On April 12, 2006, Governor Mitt Romney, of Massachusetts, signed the most significant bill of his career: a law requiring every citizen in his state to buy health insurance. Romney usually held signing ceremonies in the gold-domed State House, in Boston. But this time his political team, which was preparing for his 2008 Presidential campaign, orchestrated an elaborate ceremony at Faneuil Hall, the site of some of the country’s great pre-Revolutionary War speeches. The brick building was decked in patriotic bunting, and a fife-and-drum corps led Romney inside. Two enormous signs flanked the stage, announcing, in a vaguely eighteenth-century font, “Making History in Health Care.” Aides distributed buttons with the same message. “I want to express appreciation to Cecil B. De Mille for organizing this event,” Romney said as he began his remarks.

Mitt Romney laid the groundwork for Barack Obama’s health-care reform. Illustration by FINN GRAFF

Political, academic, and business leaders gathered under a monumental painting of Massachusetts Senator Daniel Webster debating South Carolina Senator Robert Hayne in 1830. The painting, sixteen feet tall and thirty feet wide, depicts a moment from a weeklong colloquy that became one of America’s most historic debates about Federalism, with Hayne arguing that states had the right to nullify federal law, and Webster arguing for a strong federal system. The most famous words from Webster’s final speech served as a backdrop for Romney that day: “Liberty and Union, now and forever.”

Romney had accomplished a longstanding Democratic goal—universal health insurance—by combining three conservative policies. Massachusetts would help the uninsured buy private insurance; it would create a deregulated online marketplace; and it would require that everyone carry insurance. Uninsured citizens no longer would use the emergency room as a primary-care facility and then fail to pay their bills. “It’s a Republican way of reforming the market,” Romney said later that day. “Because, let me tell you, having thirty million people in this country without health insurance and having those people show up when they get sick, and expect someone else to pay, that’s a Democratic approach. That’s the wrong way. The Republican approach is to say, ‘You know what? Everybody should have insurance. They should pay what they can afford to pay. If they need help, we will be there to help them, but no more free ride.’ ”

Although some influential libertarians condemned Romney, most conservatives praised the plan. Robert Moffit, a policy expert at the conservative Heritage Foundation, which helped write parts of the law, spoke at the ceremony. “The real trick is to retain what is best in American health care while correcting its deficiencies and expanding upon its indisputable benefits,” he said. “Massachusetts has done just that.”

Romney signed the bill at a wooden desk using fourteen different pens, which he later distributed to the dignitaries on hand. “It’s law!” he shouted after the final stroke. On cue, the sounds of the fife-and-drum corps filled the hall with Colonial-era music. Behind Romney stood the people most responsible for passing the plan, among them Senator Ted Kennedy and Salvatore DiMasi, the Speaker of the Massachusetts House of Representatives. In one photograph, the Governor is looking over his shoulder at DiMasi, laughing, and Kennedy is smiling at Romney. Kennedy died in 2009, and DiMasi is currently on trial for extortion and corruption and may go to jail. Romney, who did not seek reëlection in 2006, is running for the 2012 Republican Presidential nomination. Early this spring, as his campaign was foundering, a morbid joke about the photo circulated among Massachusetts political insiders: “The funny thing about that picture is that there’s three dead men, but only one is in the ground.”

Mitt Romney, the son of a Republican governor of Michigan, was a successful management consultant at Bain & Company, in Boston, which he joined in 1978 after earning a J.D. and an M.B.A. at Harvard. In 1984, he founded Bain Capital, a private-equity firm. He challenged Ted Kennedy in a 1994 Senate race but lost badly. He returned to Bain Capital but left to serve as C.E.O. of the organizing committee for the 2002 Winter Olympics, in Utah. The job went well, and his revival of the nearly bankrupt and scandal-plagued games gave him the reputation of a non-ideological and data-driven problem-solver. He returned home after the Olympics and was elected governor that year.

Once in office, he saw that health care was one of the biggest data-driven problems that needed solving. It consumed thirty per cent of the state budget, and costs were rising fast. “The Pac-Man of health insurance takes more and more, and every year roads, bridges, schools, higher education have to go down unless you want to keep raising taxes,” Timothy Murphy, the architect of Romney’s policy, said. “That’s why we decided to tackle health care.”

Before joining Romney, Murphy, a graduate of Harvard’s Kennedy School of Government, was an investment banker at J. P. Morgan. Like the rest of Romney’s health-care team, he was not an ideological conservative. “I wouldn’t go to the Kennedy School if I thought government was evil,” he told me recently at a café in Boston’s South End. “If government was evil, the Pilgrims wouldn’t have come and written the Mayflower Compact. That’s how societies work. If societies were just disaggregations of people roaming around, you wouldn’t have that street.” He pointed out the window at the road outside. “Mitt’s more in that vein. How can you run for President and be anti-government?”

The Romney administration also hired Jonathan Gruber, an M.I.T. economist who is the country’s foremost authority on modelling the effects of health-care policy. Romney never asked Gruber, who is a Democrat, about his political views. “It wasn’t an issue at all,” Gruber told me. Another Romney aide, Amy Lischko, of the state’s Division of Health Care Finance and Policy, had long studied the composition of the uninsured in Massachusetts. She was impressed by how much attention Romney gave to her number crunching. “He’s a real data wonk,” she said. “It’s just exciting that somebody wanted to have empirical data to base their policy on.” The three Romney advisers—Murphy, the pro-government Republican; Gruber, the liberal academic; and Lischko, the state employee—started to work.

In 2004, Lischko presented Romney with a detailed description of Massachusetts’s uninsured. About twenty per cent were eligible for Medicaid, but they hadn’t enrolled. It would be easy to find them and get them into the program. Forty per cent made too much money to qualify for Medicaid but not enough to afford insurance. They were generally in jobs—perhaps working half time for two companies—with no benefits. The remaining forty per cent, many of them young and healthy, could afford insurance but hadn’t bought it, perhaps because they didn’t think they were at risk. The state was paying about a billion dollars a year to compensate hospitals for treating uninsured patients who didn’t pay their bills. Conservative health-care experts wanted to use that money to subsidize the poor in buying insurance plans on the private market. Romney immediately adopted the idea.

There also needed to be a simpler way for individuals to buy insurance. “The types of insurance products we were offering sucked,” Murphy told me. “And it’s because the state had overregulated the markets.” The market was so confusing—and so geared to selling group policies to institutions—that only fifty thousand people, in a state of 6.4 million, bought policies that weren’t provided by their employers.

Moffit and his colleagues at the Heritage Foundation had promoted the idea of an exchange to help people buy insurance. As CarMax had done for automobiles and as eBay had done for old furniture in the attic, the online exchange could consolidate the splintered health-insurance market. Creating such an exchange would also help accomplish another long-term conservative policy goal: transforming health insurance from a responsibility for employers to a responsibility for individuals. Romney loved this idea, too.

Romney often argues that his plan resulted from the unique circumstances of the state, and in many ways this is true. When he became governor, only eleven per cent of Massachusetts residents were uninsured, a relatively low figure compared with other states. But the most idiosyncratic feature of Romney’s plan was how it was funded.

Starting in 1997, Massachusetts had operated its Medicaid program under an arrangement worked out between Ted Kennedy, Republican Governor William Weld, and the Clinton Administration. Like a few other states, Massachusetts received a waiver that allowed it some flexibility in how it administered the program. In addition, Massachusetts was given a special pot of money, which was secured with Kennedy’s influence, designated primarily for the politically powerful Cambridge Health Alliance and Boston Medical Center.

In the first year of the deal, the federal government gave Massachusetts approximately a hundred million dollars for the hospitals. In 2002, the deal expired, and Kennedy, who had just worked with the White House to pass George W. Bush’s new education law, persuaded the Administration to continue the arrangement for three more years. By 2004, the special fund had grown to three hundred and eighty-five million dollars annually. But that fall Romney received a warning from the Bush Administration. It would extend the waiver for Medicaid for another three years, but the extra money would be cut off in 2005.

Romney called Kennedy, and they agreed to approach the Bush Administration and present the outlines of Romney’s embryonic health-care plan. If the Administration would allow Massachusetts to continue to receive the extra money, Romney would achieve universal health care in his state. If the strategy worked, Mitt Romney and George W. Bush could both take credit for reforming health care by using market-based ideas and without raising taxes.

Before Romney could pitch his full plan to the Bush Administration, he needed to make a major decision: Would he favor an individual mandate? Was it enough to create an exchange and offer subsidies, or did he need to require people to buy insurance?

According to Murphy, Lischko, and Gruber, Romney believed that the logic in favor of a mandate was impeccable. Federal law requires emergency rooms to treat patients regardless of their ability to pay. “This is not Calcutta,” Murphy said. “We don’t let people go and die in the street. And then the question is, Who bears that cost? Those costs get paid by increased premiums for the people who do buy insurance, or they get paid for through socialized costs and claim our tax revenues and come at the expense of other things that people might want to do, like building roads and bridges. And in the Republican Party that I grew up in—go back to the welfare debate, it’s about personal responsibility—that seems pretty reasonable.”

Republicans had been discussing the idea for years. In 1990, the Heritage Foundation made the individual mandate a linchpin of its health-care plan, arguing that it should be part of “a two-way commitment between government and citizen.” The government would help individuals buy insurance, and, “in return, government would require, by law, every head of household to acquire at least a basic health plan for his or her family.” The head of the family would make the decisions.

In 1993, Republican Senator John Chafee, of Rhode Island, adopted much of this plan, and his bill became the main G.O.P. alternative to Bill Clinton’s health-care proposal. The concept of a mandate also won support from Representative Newt Gingrich, among others. One of Chafee’s health-policy aides, Christine Ferguson, later became Romney’s Commissioner of Public Health, and she reminded his policy team of the Heritage and Chafee proposals. “We got the idea from Christy Ferguson,” Lischko told me. “At one of our early meetings, she brought up the idea of the individual mandate and said, ‘We need to look at that. Don’t assume that because he’s a Republican governor he’s not going to want an individual mandate.’ ”

Romney and his aides had a lengthy debate about the merits of the mandate, which evolved into a broader philosophical discussion. Personal responsibility was important, some aides argued, but what about the libertarian view that the government had no business requiring people to buy something? It was one thing to ask drivers to buy car insurance. Owning a car is a choice. But the health-insurance mandate demanded the purchase of a product just for being alive.

Philosophically, Romney sympathized with the personal-responsibility argument and not with the libertarians. The pressure of satisfying the Bush Administration was also acute. Gruber, the M.I.T. economist, may have sealed the case with a model showing that, without a mandate, Romney would insure a third of the people at two-thirds of the cost of doing it with a mandate. “All the sick guys sign up,” Gruber said. “So you’d be silly not to have the mandate.” Gruber says he attended a meeting where the discussion of the mandate turned into a debate between Romney and his political advisers. Romney argued passionately for it; his advisers argued against it.