You can take a great deal of meaning out of the result of yesterday’s Massachusetts special election in many different ways. For someone of my leanings, most of it is pretty grim. One thing would be false to infer, however, is that it was a failed referendum on health care reform. In the grand scheme of things, I really don’t see this election as a “game-changer” so to say. As much as it pains me to admit, the people of Massachusetts are justified in their choice, and Martha Coakley probably deserved to lose. There is no reason to be mad at them. If any fingers are to be pointed, they should be at Martha Coakley for taking her victory for granted, but also at Max Baucus and Barack Obama for allowing a process that should have been concluded over the summer to drag on into January. At this point, the “end game” that I laid out is in some danger as a reform bill will almost certainly not be on the President’s desk by the time he gives his State of the Union Address, further delaying a shift towards jobs, the economy and averting a potential disaster in the midterm election.

I would like to make one think crystal clear, however: The voters of Massachusetts did not vote to repudiate the health care reform bill yesterday. The reality is that President Obama is still quite popular in the state and the national media, as well as the GOP, have it all wrong. Martha Coakley was a mediocre candidate who ran a poor campaign. She was described as dispassionate and her campaign schedule was remarkably light. That is even without mentioning that she misspelled “Massachusetts” in a campaign ad. Why did she even win the primary, then? I’m probably the wrong person to ask as I supported Alan Khazei, but being backed by the powerful Massachusetts Democratic machine might have helped. Mr. Brown, on the hand, hired former staffers from Mitt Romney’s successful run for governor in 2002. He moderated, shunned the Republican party establishment and took advantage of the feelings of a frustrated electorate by creating a strong contrast by successfully painting her as an insider. As we all know, being defined by your opponent is the kiss of death and anyone who watched the race closely saw this coming. Once she was defined by Brown, not even Barack Obama could save her. In fact, the presence of prominent politicians only reinforced Brown’s message.

A reform bill must and will be passed. Without a filibuster proof majority, the blame for failure shifts more towards Republicans and they will have to explain why health care coverage should not be near universal, why people should be allowed to be denied for pre-existing conditions and why parents should not be allowed to keep their children on their plans till they are twenty-six. Saying no for the sake of bringing down the Democrats is not so smart, and prying away one Republican is not an impossible task. It may be watered down some more, but mark my words that this bill will not die.

The problem goes back to Massachusetts. Mitt Romney passed a landmark health care reform bill in his state that mandated coverage. Scott Brown can tell you all about it; he voted for that bill in the state senate. To that end, it was wildly successful and has served as an empirical example for wonks to draw from. In fact, the Senate bill has a striking resemblance to the Massachusetts plan. The only problem was that it left the state with a multibillion dollar budget deficit. While it is possible to address the issue of coverage and the high cost of care separately, solving the former without the latter being resolved soon after is a recipe for disaster. I maintain that a legislative solution to the cost problem is unlikely to pass and even more unlikely to completely solve the problem. There are four measures that I think need to be taken and I will elaborate on some of these in a future column, but I’ll kill the suspense by briefly previewing them all now.

The first may well be included in the compromise bill. It is to pay for reform not by taxing the wealthy, but by enacting a tax on the “Cadillac” health insurance plans. While it would be a tax on some of those making less than $250,000 a year, breaking an Obama campaign promise, many of his advisors think is makes a great deal of sense to pay for reform with money from inside the system. The added benefit is that it will deter expensive experimental treatments and help to bring costs under control for everyone by restoring some equilibrium to the system. Watch closely to see if this is the provision that House and Senate leaders ultimately settle on. It could be the most effective part of the bill at cutting costs if I understand it correctly.

The second is the public option. We have beaten to death why is it is a good idea. It will not pass in this bill, but I can foresee a short window as soon in either 2011 or 2013 in which it can be brought back onto the agenda if and only if the Democrats are able to more or less hold their ground in 2010 and/or if President again wins big in 2012. While a tax on “Cadillac” plans will help to regulate the market, providing direct competition will force costs to stay in check, and hopefully decrease at the expense of massive insurance industry profits.

Yet the insurance industry is only part of the problem; each and every doctor is in part responsible for skyrocketing costs. Trying to create a bill to command and control the way the proscribe medication, order tests and recommend surgery is a laughable concept. This will take experimentation and innovation over a period of time in small and controlled environments. Once a measure is proven successful, other doctors will adopt it. The process is much more complex but that is the gist. I truly believe in this method and will be talking about it more in the near future.

The last falls upon me, you, and the companies we work for. We must stay fit, eat better, and live healthy lifestyles. I have a few ideas on how to do this based on the fact that people respond to incentives. There are a few corporate examples as well that are fascinating, promising and exciting.

We cannot just fiat that the cost of medical care decrease. Our system is complex and broken. Certainly increased coverage and the first of my four initiatives suffered a slight setback yesterday, but it is not an insurmountable one. I truly believe the key will be what we can do outside the system through good old American ingenuity. In my next column or two on the issue, I hope to persuade you of the same.