Power of Incentives

In a recent post (Momentum...), I was thinking about how to provide the right kinds of incentives to use information technology to improve healthcare service delivery. The example (from my home state of California) had pretty narrow focus -- standardization of Electronic Medical Records (EMR) for improving interoperability.

Talk about momentum -- now Massachusetts has raised the bar! This just in: "Massachusetts Set to Offer Universal Health Insurance."

They say the process was a testament to the powers of negotiation. Here's an excerpt:

"The bill, which resulted after months of wrangling between legislators and the governor, requires all Massachusetts residents to obtain health coverage by July 1, 2007.

Individuals who can afford private insurance will be penalized on their state income taxes if they do not buy it. Government subsidies to private insurance plans will enable more of the working poor to be able to afford insurance and will expand the number of children who are eligible for free coverage. And businesses with more than 10 workers that do not provide insurance will be assessed a fee of up to $295 per employee per year."

I say the process is a testament to the powers of using incentives. The ramifications are enormous.

What do you think? How does this affect healthcare economics?