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5/30/2011

Romney and health care: In the thick of history

The former governor has faced a fusillade from the right for the plan they call RomneyCare. But a look back at the birth of the Mass. law shows why he can’t, and won’t, back away. It was an amazing political feat, and no one’s role was bigger than his.

Governor Romney signed the state health care overhaul bill into law to much fanfare at a Faneuil Hall ceremony in 2006.

DAVID L RYAN/GLOBE STAFF/ FILE

Governor Romney signed the state health care overhaul bill into law to much fanfare at a Faneuil Hall ceremony in 2006.

First in a series on Mitt Romney and the Massachusetts health care overhaul.

In late spring 2005, Mitt Romney gathered with a dozen top policy and political advisers in a conference room near the governor’s suite on the third floor of the State House.

For two years, they had grappled with the abstruse complexities of health care reform, sifting data, evaluating input from experts, and testing theories to craft a plan that would expand coverage to nearly everyone in the state and not break the bank.

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This was a bold move for a first-term Republican governor, some of whose more conservative advisers doubted the wisdom of a foray deep into policy turf long dominated by Democrats. One privately called the idea Dukakis II, a reference to the 1988 Democratic-led effort by Governor Michael S. Dukakis to phase in near-universal coverage - even though Romney’s approach was fundamentally different.

But Romney was resolute in pushing forward. And on the table this day was a critical decision that would, in many ways, define the plan, and also Romney’s political ambitions, wherever they would lead him.

The question: Should adults with sufficient income be required to buy basic health insurance or pay a penalty if they refuse?

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It was in many ways a conservative notion, grounded in personal responsibility, and Romney was drawn to it. At the roundtable meeting, he pressed the issue, challenging his advisers.

“Everybody in the room was very aware it was a novel approach and that it had repercussions in Massachusetts,” recalled Timothy R. Murphy, who was Romney’s point man on the legislation. “I don’t think it was lost on anyone that Mitt had an emerging national profile, but there weren’t many of us thinking there would be a national debate on this.”

Instead they were focused on what would work in Massachusetts - and fit the demands and philosophy of the man at the head of the table.

“We felt that personal responsibility was consistent with what the governor stood for,” Murphy said.

Six years later, the decision to press ahead with an individual mandate has had far-reaching and still evolving consequences. It provided a key part of the template for the national health care overhaul enacted last year amid partisan bloodletting in Washington.

And it has become the rallying cry for conservatives who reject the national plan, pressed by President Obama, as statist anathema.

Some of these critics maintain that Romney must disavow the Bay State health reform to have any chance of winning the Republican presidential nomination in 2012.

He will not.

“Overall, it was a positive approach,” Romney said in a Globe interview for this story. “I’m proud of the fact we took on a real tough problem and moved the ball forward.”

“I know this is going to get a lot of conversation,” he said, “but the health of the people in Massachusetts is more important to me than the health of my political prospects.”

During a 51-minute interview, he used a variation of that line three times.

Mitt Romney was an unlikely champion for overhauling health care.

During the 2002 campaign, the issue was background noise. By Romney’s count, he made 93 campaign promises, and expanding health coverage was not one of them.

It was a conversation with a friend that began to turn his mind this way.

Romney and Thomas G. Stemberg, founder of Staples Inc., the office supply superstore, had been close since Romney’s investment firm, Bain Capital, helped finance the early growth of Staples. After the November election, the two sat down to talk about Romney’s goals as governor. Stemberg had an idea.

”We were talking about a bunch of stuff,” recalled Stemberg, then a member of Romney’s transition team and now a managing general partner at Highland Capital Partners. “I said, `Mitt, if you really want to do a service to the people of Massachusetts, you should find a way of getting health care coverage to them.”’

“One of the things I mentioned,” said Stemberg, a Republican with conservative fiscal views and liberal social beliefs, “was the huge number of people going to the emergency room for care at a cost of three, four, five times what it costs to go to a doctor’s office.” That’s wrong, he told Romney, because they were passing along the cost of that care to others.

“It struck me when Tom suggested it as being, frankly, impossible,” Romney said recently. “I think I dismissed Tom out of hand.”

But external pressures would make Romney think again. One was the threatened cutoff of $385 million a year in federal funds for health care coverage for the working poor - a budget disaster that could only be averted if the state came up with a compelling and comprehensive new approach.

The other carried an even bigger price tag: More than $1 billion was being spent annually to provide “free” care to the state’s uninsured, and the number was growing. Recalling his “aha moment,” Romney said: “If we could get our hands on that resource to help people buy insurance instead, it would be less expensive.”

For a long time, Stemberg did not hear from his friend in the corner office. “The next thing I know, he’s hard at work, actually trying to do it,” Stemberg recalled. “He called to tell me I gave him the idea.”

Early in 2003, Romney put his staff to work trying to make that idea come to life. A year later, Ronald Preston, Romney’s first secretary of health and human services, circulated a 29-page “white paper” concluding that near-universal coverage was attainable but would cost more than $2 billion a year, and require expanding the Medicaid program and imposing mandates not only for individuals to get coverage but also for employers to offer it.

It was a thorough analysis but, with the employer mandate and Medicaid expansion, a long way from what Romney had in mind. Romney assigned Cindy Gillespie, a trusted aide, and Murphy, his policy adviser, to lead the project. Murphy would later succeed Preston as secretary.

They began crunching the data. Romney loved data and demanded that the numbers add up. As it turned out, the state had quite a lot of data, and the picture that emerged was surprising.

Of the estimated 460,000 Massachusetts residents without insurance (another survey put the figure at more than 650,000), about 168,000, or 37 percent, earned enough to pay for basic coverage. Another 106,000 were poor and eligible to enroll in MassHealth, the Medicaid program, with half the cost reimbursable by the federal government. That left 36,000 short-term unemployed and about 150,000 who were working but caught in a health care vise - making too much for Medicaid, but too little to afford private health coverage. This was the group that would need subsidies to obtain insurance.

The numbers weren’t small, but not outlandish, either. Suddenly, the problem seemed manageable.

The first step was finding a way to make the 37 percent who could afford insurance but didn’t have it buy in. Romney’s answer came in part from an administration consultant, Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology and a leading adviser, usually to Democrats, on health care reform issues.

Gruber had an ingenious computer model designed to predict how individuals and businesses would respond to changes in the health care system.

“What my numbers showed is that it made enormous sense to have the individual mandate,” Gruber recalled. Without it, the money available for new insurance subsidies would cover half as many people.

“Romney was intrigued with it because of the personal responsibility aspects,” said Gruber, recalling his one meeting with the governor. And if younger, healthier people were coaxed into the system, the cost of premiums would moderate for a larger population.

“There was the moral `free rider’ argument, but the numbers said it was financially feasible, too,” Gruber said.

Romney’s grasp of the subject was “unbelievably impressive,” he said, and the governor warmed to the game-changing potential of the individual mandate. Romney’s political advisers, however, “were not that keen on it,” Gruber said.

To them, the political hazards spoke louder than the policy-making opportunity. Even at this early date, it was anticipated that Romney would serve only one term and seek the Republican presidential nomination in 2008.

Moving hard on health care would put Romney way out front in a cause generally identified with the left - even though, at the time, the individual mandate was a concept with conservative and Republican roots. In the early 1990s, the Heritage Foundation, a conservative think tank, endorsed the idea and some Republicans offered it as an alternative during debate on the doomed national overhaul proposed by then-first lady Hillary Rodham Clinton.

Despite some aides’ skittishness, no one in the inner circle was expressly opposed when the governor convened the roundtable to hash out the idea, Murphy said. Romney himself did not announce a decision, but later told Murphy he favored it. That was shortly before a major speech Romney was to deliver on June 21 to a health care summit sponsored by the Blue Cross Blue Shield of Massachusetts Foundation at the John F. Kennedy Library.

As with most Romney decisions, it remained a closely held piece of information until he was prepared to announce it.

Twelve days before the speech, Andrew Dreyfus, who was then president of the Blue Cross foundation, visited Murphy’s office and told him he was assembling a chart, putting a mark next to each issue supported by the various players, including Romney and the Legislature. Murphy balked at the individual mandate.

On the day before the summit, Dreyfus telephoned Murphy looking to fill in the blank.

“What about the individual requirement?” Dreyfus asked.

“There was some good silence on the phone,” Murphy recalled. “I mean, it was supposed to be embargoed until the governor spoke.”

”I told him to put it in,” Murphy said.

Romney made his speech, and later told reporters: “No more free riding, if you will, where an individual says: `I’m not going to pay, even though I can afford it.’ ... It’s the ultimate conservative idea, which is that people ... don’t look to government to take care of them if they can afford to take care of themselves.”

It was a huge step, but by no means the first in a state where the dream of universal health care had long abided, and where much had already been done.

Health care is an enormous engine of the state’s economy. With its liberal political culture and prestigious teaching hospitals, medical schools, academics, and researchers, the Bay State has long been an incubator for innovations in health care and related policy. Health care interests are among the state’s most powerful political players.

Massachusetts was well situated in other ways, perhaps uniquely so, to take the lead.

As Romney and his team built their plan, the rate of uninsured was already among the lowest in the nation because a higher percentage of employers offered insurance to employees than the national average. The state also had an asset enjoyed by no other - $385 million a year in federal Medicaid reimbursements from the federal government as part of an experiment to extend coverage to the working poor.

Massachusetts, too, was one of few states in the country that had a pool of funds to pay for treatment of the uninsured at hospitals and health centers. And it was one of only five states that barred insurers from denying coverage, or jacking up premiums, based on individual health histories.

Executive ranks of insurers, major providers, and business associations here were marbled with veterans of past efforts to expand coverage. Many were alumni of the administrations of Dukakis, who, in his third term as governor, played a leading role in passage of what was supposed to be the first expansion of coverage to nearly all residents of a state.

As in the case of Romney, presidential ambition was a factor. Dukakis was on the threshold of winning the Democratic presidential nomination in 1988 when he signed the law during an elaborate ceremony on the steps of the State House that April. Despite an overwhelmingly Democratic Legislature, the bill had barely passed. Business leaders were almost unanimously opposed, largely because of a proposed penalty of up to $1,680 per employee on companies that did not offer insurance.

“There was no business support and in fact strong business opposition and barely a legislative majority for it,” said Dreyfus, who was then director of operations for Dukakis’s secretary of health and human services.

After losing to George H.W. Bush that November, Dukakis was weakened by the defeat and the onset of a brutal recession. His health care measure withered and died in a hostile environment. Imposition of the employer mandate was put off three times and ultimately repealed in 1996.

By the time Romney took office in 2003, the climate had changed after 12 years of Republicans in the governor’s office.

In William F. Weld’s administration, the health and human services secretary, Charles D. Baker, and his deputy, Bruce M. Bullen, led the effort to obtain a federal Medicaid waiver that enabled them bring the “budget buster” of Medicaid under control for several years and extend coverage to about 300,000 previously uninsured low-income residents, many of them children.

The Bay State reform effort of 2006 was largely “built on foundations that were laid earlier,” as Bullen put it.

From there, a unique confluence of outside pressures, corporate interests, and political ambitions drove a process with remarkably few moments of grandstanding or leaks to the media.

“There were no organized groups that I know of that thought we were headed in the wrong direction inside the state,” Romney said recently. “There may have been some outside the state.”

The fact that the process proceeded with so little early controversy is unusual because the health care payment system is a huge, balky component of the state economy. Extending coverage to the remaining 6.4 to 11 percent who were without insurance - survey data varied - required major changes that would affect all of the big stakeholders in the system.

As Romney’s team was assembling its plan, business leaders were mobilizing on another track.

Taking the initiative in early 2004 were top officials of Blue Cross Blue Shield of Massachusetts and Partners HealthCare, a powerhouse provider network with nine hospitals - including two of the world’s best-regarded - and about 5,500 physicians, or roughly one-fifth of all doctors practicing in the state.

The chief executive of Blue Cross, William C. Van Faasen, joined forces with John “Jack” Connors Jr., chairman of Partners. They supported expanded coverage but their motives were not entirely altruistic. As part of any plan, they also wanted the state to increase the long-lagging rate at which it reimbursed providers for services to Medicaid recipients, a major source of hospital revenue.

Van Faasen and Connors, an advertising executive and one of Boston’s great movers and shakers, approached John Sasso, chief political adviser and top aide to Dukakis. They hoped Sasso, now a lobbyist and consultant, would quarterback the effort on Beacon Hill. Sasso, however, was committed to the presidential campaign of Senator John F. Kerry through November when he lost to George W. Bush.

In January 2005, he signed on. By then, health reform was gaining momentum.

Sasso had deep Democratic connections and a track record of getting big, complicated things done, but he faced an obstacle: He didn’t know Romney and had no lines into his administration or inner circle. Connors suggested Joseph J. O’Donnell, the region’s concessionaire king, who, like Connors, knew just about everyone but was also close to Romney. They were neighbors in Belmont, where O’Donnell, an independent voter and friend of then-president Bush, had coached some of Romney’s sons.

O’Donnell, however, warned Sasso that Romney harbored a grievance because of his role in the relentless negative attacks on him in the 1994 Senate campaign, when Senator Edward M. Kennedy beat back a stout Romney challenge. The Kennedy camp demonized Romney, painting him as a heartless businessman at Bain Capital, pocketing profits while workers lost jobs.

O’Donnell set up the meeting. When the three sat down, he told Romney he trusted Sasso.

It was awkward and a little tense at first, but they set past unpleasantness aside.

“This was talking about policy, not politics,” Romney recalled. “[Sasso] said: `Look, my clients ... think we can work together on this.”’

Mindful of the errors of the Dukakis reform drive in 1988, the Partners-Blue Cross alliance was determined to create a united front within the state’s business community.

Connors enlisted a quartet of key business players he dubbed “the four horsemen,” after the famed Notre Dame football backfield of the 1920s.

They were leaders of associations that represented the largest employers in Massachusetts. All had experience in government and navigating the intersection of politics and policy in health care. Their members were generally supportive of expanded coverage as good business practice and a quality-of-life issue.

But all also opposed any mandate on their business members to provide insurance.

Murphy, head of the reshuffled Romney team, had been a vice president of a Wall Street investment banking firm and before that served on the staff of the Senate Ways and Means Committee. He understood complicated financial issues and knew the ways of the State House. His task was to craft a more market-oriented solution that would expand coverage without requiring new taxes.

The state was facing a deadline on the plan’s linchpin, the Medicaid waiver, and Romney’s staff was working closely with Kennedy’s office.

“Our politics were very different, but he had a very effective office, was very collegial, and said, `If it’s moving the ball forward, that sounds good to me,”’ Murphy said of Kennedy.

By the end of 2004, Romney’s team had built the framework for its health care bill, proposing to convert the Medicaid waiver money and much of the funding for “free” hospital care into an insurance program to subsidize the working poor.

There were other new elements. Murphy had a “eureka moment” after a meeting with officials of the conservative Heritage Foundation. He was raving about their concept of an “exchange” to provide one-stop shopping for small businesses and individuals seeking health coverage from commercial insurers. This would also prove a forerunner to Obama’s national plan.

Romney introduced another idea to encourage employers to give their employees a fixed amount of money to buy their own health insurance, rather than be covered by a blanket policy chosen by the employer. The goal was to create a health care marketplace driven by consumer choice, a bedrock principle of conservative thought on health care.

With this package of proposed changes, Romney and Kennedy went to Tommy G. Thompson, the US secretary of health and human services, seeking an extension of the state’s Medicaid waiver.

On Jan. 14, 2005, Thompson’s last day in the Bush administration, Romney, Kennedy, and their aides met with Thompson and his staff for about two hours at the Hubert H. Humphrey Building, finally reaching an agreement in principle on an extension starting on July 1, subject to the state enacting the measures it proposed.

As they worked out the details, they could hear the sound from Thompson’s retirement party a floor above.

“People kept coming down, saying everyone’s at your party, waiting for you,” recalled Stacey B. Sachs, Kennedy’s counsel on health care matters. “The next thing I knew, we were all heading up to the party.”

Romney and Kennedy were “kind of a riot, on the stage going on about being the odd couple,” Sachs said. It was the first time they had shared a stage since their 1994 debate in the Senate campaign.

Kennedy’s support of the Massachusetts bill would provide fodder for Romney’s conservative critics, most of whom exaggerate his role. But Kennedy was a force in moving Robert E. Travaglini and Salvatore F. DiMasi, the Senate president and House speaker at the time, to resolve a stalemate over competing versions of the bill. Just as important, Kennedy’s exalted status among Democrats, particularly on health care reform, provided Romney with valuable political cover at critical moments.

Sachs said the senator made a “strategic decision” to support Romney once he became convinced the governor was serious about extending coverage. The first evidence was around Romney’s opening gambit, an op-ed piece in the Globe on Nov. 21, 2004, under the headline “My plan for Massachusetts health insurance reform.”

His staff had provided Kennedy an advance copy, Sachs said.

“Everyone expected Kennedy to come out screaming, but he said, `This looks pretty good, and if he’s willing to work for this, let’s work with him,”’ she said.

As the health care debate began to heat up, a coalition of advocacy groups long supportive of universal coverage began gathering signatures for an initiative petition on the 2006 state election ballot.

“If they couldn’t agree, we wanted to put it before the voters,” said John E. McDonough, a former House chairman of the joint committee on health care and executive director of Health Care for All during the health reform debate.

The coalition, which included religious and labor organizations, at the outset favored a mandate on employers to offer coverage or face penalties but not a mandate on individuals, said McDonough, now a professor at the Harvard School of Public Health.

It was a serious threat. In 2000, a ballot question that would have started the process of universal health care lost by 96,000 votes out of 2.6 million cast. The closeness of the margin alarmed health care industry leaders who had spent huge sums to defeat it.

Travaglini and DiMasi also had colliding visions of what health reform should look like. Travaglini provided early impetus, but DiMasi, who became speaker in fall 2004 and is now on trial on federal corruption charges, drove much of the debate near the end. His views, including a payroll tax on employers who did not offer insurance, were aligned with the Health Care for All-led coalition of activists.

Seven years in age separated DiMasi and the younger Travaglini, but they had developed a close relationship. Each was the first Italian-American to rise to the leadership of their respective chambers, and had spent their entire lives in their tight-knit Boston neighborhoods, DiMasi’s North End and Travaglini’s East Boston, separated by Boston’s inner harbor.

Travaglini’s relationship with Romney was warm and collegial; DiMasi’s was strained.

Unlike his Republican predecessors, Weld and Paul Cellucci, Romney never enjoyed very good relations with the Democratic Legislature. But with the stakes so high on overhauling health care, he wisely left most of the grubby work of politicking and horse trading to others.

“We had tough relationships up there for a long time,” said Murphy, who was held in high regard by legislators and interest groups, with whom he and other administration figures held countless meetings to cultivate credibility. “We didn’t want this to play out in the press, and we wanted to make sure we were being complimentary,” he said. “Why blow it up for small-ball politics?”

Conversely, there weren’t many shots taken at Romney during the tortuous legislative process. “We assured him we weren’t going to hurt him,” one Democrat remarked.

In early December 2005, Kennedy weighed in publicly, endorsing none of the competing versions but making clear that he supported the individual mandate Romney had proposed if it was part of a broad compromise.

“I’ve never been one for individual mandates in the past, but I do think that the way this has been proposed, in that everybody will do their part, that’s a compromise,” Kennedy said. “I can buy into that.”

But the Travaglini-DiMasi standoff continued. The state missed a Jan. 15, 2006, deadline to get a plan to Washington to extend the waiver. Twelve days later, a Friday, talks broke down.

The next day, Murphy was out shopping when his BlackBerry buzzed with an e-mail from Romney’s personal account. The governor had a personal letter he wanted to deliver to DiMasi and Travaglini to get the bill back on track. “The plane is circling, and we have to land it,” Murphy quoted Romney as saying.

On Sunday, Romney showed up at the lawmakers’ homes. DiMasi wasn’t there, so he taped the letter on his door. Travaglini was home, wearing a sweat suit and slippers and invited Romney in. Romney made his pitch, warning of the impending loss of the precious federal funds if they did not resolve the matter soon. They talked for about five minutes.

Then, about two weeks later, Romney invited DiMasi to his office for a rare one-on-one meeting, according to DiMasi. Romney, always unflappable, was agitated, DiMasi said.

“He did everything he could to put pressure on me to change my position on the business assessment,” he said. “I tried to walk out, and he wouldn’t let me go out the door. I actually opened the door, and he said, `No, no, no. Get back in here. I have to talk to you.”’

When he left, the matter remained unresolved.

Meanwhile, the business groups were ready to yield on a penalty for businesses not offering coverage. On March 1, at his office in the John Hancock tower above Copley Square, Connors convened a high-powered group of executives from the four big business associations, Partners, and Blue Cross Blue Shield.

They went over a proposed compromise, which called for a “fair share contribution” of $295 per employee from businesses with 11 or more employees that did not offer coverage. Under federal law, states could not compel employers to provide coverage, so the discussion was about a “play or pay” mechanism. Michael Widmer of the Massachusetts Taxpayers Foundation had come up with the figure, which reflected the average cost of free health care used annually per employee without health insurance.

The next night, DiMasi and Travaglini made peace, dining with their wives in the North End. DiMasi’s wife, Debbie, and Travaglini’s wife, Kelly, also friends, had arranged the meeting to clear the air.

“When communication broke down between the two of us, our wives may have overheard us describing each other in vulgar ways,” said Travaglini.

“They said you’re friends, and you have to work this out,” DiMasi recalled.

The following day, the legislative leaders met with the business group at a closed-door session at the State House, emerging to announce an agreement on the $295 employer assessment.

And finally on April 4, the landmark law, Chapter 58 of the Acts of 2006, was passed by the House, 155 to 2, and the Senate, 37 to 0. Its title was “An Act Providing Access to Affordable, Quality, Accountable Health Care.”

The signing ceremony was set for April 12, 2006, at Faneuil Hall.

A day earlier, however, in an op-ed piece in the Wall Street Journal, Romney declared he would take “corrective action” on the employer assessment, outraging many Democrats. Before the proceedings his office announced he was vetoing eight of the 147 sections, including the employer mandate.

There was little risk to Romney, who knew the Democratic Legislature would easily override him, as it did three weeks later. He could claim a large share of credit for the new law while washing his hands of something resembling a tax, problematic with a national Republican audience.

Like most of Romney’s momentous public events, the bill-signing extravaganza was a masterwork of political stagecraft in a setting that evokes many important events in the nation’s history.

Guests received programs printed on faux parchment, with commemorative lapel pins to match. The stage of the majestic hall was augmented with a pedestal for the podium and an extended platform with a desk on a circular oriental carpet. On either side were banners to mark the occasion: “Making History in Healthcare.” The procession to the stage was led by a fife and drum corps, clad in tricorn hats, breeches, and stockings, playing Colonial tunes. An audience of several hundred VIPs greeted Romney warmly with a 30-second ovation.

Referring to the last time he and Kennedy were at Faneuil Hall for the 1994 debate that marked the beginning of the end of his Senate challenge, Romney quipped: “This for me feels a bit like the Titanic returning to visit the iceberg.”

“My son said that having Senator Kennedy and me together like this on the stage, behind the same piece of landmark legislation, will help slow global warming. That’s because hell has frozen over,” Romney said to hearty laughs.

He introduced Kennedy as “my colleague and friend.”

The liberal icon was also greeted enthusiastically and after thanking Romney quipped: “My son said something, too, and that is when Kennedy and Romney support a piece of legislation, usually one of them hasn’t read it.”

When the laughter subsided, he turned to Romney and said: “That’s not true today, is it governor?”

“This is an achievement for all the people of our Commonwealth and perhaps for the rest of America, too,” Kennedy said. “And we intend to make the most of it.”

Romney moved to the desk and used each of 14 commemorative pens during the signing.

“It’s law,” Romney said upon finishing. “Congratulations.”

The ceremony was over in 40 minutes.

On that spring day, as he signed the law, Romney was already laying the groundwork for a presidential candidacy in 2008. He couldn’t know then how the new Massachusetts law, and his critical role in making it happen, would play out.

He described the legislation as “a big part of the legacy I will have personally for my four years of service as governor,” The New York Times reported. “But I have no way of telling if it’s going to be a help or a hindrance down the road.”

Coming soon: How well has it worked?

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