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The Governor’s race | Back Stories

A brash change-agent, Baker rose fast

In top state posts, he tackled big issues

By Michael Rezendes
Globe Staff / September 12, 2010

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Twenty years ago, during a recession that mirrors today’s down economy, Massachusetts voters chose a fiscally conservative Republican to take control of the state’s foundering finances, electing William F. Weld governor on a promise of smaller budgets, lower taxes, and a new approach to governing.

It was the “Weld revolution’’ of the early 1990s, and “the soul of the Weld administration,’’ as the governor put it, was Charles D. Baker, a bright, brash 34-year-old Harvard grad who took on some of the most intractable problems in state government, including decrepit state hospitals, an outdated welfare system, and a runaway Medicaid budget that was pushing the state toward insolvency.

“The thing I learned about Charlie is he’s very good at fixing big things that are broken,’’ said David P. Forsberg, Baker’s former boss at the state office of Health and Human Services and a supporter of his Republican campaign for governor. “There was a lot of change in those early days.’’

Starting with his appointment in 1991 as undersecretary for health, Baker would serve for more than seven years under governors Weld and A. Paul Cellucci, moving up to replace Forsberg as health and human services secretary and, in 1994, becoming secretary of administration and finance. They were jobs — two of the most challenging in state government — in which Baker pushed his vision of free markets and deregulation, especially in health care, forcing changes still in effect.

The changes were driven in part by a fiscal crisis and the dire need to slash state spending, and in part by a belief — shared by Weld — that the state needed a new paradigm for governing. It was a model that broke from the more regulation-friendly administration of the previous governor, Michael S. Dukakis, and embraced the market-oriented philosophy espoused by Baker during his prior job at the Pioneer Institute for Public Policy Research, an independent think tank that often promoted libertarian views.

Armed with those principles, Baker made a variety of radical moves in state government. Some would come back to haunt him, including his decision to approve the hospital merger that created Partners HealthCare, the powerful consortium some blame for helping push up health care costs. Others would draw intense criticism, such as his plan to cover soaring Big Dig costs by borrowing against future federal highway aid — a debt that taxpayers are still paying.

But Baker also led innovations in state government that continue to draw praise, notably a major overhaul of welfare and his restructuring of Medicaid in a way that many believe slowed cost increases and provided the financial foundation for the state’s 2006 universal health care law.

Today, as Baker enters the homestretch of his campaign for governor against Democratic incumbent Deval L. Patrick, independent Timothy P. Cahill, and Green-Rainbow candidate Jill Stein, his tenure under Weld and Cellucci has become a major asset and occasional liability as he positions himself as an outsider capable of bringing reform to Beacon Hill.

For many, the plan worked
When it comes to welfare, Baker’s record is often considered a success, chiefly because the plan he drew up in the early 1990s, with the help of legislators, department staffers, and Weld’s strong backing, cut welfare rolls by more than half and, during a time when the economy was rebounding, pushed tens of thousands of recipients into private-sector jobs.

The overhaul included a two-year limit on benefits, a work requirement, and an education requirement for teens. And the impact of the changes was striking. The Cellucci administration would later release a study showing that the number of welfare recipients had plunged from more than 100,000 in 1995 to fewer than 50,000 four years later. The vast majority of those who had been cut from the rolls were also earning more than they had on public assistance.

“I had worked in the system for many years and change generally came very, very slowly, if at all,’’ recalled Claire McIntire, a holdover from the Dukakis administration who was promoted under Weld to welfare commissioner. “And all of a sudden all of this was happening in a very short period of time.’’

Baker, for his part, credits the political climate at the time for easing the way. Although Massachusetts was ahead of the federal government, he said in a recent interview, it was a time when many conservative and liberal sociologists were reaching a consensus on the need to overhaul public assistance to the poor.

“There was a lot of research out at that point that showed that . . . if you didn’t get real about creating some kind of nudge to get the people who just stayed on welfare to do something, they would sort of spin into this really dark and difficult place and never actually get up and try,’’ Baker said.

Still, Baker’s critics at the time said the changes, including a freeze on benefit increases and the elimination of clothing allowances, exacted an unfair toll on the poor.

Judy Meredith, a veteran lobbyist, once famously described Baker as “the most charming slash-and-burn artist that this human services advocate has ever seen.’’

Meredith bolstered that view in a recent Globe interview, recalling Baker’s refusal to back away from some of his plans.

“You couldn’t get to him on a value system that involved compassion,’’ she said. “There was just a coolness there. I could never figure out what made him tick.’’

Remedy earns praise
When Weld and Baker arrived at the State House, the state’s constellation of aging hospitals for the disabled, the mentally ill, and the mentally disabled had long been a source of criticism. Many were half-empty, in dire need of repair, expensive to operate, and even more expensive to fix.

But they were also highly valued by the families of patients, the unions whose workers staffed them, and the political leaders who represented the cities and towns where the hospitals were located.

Baker, assigned to carry out the recommendation of a blue-ribbon panel that called for closing nine of the hospitals, believed he could please most of the stakeholders by shuttering the facilities and using the savings to pay for community housing and clinical services. His mantra, and his promise, to skeptical patients and their families was that the state would provide care “equal to or better than’’ the care they were receiving.

Yet many weren’t buying it. In once instance, in 1993, more than a hundred chanting protesters gathered outside Weld’s office, demanding that he not close the 84-year-old Western Massachusetts Hospital in Westfield, which housed patients with Alzheimer’s disease, AIDS, and other debilitating illnesses.

“There is no other hospital in the state that can take care of my daughter the way Western Mass. does,’’ Angus Rushlow, one of the protesters outside Weld’s office, said then. Weld vetoed the closing.

But others involved in the closures, including many who were initially skeptical, were eventually won over. And in the end, some social services advocates said that, overall, many patients’ quality of life improved.

“At first, I believed his only objective was to save money, but what I came to understand with Charlie was you could do both,’’ said Mary Lou Sudders, a former superintendent of Metropolitan State Hospital in Waltham and later the state’s mental health commissioner, who has contributed to Baker’s campaign. “You could do the right thing for people with serious mental illnesses by creating the appropriate services, and the administration could save capital funds.’’

Spending criticized
In 1994, when Weld tapped Baker to be his budget chief, Baker continued in his role as point man for the Weld revolution, supervising the elimination of county governments and tightening the requirements for government workers seeking disability pensions.

But by this time, the fiscal crisis of the early 1990s that Baker had used as a cudgel to cut costs in the face of political opposition had waned. The economy was rebounding, revenues were rising, and he was faced with a new challenge — how to manage the hundreds of millions of new dollars suddenly flowing into state coffers.

Thanks to this windfall, Baker was able to stash close to $1 billion in the state’s rainy day fund. And he increased payments into the state pension system, cutting the unfunded liability by another $2 billion, down to about $7.9 billion.

At the same time, Baker continued to help fulfill the promises made by Weld and Cellucci to cut taxes, overseeing a reduction in, or the elimination of, many of them, including the capital gains tax on sales of principal homes worth up to $500,000.

But Baker also took actions that have become political liabilities.

Instead of investing more money in the Big Dig during peak construction, for example, he led a plan to borrow against future federal highway aid, a move that has been sharply criticized by his gubernatorial rivals in part because it increased debt for state taxpayers.

In addition, although Baker has attacked Patrick over state spending, overall state spending rose by an average of 4.81 percent a year during his four years as state budget chief, compared with an average increase of 2.31 percent during the Patrick administration, according to the Massachusetts Taxpayers Foundation, a business-funded watchdog group.

“He hasn’t been forthright about his work on the Big Dig. And he’s criticized Governor Deval Patrick’s spending while, when he was budget chief, state spending grew at more than twice the rate it has under the governor,’’ said Doug Rubin, Patrick’s chief campaign strategist.

Medicaid successes
Aside from the role Baker played in financing the Big Dig, perhaps his most far-reaching decisions were the ones he made regarding health care policy, during the early years of his tenure.

For instance, working with Bruce Bullen, another holdover from the Dukakis administration, Baker took measures to stem alarming annual cost increases in Medicaid, which uses state and federal money to pay for medical care for low-income residents.

The Baker-Bullen team caught an early break in 1991 when a part-time bureaucrat named Kathleen Betts noticed a loophole in federal reimbursement regulations that turned into a $500 million windfall for the state.

But the thrust of their cost-saving solution was a plan to transform much of Medicaid into a managed care program, similar to a health maintenance organization. Among other things, that meant Medicaid patients who often used expensive emergency rooms for basic health care were assigned primary care physicians.

“It not only saved money, it improved the quality of service,’’ Bullen said in an interview.

At the time, the Massachusetts Taxpayers Foundation said the Baker-Bullen initiatives appeared to significantly reduce Medicaid spending. But John E. McDonough , a former Democratic House chairman of the Legislature’s Health Care Committee, and a Patrick supporter, said in an interview that hindsight shows that medical costs generally were leveling off in the mid-1990s anyway, although they would again soar in subsequent years.

Nevertheless, McDonough said, Baker and Bullen deserve enormous credit for a federally approved plan to use the Medicaid savings to provide health insurance to 300,000 previously uninsured low-income families. The plan, McDonough said, became the foundation of the 2006 universal health care law signed by former Republican governor Mitt Romney, which in turn was a blueprint for the national universal health care plan signed by President Obama earlier this year.

“There’s a direct line between Bruce and Charlie’s idea in 1993 and what happened with the 2006 universal health care reform law, which became the model for national health care reform,’’ McDonough said.

Health care dispute
Two other health care initiatives that Baker led under Weld, who did not return calls from the Globe, would prove more controversial.

The first was a decision to deregulate hospital rates, allowing hospitals to charge whatever the market would bear. Part of the rationale was that market forces would at least slow the rate of increases; proponents also said the change would do away with a regulatory process that many felt had grown overly complex.

But critics of the move say there is a cause-and-effect relationship between deregulating hospital rates and today’s escalating health care expenses.

“The deregulation of hospital costs was a terrible mistake and we’ve been paying through the nose for it ever since,’’ Dukakis, who is supporting Patrick, said in a recent interview.

Baker today stands by the move, saying it slowed the rise of hospital costs for several years.

“If you look at the increase in health care costs over the course of the next four or five years, it was at or below the rate of inflation,’’ he said.

During his government tenure, Baker also signed off on the merger of Massachusetts General and Brigham and Women’s hospitals, which led to the creation of Partners HealthCare, the health care giant.

The network of hospitals, clinics, and doctors has helped drive up health care costs in part by demanding that health insurers pay premium rates for care at its renowned teaching hospitals, as the Globe Spotlight Team has reported.

In the past, Baker has said he came to rue his decision. As chief executive of Harvard Pilgrim Health Care, a major insurer, Baker later had to contend with Partners’ demands for higher rates for medical services.

In 2003, he testified before the Federal Trade Commission that the hospital merger that created Partners was partly responsible for the spike in health care costs, comparing his approval of the deal to “having a grenade that you throw on one end of the boat roll back down and blow up on you when the boat shifts.’’

But in the recent interview, Baker said the merger made sense at the time, because of its potential for lowering costs and enhancing efficiency.

“They were talking about creating an integrated health care delivery system and saving money and reducing duplication and not competing,’’ he said.

Philip W. Johnston, who was health and human services chief under Dukakis, attributes the controversial health care moves Baker made to his Republican, free-market philosophy. He contrasts that with the tack the Patrick administration has often taken, particularly its recent attempt to cap health insurance rates for individuals and small businesses.

The difference, Johnston said, neatly captures the divergent choices for voters this fall.

“He has strong ideological convictions, as do I,’’ said Johnston, a former head of the state Democratic Party. “And I respect that. He’s not a weather vane.’’

Michael Rezendes can be reached at rezendes@globe.com.

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