Health care’s state of emergency
Covered California Executive Director Peter Lee explains why the Affordable Care Act must survive
As program director of the National AIDS Network in the 1980s, Peter Lee helped organize protests outside the While House, as then-President Ronald Reagan refused to confront the epidemic. Lee’s main focus at the time was getting access to health care for the hundreds of thousands of Americans affected by the epidemic.
Three decades later, Lee found himself visiting the White House again, while working for President Barack Obama as the deputy director of the Center for Medicare and Medicaid Innovation.
Now, five years into his tenure as Covered California’s executive director, Lee remains committed to the cause of health-care access. And his main adversary is again the man in the White House.
SN&R publisher and CEO Jeff vonKaenel visited Lee in his Sacramento office last month to discuss the Affordable Care Act, skyrocketing costs and California’s role in the future of health care.
Since Donald Trump took office, it seems like every day there’s a new issue, a new conflict in relation to Covered California and the Affordable Care Act. I can’t keep track of them all. What is keeping you up at night about these issues?
Well, the thing I’d start with is the reminder of where we are not. President Trump ran on a platform that included “repeal-and-replace” the Affordable Care Act. And it’s so important that we are light-years away from that. And I think there’s been a referendum in Washington, but it said we are not repealing the Affordable Care Act.
I think the fundamental thing to recognize, which is very good news, is that the Affordable Care Act, one of the most politicized pieces of legislation ever, withstood attempts to repeal it. Because it makes sense across the political spectrum. You had Republican governors saying, “Wait a second, we expanded Medicaid. This program makes sense.” You had Republican members of Congress saying, “Boy, we’re never going back to the day when we will deny coverage to a woman with breast cancer.” That is a fundamental change in America.
But I will talk about what I call “the nipping at the heels.” One fundamental element of the ACA relates to the restructuring of the insurance system. However, the [federal] tax act of last year did away with the ACA’s mandate.
That will mean two things: that there will be hundreds of thousands of Californians that are uninsured because they think it’s smarter to roll the dice on not having coverage, and that premiums will go up for everyone else. So that, in essence, all Californians, including those with employer-based coverage, are gonna pay more.
Is there a California solution?
Absolutely. Four states have state-based penalties, and Massachusetts had one before the Affordable Care Act. Since this action, Maryland, New Jersey and Vermont have all put in place state-based penalties.
Is it being considered here in California?
It’s absolutely being talked about, but it’s one of these political issues where no legislator wants to say, “I passed the eat-your-spinach legislation.” It’s tough. Even if it makes a world of sense, and even if it is the case that a penalty, to my mind, is like a seat-belt law. If you don’t wear your seat belt, you could say, “I wanted to take a risk. I don’t want to wear a seat belt. Screw you.” But that means sometimes you’re going through a windshield and we’re all gonna pay the bill.
We spend $100 million on marketing and outreach every year, and we keep doing it year after year because people turn over. One of the things that I give thanks for, and one of the reasons I sleep well, is because eight years ago, Gov. [Arnold] Schwarzenegger and a Democratic legislature set up a state-based marketplace.
We just heard yesterday, the feds, which already cut their marketing spending from $100 million to $10 million, are cutting their navigator spending from $60 million to $10 million.
If California hadn’t made the decision to run its own marketplace, we would be impacted by that. And so who’s going to be paying the costs? I mean, the thing that’s such a travesty, such an irony, is that the decision to not spend money on marketing will lead to higher premiums. And it’s not going to hit people that get subsidies. Subsidies will increase to offset increased premiums. Who’s it going to hit? It’s going to hit the unsubsidized middle class.
Lets go over the challenges. You mentioned removing the penalty. There has been some discussion on pre-existing conditions. Are there other things?
The expansion of limited-benefit plans [such as] short-term duration plans or association plans. None of them have standard benefits, meaning they have exclusions for certain conditions. They might exclude mental health coverage. They might exclude maternity [leave]. You think you’re getting a good deal because the premium’s lower, but it’s because you may be buying something much worse.
If you want to use it, then you’re in trouble. So let’s go back to the state solutions.
We talked about the penalty: There’s clear running room for a state to establish a penalty. There’s also running room for the state to establish other mechanisms to get people into insurance. We’re looking at automatic enrollment. So when someone leaves employer-based coverage, they automatically get signed up.
And these limited-benefit plans: States can outlaw them. There’s a piece of legislation under consideration right now that would basically outlaw [private], short-term plans. Covered California is a short-term plan—people come in and out all the time. Every year, 40 percent of our people leave. And for good reasons, not because they don’t like us; they leave because they get a job and employer-based coverage. They leave because they turn 65. So you could actually, as a state, outlaw those [private] products or regulate them stringently.
California has a very positive history of strong consumer protections in the health-care arena. So the Department of Managed Health Care thinks actively about the scope of benefits. This is part of the culture of California—to make sure consumers have someone who has their back.
There’s been discussion about restructuring health-care insurance, either with single-payer or a public option. What are your thoughts on those?
I’m very much a focused-on-the-here-and-now kind of guy. We have with the Affordable Care Act, the tools, if we keep making it work, to be very, very close to universal coverage. To my mind, what we should be trying to do is get everybody coverage, spend less money on administrative waste and spend more money effectively on people getting the right care at the right time. And whether you have a single-payer system or a very diverse system doesn’t say you necessarily get there.
The other thing to remember is that about 70 percent of health-care dollars are public dollars today. When you add up Medicare spending, Medi-Cal spending—one-third of Californians under 65 now has Medi-Cal—and the employer tax benefit; it’s a lot. So public funding is the vast majority of health-care spending today.
The thing that we do spend [more on] compared to other nations is administration; it’s about 8 percent of our spending, compared to 3 percent. That’s a lot, but that difference between 3 and 8 percent doesn’t account for our health-care costs being double. So let’s be really clear that a single-payer solution, if it’s trying to focus only on administration, doesn’t get us anywhere close to why we spend a lot more money than most of the world.
The bigger issue is we pay more for everything. And this isn’t at the insurance-company level. It’s because we pay doctors more; we pay hospitals more; we pay more for drugs. And so the challenge we have is we need to, number one, make sure people aren’t getting unnecessary care.
What do you think of the public option expansion and single payer?
In Covered California we have 11 health plans that compete for enrollment. One of them is LA Care. LA Care is the largest Medicaid plan in the nation. It is a public option. It’s a publicly responsible entity. Our second largest plan in California is Blue Shield of California, which is a nonprofit.
So … what do we mean by a public option? From day one, we at Covered California wanted a range of choices. In Northern California, in the very beginning days, we approached … a Medi-Cal plan, a public plan. And they said: “Excuse me, we’re about to grow our Medi-Cal enrollment by threefold, and you want us to be distracted by this? Give me a break.” And so it wasn’t from lack of mission alignment, it’s bandwidth. So the issue of a public option, I’m really not sure what it means or how you structure it.
One of the things the Affordable Care Act did, which isn’t talked about much, is provide new foundational support for community health centers in California, which are some of the best delivery systems in the world. But there were two elements that I think were probably really flawed and this comes back to the public option.
One was the idea that we should set up a new publicly accountable plan to compete with the other plans. We called them co-ops. Most all of them failed and they lost a lot of money. They didn’t do a good job because health insurance is complicated. And so the idea of, “let’s set up new things"—it’s really hard to do.
The other failed program was the “risk corridor” program, which said, if you as a health plan lose a lot of money, don’t worry, the federal government will have your back. That ended up meaning health plans could take big risks. And they lost a boatload of money. And then congress changed the policy and said, “We ain’t funding it.”
In California, we didn’t have plans using that program, because they made money. Partly because we at Covered California actively negotiate with every health plan and help them set their rates. And when I say help them—we don’t want plans to lose money; if they lose money, they’re going to make it up next year. But we also don’t want to make too much money.
In the rest of the nation, there wasn’t anyone doing that. And that led to a lot of instability in 2015 and ‘16. Not in California, but in the rest of the nation.
Let’s talk about affordability. You mentioned we’re paying twice the GDP for our health care, without any significant health improvements. So … it’s called the Affordable Care Act …
One of the really healthy things that has come up in the last five years, and I’ve actually seen some of your reporting on this, is a recognition that health isn’t just about the health-care system. It’s about communities, about social determinants and those factors have a lot more in the long run to do about health and health-care costs than, “Can you do a good surgery?”
While we spend double what the rest of the developed world spends on health care, we spend half what the rest of the world spends on social policies that lead to better health. And this might be a homelessness program; this might be programs for women after giving birth to a baby, being able to stay out of work for longer. These might be food programs. We spend half, and we need to build in a balancing of the two.
And the Affordable Care Act actually started down that path by having major funding for community preventive health. Those programs have been gutted.
So, originally the major goals were, let’s get us down to 6 percent or 3 percent uninsured, and that was a major accomplishment. But now we have to move into this next phase.
Absolutely. We are looking at what has been part of our DNA from the beginning. We’ve always had the vision that we need to be looking at affordability, but we’re turning to that with a lot more rigor now. But we’re sort of living with a bit of a schizophrenia because we are also having to play defense relative to the federal policies.
We’re having to look two directions down the road, but also looking for what might be coming out of left field.
If I made you our health-care czar and said, “OK, let’s improve health care but let’s cut out 3 percent of the GDP that we’re spending on it,” what would you do?
I would start by saying this czar wouldn’t have unrealistic ambitions. Which is, we ain’t going to cut 3 percent out of the GDP. Rather, I’d say, “Sorry, if you want a czar that can do that. That’s a czar that’s living in la-la land.”
What would I do to reduce cost growth? One, we should be looking at having caps on what some providers charge. What we’re paying is too much. Second, we do spend far too much on administration and having things like patient-centered benefits, not just in Covered California, but with large employers. So, I would look at administrative simplification.
What about health-care providers like Sutter not sharing their prices? Let’s take something like a colonoscopy. If I want to know the cost, how do I find it?
You would call [your insurer’s] customer service line.
You’re the first person that’s ever said this information is out there.
It’s absolutely out there. But it’s not used. Our plans are required not only to make it available, but to tell us usage rates. And the usage rates are really small.
And the other piece: One of the elements there is what’s called “shared decision-making.” Because I care about price, and I care more about our consumers being given tools for understanding: Should they get the procedure in the first place? So, before you get a prostatectomy, have you considered what the other treatment options are, and do you understand what those issues are? And there’s a science of shared decision-making, and that isn’t happening enough and it should be happening more.
One of my favorite stories on this is one of my former partners, a family doc. He lives in the Bay Area and his doctor said, “You need an MRI; go to the local hospital.” He knew the local hospital charged up the wazoo, right? He called them and said, “I wonder how much it’s gonna cost.” He was responsible in a coinsurance basis for 30 percent. He shopped around and instead of it costing him $1,000 at 30 percent of a $3,000 MRI, he found an MRI that he knew was as good for $800 total cost. It cost him 250 bucks. And that’s it. That was him making phone calls around.
Thanks for what you’re doing. I mean, really, I’m so proud. And I’m excited about us figuring out a response to Trump.
We’re proud too. And we shall persist.