Published: Jan 22, 2010 6:52 p.m. ET

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Why Scott Brown's election may not kill health reform

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SAN FRANCISCO (MarketWatch) -- After the Massachusetts special election deprived Democrats of the supermajority they needed to pass comprehensive health reform easily, the key question is will the U.S. go the way of California or Massachusetts?

The two states recently pursued similar health-care overhauls with very different outcomes. In March of 2006, Massachusetts Gov. Mitt Romney, a Republican, signed into law a statewide reform that aimed to cover nearly every resident. It had unanimous support from state senators including Scott Brown, whom Massachusetts voters elected this week to fill the U.S. Senate seat held by veteran Sen. Edward Kennedy prior to his death last August.

In an apparent contradiction, Brown campaigned on being the 41st vote needed to derail two health-reform bills that lawmakers were in the process of merging into a final bill. The Massachusetts law is widely considered a blueprint for a national version; its centerpiece is a shared-responsibility mandate that requires all individuals to buy coverage, and it provides subsidies for people who can't afford it.

Brown's objection to national reform but support of his own state's reform may have attracted some Massachusetts voters, but the Bay State relies on federal taxpayer dollars to accomplish its overhaul, said Alan Sager, professor of health policy and management at the Boston University School of Public Health

"Maybe some voters felt they didn't want to have to pay for uninsured residents of other states," he said. "That isn't all that fair because a decent share of the money that's financed to improve coverage in Massachusetts came from a Medicaid waiver and accompanying cash from Washington."

John Holahan, director of the Health Policy Center at the Urban Institute in Washington, agreed. "That essentially means people from other states are supporting this Massachusetts reform."

Some voters may have been turned off by the deal-making aspects. But the Massachusetts bill faced similar issues before passing, said Brian Rosman, research director for Health Care for All, an advocacy group in Boston.

"The process here wasn't so pretty either," he said. "There was a stalemate for months."

But after it passed and changes took place, Massachusetts was able to reduce its uninsured rate to 2.8%, the lowest in the nation.

A different story in California

Perhaps heartened by the Bay State's success, California Gov. Arnold Schwarzenegger, a Republican, put health-care reform at the top of his agenda in early 2007. Lawmakers worked with health insurers, hospitals, doctors, consumer groups and others to forge a fragile consensus.

By late September, stakeholders were cautiously optimistic that a deal was just weeks away, even though California had a much higher bar to meet: The Golden State's uninsured rate hovered around 18% compared with the 8% to 10% uninsured rate that inspired action in Massachusetts. Though Schwarzenegger called a special session when lawmakers failed to meet his deadline, the bill ultimately died under the weight of political tensions and budgetary constraints.

In Massachusetts, many of the fears people had about the coverage expansion proved unfounded, Rosman said, noting that employers haven't been dropping coverage despite an employer mandate and insurance quality hasn't degraded.

The biggest criticism has been that the state's reform did nothing to contain costs. While that's true, reducing the cost of care is a much tougher political road to travel because it involves antagonizing interest groups, Sager said.

"It was much easier to agree on improving coverage than on controlling costs," he said, adding that knowledge of how to do it remains elusive as well. "No one really knows how to contain health-care costs."

Unlike Massachusetts, the bills that Congress passed contain some cost-control measures. Nearly four years after passage, Massachusetts continues to tweak its plan, which enjoys high satisfaction.

"The basic structure remains unchanged, but there's constant tinkering and we think that's a model frankly for what Washington will need to do," Rosman said.

In 2010, California remains plagued by a more than 20% uninsured rate and the black eye of legal tussling over a recent spate of rescissions, where some health insurers revoked sick patients' coverage after they submitted claims. California has more uninsured people than Massachusetts has people.

What does Brown's win mean?

As congressional Democrats reassess the odds of passing major reform legislation after Brown defeated Martha Coakley in Massachusetts, health-care experts are trying to read the voters' message as well. Did they object to health reform overall or were they unhappy with certain provisions in the bills? Were there local issues and other factors that affected their decision?

Brown's election prompted Democrats to back away from the prospect of passing the Senate's health-care bill quickly and make changes later. On Thursday, House Speaker Nancy Pelosi said the House didn't have the votes to pass the Senate bill as is. President Obama vowed Friday to keep fighting for legislation but earlier in the week suggested he's open to a pared-down version. Health-care reform: See our complete coverage.

U.S. lawmakers proceed hastily at their peril, Holahan suggested.

"I think they've reacted too quickly without figuring out what this really means and whether it's a weird event that happened in Massachusetts because of a weak candidate," he said. "Or is it people reacting to health reform because they don't understand it and have bought a lot of the rhetoric about government takeover, death panels and job losses, or is it something more fundamental? I think they need time to sort that out."

While there was no official exit polling after the special election, a poll released Friday shed some light on why Massachusetts voters went for Brown. Among his supporters, eight in 10 opposed the health-reform bills, with two thirds of them strongly opposed, according to a poll of 880 Massachusetts residents who say they voted in the special election from the Washington Post, the Kaiser Family Foundation and Harvard University's School of Public Health.

But general dissatisfaction with the federal government and the direction of the country factored highly as well. Overall, 43% of Massachusetts voters favored the health-care proposals compared with 48% who opposed them. Many Coakley health-care voters said the need to cover the uninsured and repair the system drove their decision, according to the poll.

Despite their misgivings about the national picture, 68% of people who say they voted in the Jan. 19 special election supported Massachusetts' own health reform, including a little more than half of Brown voters.

What's next for health reform?

If U.S. lawmakers abandon their health-care bills, starting over is far from a sure thing.

"The House and Senate bills represent the high water mark...of the smartest available politics in Washington to craft a political compromise to improve coverage without getting into the guts of health-care cost control," Boston University's Sager said.

"One possibility is we have to wait another 16 years before politicians are willing to consider this seriously again."

Another option, scaling the bills back, is difficult to do because so many parts of the proposed overhaul are interdependent.

"If you want health insurers to take all comers without basing rates on health status, charging more for the sick, then you probably need an individual mandate," Rosman said. "Otherwise you have people waiting until they have health needs [to buy insurance] and rates would be sky-high."

Low-income people also need subsidies to afford coverage, employers need to play a role and the marketplace needs to provide people with the plans they need, he said. In short, effective health reform has to look a lot like what Massachusetts did.

Better odds for Medicare for all?

The message from Massachusetts voters was "rather muddled," said Dr. Steffie Woolhandler, professor of medicine at Harvard University and an internist in Boston.

"It's not that people in Massachusetts are profoundly unhappy with the [reform] in Massachusetts but seem to feel it's irrelevant," said Woolhandler, co-founder of Physicians for a National Health Program.

People are rightfully concerned that the benefits of the bills are too meager compared with the costs, she said.

A Medicare-for-all approach would produce hundreds of billions of dollars in annual savings due to the lower administrative costs that come from cutting out the middleman, Woolhandler said.

"I know that's not what the private insurance industry wants to hear and they're very powerful, but the only way that we can afford universal health care is through a Medicare-for-all model," she said.

"We need to learn from other countries what works, and the message is national nonprofit health insurance works and what they're doing in Washington and what we've done in Massachusetts is not the solution."

Woolhandler said she didn't root for Scott Brown's victory, but that his election raised the chances for a Medicare-for-all approach down the line "because it's obvious we have to do something else, something different from what we've been doing."

Such a large-scale change is less of a long shot now, Holahan said. If health reform dies this year, within a decade there will be demand at least for Medicare as an option, with income subsidies similar to what's in the current bills -- and the potential for Medicare for all isn't out of the question either, he said.

"I almost think you'd have to because of the budget implications and the health implications and financial pressure on health-care institutions," Holahan said. "If the uninsured rate goes to 60, 70 million over next decade, that's an awful lot of people who can't afford to pay."

Kristen Gerencher writes about health care for MarketWatch.

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