick.

>> NARRATOR: By August, as Congress headed home for the summer recess, there was still no bill.

Some in Washington wondered whether health care reform could survive the recess.

>> Heading into the summer recess is a period of great frustration for the White House.

Everything was getting stuck, everything was sort of slowing down.

And as they head in to August, they don't recognize what's about to hit them.

>> You want to kill my grandparents, you come through me first.

>> God will take care of health care.

>> You dirty thieves!

>> Yes, we can!

Yes, we did!

>> We can't afford it!

>> Afro-Leninism!

>> NARRATOR: Angry citizens, stoked by economic fears, outraged about bailouts and expanding government... >> The things that Obama's doing are the exact things that Hitler did.

>> No public option.

>> NARRATOR: ...focused their rage on the health care bill.

>> Boom, the summer town halls literally blow up in our faces.

>> Radical communists and socialists.

>> The fat really hit the fire when we went home in August for what usually is a fairly leisurely stroll through the district... >> Yes, we can!

>> You're pathetic!

>> ...to town hall here... (yelling) >> Baby killer.

Abortion is murder!

>> ...a summer parade there, an ice cream social here.

No, it was all health care all the time.

And people were... were red hot about it.

It was a radioactive issue all summer.

>> We won't pay for murder!

>> The surprise is just how out of hand these town hall meetings are getting.

>> There is an ugliness with these fringe people who are comparing the president to Hitler.

>> This opposition was real.

And this opposition rose up, and this opposition let individual members of Congress from across the country know that they had problems with this health care plan.

>> In that first week of August, the anger was spilling out.

It was spilling out so much that guns were spilling out of people's coat pockets at town hall meetings.

>> I'm not a lobbyist with all kinds of money to stuff in your pocket!

>> And I think that the members themselves were a bit taken aback by the intensity of that anger.

>> And the rest of your damned cronies up on the Hill.

>> There was anger out there.

And members of Congress listened, and they were scared.

>> You had this horrible backlash.

I mean, there were moments in August when it looked like it was done.

This was the end of health care reform.

(applause) >> NARRATOR: Senator Grassley, the swing man in the president and Max Baucus' bipartisan strategy, felt the fire from his conservative base.

>> I had people come to my town meeting with sheets of paper that thick off the Internet and quoting from the bill.

You know, I've never had that happen before.

People were up on it, and people didn't like what they were reading.

>> Democrat or Republican for whoever, senator or congressman, vote for this bill, we will vote you out.

(cheers) >> Suddenly, the idea of cutting a deal with President Obama no longer looked like it was good politics, no longer looked like it was good policy.

>> There's a bill out of the House of Representatives put together under Speaker Pelosi's leadership.

I'm a... (booing) I'm...

I'm a...

I would not vote for that.

(applause) >> It's not a profile in courage.

It's someone who becomes convinced that health care, if he supports it in any version, will, you know, end his career politically down the road.

>> Thank you all very much for coming.

>> Once they sort of lost Grassley, they lost, arguably, their last chance to really get a bipartisan bill.

>> Kill the bill!

Kill the bill!

Kill the bill!

Kill the bill!

Kill the bill!

>> NARRATOR: Just as the town hall anger was reaching its boiling point, the president received more bad news.

(phone rings) >> Senator Edward Moore Kennedy, the patriarch of the Kennedy clan, has died.

>> The last in the line of this extraordinary American dynasty is gone.

>> Last night, an American political era came to an end.

>> NARRATOR: The most passionate advocate of health care reform was dead.

But some believed Kennedy's death might change the tone of the debate.

>> Ted Kennedy's life work was not to champion the causes of those with wealth or power or special connections; it was to give to give a voice to those who were not heard.

>> It was an emotional rallying point for Democrats for a while-- "Win this for Teddy" kind of thinking.

>> Some people thought, "Well, gosh, maybe in memory of Senator Kennedy, "some of these old Republican friends of his would rejoin the effort."

>> NARRATOR: The president would redouble his efforts to achieve Kennedy's dream.

>> After consulting with a number of people, including Senator Daschle and others, I think the president concluded, "I need...

I need to take back control of this."

>> Madam Speaker, the President of the United States!

(cheers and applause) >> They know that their most powerful tool is Barack Obama-- always has been, probably always will be.

>> His audience, really, in that speech wasn't the public in general, it was the people sitting in that chamber.

>> The time for bickering is over.

The time for games has passed.

(applause) Now is the season for action.

Now is when we must bring the best ideas of both parties together and show the American people that we can still do what we were sent here to do.

>> It was an attempt to sort of recapture the high ground.

It was an attempt to, you know, bring the debate back to a loftier level.

>> More security... >> NARRATOR: But the tone immediately sunk to a new low.

>> There are also those who claim that our reform efforts would insure illegal immigrants.

This, too, is false.

The reforms... the reforms I'm proposing would not apply to those who are here illegally.

>> You lie!

(gasps, boos) >> That's not true.

>> A lone Congressman says, "You lie!"

>> You lie!

>> NARRATOR: It was Republican Representative Joe Wilson from South Carolina.

>> It crystallized this... this moment in Washington.

It crystallized the anger, it crystallized the fervor of the opposition.

>> I was in the chamber when the speech was being given, and there was a gasp on both sides of the aisle.

>> I was upset with that.

That was inappropriate.

I was sitting there and I thought, "What in the world?

Why would anybody do something like that?"

>> An outburst that continues to reverberate across the country.

>> Totally disrespectful, no place for it.

>> He is lying.

President Obama is, from the moment he opens his mouth until he ends the speech.

>> How did we get to a point where it's okay to yell "You lie" at the president while he's speaking to Congress?

>> NARRATOR: The effort to forge a bipartisan agreement was, for all practical purposes, over.

Now, the president would turn to the Democrats.

They pressured Max Baucus.

Emanuel wanted a bill ASAP.

>> They just ignored Max in the end.

They just felt they could ram this right through, to heck with Republicans, to heck with conservatives.

>> I don't think that Rahm Emanuel ever worried much about bipartisanship.

He was focused on winning.

>> NARRATOR: Senate majority leader Harry Reid would take control of the bill.

Talk of a public option was back.

The mandates the insurance industry had fought for were watered down.

Karen Ignani didn't like what that might mean for the bottom line.

>> I was concerned about what we were seeing from our actuaries, what we were seeing from our economists.

We were very concerned about what was happening.

>> And the insurance companies at that point decided, "We've got to fight back on this."

>> America's health insurance plan said the finance bill could result in dramatically higher insurance premiums.

>> The insurers are trying to scuttle the health care bill.

>> White House officials today said they feel broadsided.

These are the... >> NARRATOR: At the White House, they decided a war with the insurance industry was just what the doctor ordered.

In his weekly Internet address, the president let them have it.

>> The insurance industry is rolling out the big guns and breaking out their massive war chest to marshal their forces for one last fight to save the status quo.

>> It's always great to have an enemy in politics, there's no question about that.

However, we didn't pick the insurance companies as the enemy; they decided to play that role when they decided to spend tens of millions of dollars to defeat health reform.

>> They're flooding Capitol Hill with lobbyists and campaign contributions, and they're funding studies designed to mislead the American people.

>> I have a hearing disability.

I wear a hearing aid, and I didn't have my hearing aid in.

And I thought to myself, "This can't be true."

I ran around looking for my hearing aid, because I was sure that I was mishearing, not hearing it correctly.

>> It's smoke and mirrors.

It's bogus.

And it's all too familiar.

>> NARRATOR: Karen Ignani and her allies fought back.

>> New hidden taxes that Congress wants on your health care.

Hidden health care taxes on medicines, medical devices and health insurance.

>> NARRATOR: They secretly funneled millions of dollars to a tough ad campaign by the Chamber of Commerce.

>> Call Congress.

Tell them no hidden health care taxes in a recession.

>> NARRATOR: And powerful senators stepped up to support her cause.

>> There were still some-- Senator Lieberman was one, Senator Nelson of Nebraska was another-- who still said there's merit to what the insurance industry is saying.

And those were critical swing votes.

>> NARRATOR: Emanuel and Harry Reid were now doing deals just to win over Democrats.

They killed the public option, pleasing Senator Lieberman and others.

They lowered proposed taxes for medical device makers for Evan Bayh.

The final holdout was the Democrat from Nebraska, former insurance executive Ben Nelson.

>> Ben Nelson is one of the more conservative members of the Democratic caucus in the Senate, and they needed his vote, they had to have his vote.

>> That meant sitting down and hammering out a deal, really giving him almost what he wanted, anything he wanted.

>> The focus at the end of a bill like this is always how you're going to get those last two or three votes.

And compromises are made and thrown at senators' feet in order to get them to vote.

>> NARRATOR: In Nelson's case, the cost was $100 million.

The costs of expanding Nebraska's Medicaid would be covered by the U.S. taxpayers.

>> To a lot of us, we were very, very upset about it.

It was very poorly done.

But the only way they could get it through was, basically, to bribe their members.

>> NARRATOR: The press called it the "Cornhusker Kickback."

Nelson promised to vote for health care reform.

>> Prostitution has been legalized in Washington, D.C. >> Is this deal for Ben Nelson, forever and ever, amen?

Forever and ever, and only for Nebraska.

>> I think it stinks.

I think it's sleazy.

>> This isn't sleazy, this is gangster.

>> You've got to compliment Ben Nelson for playing The Price Is Right.

>> It's not a pretty process; there is deal-making.

That's the way it's been done for a long, long time.

But those deals can... done in your front parlor can be pretty smelly.

The public was already up to here with what they were seeing in Washington, and I think it just put them over the side.

>> That was very sour stuff to most people in this country.

They realized that this was not the way to legislate.

(gavel pounds) >> Mr. McConnell.

No.

Mr. Menendez?

>> Aye.

>> The Senate convened to send President Obama a hard-fought Christmas present.

>> Mrs. Murkowski.

No.

>> Its first roll call vote on Christmas Eve since 1895.

>> Mr. Nelson of Nebraska?

>> Aye.

>> The ayes are 60, the nays are 39.

H.R.

3590 is passed.

(applause) >> Tonight, the ayes have it.

The Senate passes an historic health care bill... >> This was a strictly party line vote-- all the Democrats voting yes, all the Republicans voting no.

The final tally-- 60 to 39.

>> On Christmas morning, everyone was sitting around thinking that he was an LBJ-like genius because it appeared that he was on the verge of accomplishing what no president had for 70 years.

>> They were so close.

They were inches away from getting this bill.

>> They had 60 votes on record in the Senate.

They had the House bill in hand.

The Emerald City was right there in the distance.

>> NARRATOR: The White House wasn't paying attention, but up in Massachusetts, that "Cornhusker Kickback" was still hanging in the air.

It was almost election day.

At stake was Ted Kennedy's Senate seat.

>> The polling numbers are all over the place.

>> This could be a breakthrough for the Republicans.

>> I think the headline in the Boston Herald this morning says it all-- "Mass Hysteria."

>> This is the Scott Brown campaign.

>> NARRATOR: A political newcomer was on the verge of taking a seat the president was counting on to pass health care reform.

>> Republican Scott Brown is riding the wave.

>> Brown's campaign language has the aura of a revolutionary crusade.

>> Business as usual is not the business we like.

And all those back room deals from Nebraska and others, it's just wrong and we can do better.

(cheers) >> Scott Brown effectively used that as a way of saying that change has not come to Washington.

>> NARRATOR: The Democrat, Martha Coakley, was sinking in the polls.

>> Only belatedly does it dawn on the White House what's about to happen.

The president's not going to go up there to campaign for her until the Friday before the election, when Martha Coakley calls David Axelrod personally, and says, "I need him to come up."

>> President Barack Obama.

(cheers) >> They frantically sent Obama up to Massachusetts the weekend before.

>> He makes it very clear to the Massachusetts electorate what's at stake here is the Obama presidency, and do they want to hand the Republicans the power to stop his agenda on health care, on everything else?

>> NARRATOR: By election day, the president knew they would lose.

>> January 19, 6:30 P.M., about an hour and half before the polls close in Massachusetts, Obama calls for Pelosi, Reid, Biden and Rahm Emanuel to come to the oval office.

>> NARRATOR: They immediately convened an emergency meeting.

>> From the very moment that it was clear that Scott Brown was going to win that seat, he began thinking through what the next steps would be to be able to right the ship and get health care done.

>> NARRATOR: The president asked Speaker of the House Nancy Pelosi if she could get the House to pass the Senate bill.

>> Pelosi is annoyed, and quite adamant that there's no way she can sell that to her House members.

Almost kind of lecturing saying, "You don't understand the realities in the House.

This won't work."

And Obama finally snaps, uncharacteristically for him, and he says, "I understand that, Nancy.

What's your suggestion?"

And there is no suggestion.

>> We went from, basically, beginning to plan how and when the president would sign the bill to if we could even resuscitate the bill.

>> Scott Brown is the winner of the Massachusetts United States Senate race.

(cheers and applause) >> Brown's victory shakes up Massachusetts and it shakes up the nation.

>> USA!

USA!

>> A Republican taking over the seat that Ted Kennedy held for 46 years.

>> USA!

USA!

USA!

>> Here he is, the United States senator from Massachusetts, Scott Brown.

(cheers and applause) >> People do not want the trillion dollar health care plan that is being forced... (cheers) >> In one election was a composite of all that ill feeling from the grassroots of America, and if it can be expressed in liberal Massachusetts, they know it's a lot worse in Montana and Wyoming.

>> If they replace the so-called Kennedy seat with a Republican, then, my gosh, you'd better wake up.

>> NARRATOR: The president's super-majority was gone.

The Republicans now had their 41st vote.

The worst blizzards in history buried Washington in February.

>> Getting a health care bill passed now looks more difficult than ever.

>> All of the options for health care get very ugly.

>> NARRATOR: It closed the government.

>> I don't see any way you go forward from here with health care.

>> They're shell-shocked.

They're going to need a whole new strategy on health care reform.

>> NARRATOR: Barack Obama was coming to terms with what looked like his first significant failure as president.

>> This is a complex issue, and the longer it was debated, the more skeptical people became.

I take my share of blame for not explaining it more clearly to the American people.

>> The process was messy, and so it turned people off.

It ended up being behind closed doors.

It was filled with a lot of partisan wrangling, people yelling at each other across the table.

We ended up having a process that represented a lot of what the American people hated about Washington.

>> The president is, in some ways, kind of re-balancing himself.

The year had been very hard on him.

The Massachusetts defeat, symbolically, was terrible and, practically, had a devastating effect.

>> The president admitted he's made some mistakes in his first year in office, but said he won't quit.

>> A chastened U.S. President Barack Obama concedes he's made some mistakes in his first year in office.

>> He's got an uphill fight here.

>> NARRATOR: While the country waited, Obama formulated a new plan.

He would personally sell the bill to Congress and the American people.

>> The president said to us that he would do anything, he will call anyone, meet with anyone.

He will speak anywhere.

He will do whatever it takes to make the case.

He was going to have to be the primary spokesperson for health reform.

He was going to have to force action.

>> NARRATOR: He deployed Rahm Emanuel to work with Speaker Pelosi.

They would try to get enough Democrats on board to push through the Senate bill.

>> They realized that their political operation had come way off the tracks, and they needed to quickly right that operation.

>> Mr. President!

>> NARRATOR: They began their comeback by staging a showdown with the Republicans, out in the open, on national television.

>> Looking forward to listening.

>> The president is gathering House and Senate leaders, Democrats and Republicans, to try to save health care reform.

>> It's a high-stakes gamble that could be all or nothing for the president.

>> Everybody please have a seat.

>> The summit was an opportunity to hit the restart button on how people viewed the process, to do it all on live on TV, open for the American people to see, make them feel more comfortable with the process.

>> Here's the bottom line-- we all know this is urgent.

>> Suddenly, the president was in the driver's seat.

>> This became a very ideological battle.

>> They needed to show that Obama was back in charge.

>> NARRATOR: Political theater-- one by one, he took on Republicans.

>> The Congressional Budget Office report says that premiums will rise.

>> No, no, no, no.

This is an example of where we've got to get our facts straight.

Let me respond to what you just said, Lamar, because it's not factually accurate.

>> That was, I think, the moment that he stepped up in a way that he hadn't before.

>> Let me just make this point, John, because we're not campaigning anymore, the election's over.

>> I'm reminded of that every day.

(laughter) >> Yeah, um... >> There's no question that there was a change in his style.

He took ownership of this health care issue.

He challenged everybody on this front.

>> ...of how we actually get a bill done.

>> NARRATOR: And then, for a month, Barack Obama the campaigner hit the road to sell the bill.

>> Do not quit!

Do not give up!

We keep on going!

We are going to get this done!

We are going to make history!

We are going to fix health care in America with your help!

God bless you!

And God bless the United States of America!

(cheers and applause) >> NARRATOR: On Sunday, March 21, the president waited to see whether he had convinced just enough members of his own party to push the bill through.

>> Down to the wire on health care reform.

The House votes just hours from now.

>> After months of rancor in the streets, the vote takes place in just a few hours.

>> Members will record their votes by electronic device.

>> Sitting in the Roosevelt Room, the president, the vice president, we sat there, and there was a small bit of anxiety as we watched the votes tick up.

>> It is a 15-minute vote.

>> We've had victory snatched from us before.

>> On this vote, the yeas are 219, the nays are 212.

The motion is adopted.

(gavel pounds) (cheers and applause) >> The 216th vote comes over, a big cheer erupts.

>> 219 to 212.

No votes from Republicans.

>> All Democrats, no Republicans.

>> This is a huge victory for this president.

>> For decades, they've been trying to do it.

It has now been done.

>> Good evening, everybody.

This legislation will not fix everything that ails our health care system, but it moves us decisively in the right direction.

This is what change looks like.

>> NARRATOR: It was victory, but experienced Washington knew the president would pay for it.

>> It came at a high price.

The entire first year, basically, dedicated to this.

Having their hopes for bipartisanship dashed.

And the White House still is not certain how this will sell in the country.

>> There is a realism that it has come with a cost.

We don't know what's going to happen in the November elections.

We don't know what's going to happen in 2012.

But there is no question that this health care battle has put his party at risk.

And how they deal with that is the next chapter.

But this was a historic moment.

>> There's more to explore on our website.

>> Health care reform will not wait another year.

>> Watch the program again online.

>> I had people come to my town meeting with sheets of paper that thick off the Internet and quoting from the bill.

>> Read the extended interviews.

>> We ended up having a process that represented a lot of what the American people hated about Washington.

>> He says, "I understand that, Nancy.

What's your suggestion?"

And there is no suggestion.

>> Get more details on the lobbying... >> It was a great bill from the insurance company's point of view.

>> ...deal-making... >> It's not a pretty process.

There is deal-making.

That's the way it's been done for a long, long time.

>> ...and key turning points in the long road to health care reform.

Then join the discussion at pbs.org.

>> Next time on Frontline...

In a country ravaged by decades of war, a tradition banned by the Taliban has been secretly revived.

Young boys, sold by their families to wealthy merchants and warlords, taught to dance and to entertain.

Frontline takes you inside the illicit sex trade of Afghan boys.

Captioned by Media Access Group at WGBH access.wgbh.org >> Frontline is made possible by contributions to your PBS station from viewers like you.

Thank you.

With major funding from the John D. and Catherine T. MacArthur Foundation.

Committed to building a more just, verdant and peaceful world.

Additional funding is provided by the Park Foundation.

And by the Frontline Journalism Fund.

With grants from Laura DeBonis and Scott Nathan.