McKinsey's Obamacare Report Sparks Political Firestorm

Whether you love it or simply love to hate it, these days there's just no getting away from McKinsey, the world's most famous consulting firm. While McKinsey has built its hard-earned reputation on intelligence, savvy and a distinct sense of elitism (I mean this in the most complimentary way possible, of course), The Firm has been at the center of more controversy than compliment in 2011. Now, in the immediate wake of the damaging Rajat Gutpa insider trading scandal, McKinsey is facing questions from within the highest circles of government after it published a report on the (negative) economic consequences of recent health care reform.

Last week, the firm published a report suggesting that around 30 percent of employers would "definitely or probably" decide to forgo offering any health insurance plans to their employees, presumably as a result of increased costs. While a pretty straightforward suggestion based on a survey of 1,000+ American business leaders, the eye-popping numbers provoked politicians and pundits on both sides of the aisle into a frenzy.

Within hours, McKinsey had gained quite a few conservative friends: in the Wall Street Journal, Karl Rove based his piece "The Obamacare Bad News Continues" on the firm's findings; he also authored a popular article on Fox News touting the report as evidence that "Everything You Ever Feared About ObamaCare is Coming True". McKinsey's report had officially become the hottest topic in American politics, and the right sung its praises to the heavens.

The Democrats, however, were less than pleased with Dominic Barton and Co. So displeased, in fact, that Senator Max Baucus, the Finance Committee Chairman, drafted an open letter to Barton today demanding further insight into the report's methodology. The Washington Post, updating the story not daily but hourly, reported that top Democrats in Congress and the White House itself had reached out personally to McKinsey for more information.

On the White House blog, presidential aide Nancy-Ann DeParle posted a strongly-worded debunking of the McKinsey report. Among her charges: studies from other reputable organizations (including Rand Corporation, Urban Institute and fellow consultancy Mercer) on the same topic reached strikingly different conclusions; that history (in this case, a similar health plan in Massachusetts) contradicts several of McKinsey's claims; and that the lack of clarification on methodology essentially voids the report as a legitimate subject of responsible political discourse.

In his letter to Mr. Barton, Senator Baucus echoed that last claim, stating that "Honest public discourse requires a standard level of transparency -- one McKinsey simply has not met." Baucus requests "full disclosure of the survey and its supporting materials" and then lists a handful of pointed questions that his committee would like to see answered.

The third party involved in this mess is, as ever, the media. While Paul Krugman at the Times has playfully labeled the incident "The Case of the Mystery Study" and Time has offered its own "Healthy Skepticism" of the report, other journalists have gone deeper. For example, Krugman pointed to a piece from TPM that suggests that there's some internal discord brewing at McKinsey over what might be a shoddy piece of work. TPM cites one McKinsey insider as describing the report as lacking credibility: "This particular survey wasn’t designed in a way that would allow it to be peer review published or cited academically."

So, let's recap: McKinsey has made some new friends (Rove, Fox News) and some new enemies (Sen. Baucus, the White House), and the firm has refused to release more information on the study in question. Will they cave? I can only think that they won't; unless this gets out of hand or some of the really big players step in (ahem...Barack), I'd be willing to bet that we'll all get to know the famous McKinsey silent treatment personally.

Baucus and friends are waiting to hear McKinsey's response by "no later than July 5". Stay tuned.

For more information:

Washington Post: Incoming: Dems dropping bombs on McKinsey
White House Blog: Getting Insurance at Work
Time: Some Healthy Skepticism of the McKinsey Study on Employer Insurance
NYT: The Case of the Mystery Study
Fox News: Everything You Ever Feared About ObamaCare is Coming True
WSJ: The Obamacare Bad News Continues