Is California Leading the Way?
Reflections from afar
As editor in chief of Health Affairs, the leading peer-reviewed journal on health policy, Alan Weil has a bird’s-eye view of the $3.5 trillion US health care system — and the complex forces that shape it. When he joined the highly regarded journal in 2014, Weil brought deep experience in federal and state health policy. In September 2018, Health Affairs published a California theme issue funded by the California Health Care Foundation, the Blue Shield of California Foundation, The California Endowment, and the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California. Weil moderated two public events related to the theme issue. The September 17 briefing featured article authors presenting their findings at the RAND Corporation headquarters in Santa Monica. The second event took place in Sacramento on October 15, where state health policy experts discussed the seismic forces guiding California’s health care system. This article was adapted from a transcript of Weil’s opening remarks, lightly edited for length and clarity.
Is California leading the nation in devising new state policies and innovations to improve the health care system? Today I’m going to share my reflections from afar on the complicated answer to that question.
Let’s start with health insurance coverage. It’s a pretty easy story to tell. California, among all the states, has had the largest share reduction in the number of people without health insurance. Given your size and where you started, that’s a big deal, and it’s a result of a lot of factors. From afar, Covered California seems to be an effective and stable health insurance exchange. It seems robust and integrated into the fabric of coverage in California. You still have about 7% of the population uninsured, but the state has a pretty good sense of who they are — particularly the importance of people here without documentation. You have taken various efforts to address those gaps in coverage and have additional steps to go. California’s coverage story, although incomplete, is one of the great success stories in the country.
California’s eligibility expansions under the Affordable Care Act (ACA) are part of a stream of coverage efforts. Along with a handful of states, California has made sequential efforts, such as trying to enact universal coverage, and often compromising back to incremental expansions. The groundwork was laid for discussing the importance of coverage expansions. Even before the ACA, individual counties expanded coverage under the Bridge to Reform waiver. This county-level buy-in was part of a drumbeat of what was possible.
Improving Care Delivery
Working on the California theme issue gave me the opportunity to revisit my long-held preconceptions and views of California’s health policy and delivery system environment. I have not always thought of California as leading the way when it comes to the kind of modification and improvement in care delivery that we need. I often refer to the Kaiser conundrum: If Kaiser’s so great in terms of care integration and quality scores, why doesn’t it grow and take hold around the country? Is California a world unto itself that doesn’t send out tendrils that develop elsewhere?
I was struck by the 2013 report from the Berkeley Forum for Improving California’s Healthcare Delivery System. Everyone at the top level talks about integration, but when you look at how the dollars flow, systems are not really integrated. From afar, California is viewed as a leader in integration, but even the leader wasn’t as far along as the rhetoric would suggest.
“There is a tremendous success story in California around reducing maternal mortality while the rest of the country is headed in the opposite direction. These things don’t happen by themselves.” — Alan Weil, editor in chief of Health Affairs
There has always been a sense of mystery around the role of California’s counties. They play a central role in care delivery, which may have given the state an excuse not to lead because it expected county-by-county actions that in other places would occur at the state level. In some instances that dynamic was successful, but it also left a lot of counties behind. Over the years, when I would look for a community-based approach to improving and organizing care systems, I would look to states like Oregon, with their coordinated care organizations, Washington state, my old state of Colorado, and Vermont. I wouldn’t have looked to California.
But evidence matters, and all you have to do is look at the September California theme issue of Health Affairs to understand why my perspective is changing. There is a tremendous success story in California around reducing maternal mortality while the rest of the country is headed in the opposite direction. These things don’t happen by themselves. The data suggest that it’s the result of actions taken to look deep inside care systems, to look at social determinants, to use data to motivate and to improve. You couldn’t tell that story without effective leadership. And the story out of San Diego on reducing heart attack deaths — again, this is a systems story. These experiences happen when systems come together, analyze problems and data, and try to figure out how to work together.
Integrating and Managing Care
In the California issue, we have a paper on the experience around the state’s Medicare-Medicaid demonstration project for dual eligibles. At the outset, California’s demonstration was bigger than all the rest of the country combined. Ultimately it was scaled back, but California is one of only a handful of states still tackling one of the thorniest issues — integrating care for the most vulnerable. Most dual eligibles are frail elders with very low incomes or people with severe disabilities served by two programs that were not originally designed to interact. Someone’s got to take on this challenge, and California is one of the relatively few states that did so. This is one of many stories in California of tremendous creativity and activity.
The integration-consolidation tension is one of the key issues going forward. Clinical integration requires actors to work together, but integration is also often a code word for financial integration, which increases the integrated entities’ bargaining leverage in the marketplace, and it’s a driver of cost. The more serious we are about clinical integration, the more realistic we have to be about the potential financial downsides.
California has a history of active purchasers. You have the California Public Employees’ Retirement System (CalPERS) doing reference pricing and using centers of excellence. We have published many papers on these very interesting examples, but how many other purchasers are taking up these practices? Not very many. This is another one of the great mysteries of all time.
But the fact is that California has large purchasers who are accustomed to the notion that they don’t just pay the bills, a philosophy that set the stage for some of what Covered California is doing. Providers aren’t surprised to hear, “Actually, we’re not just going to take your rate,” or “We are going to standardize benefit packages so that people can make more effective comparisons.” Not everyone across the country is doing these things.
California has some large institutions adopting the managed competition model. The University of California system and Stanford University come to mind as large employers structuring markets. You have the California Health Interview Survey and California Office of Statewide Health Planning and Development (OSHPD), which provide a data infrastructure for analyzing policy. The number of papers we have published using data from OSHPD is great, and agencies like it do not exist in every state.
New York Envy?
Analysis matters, and in a state that has foundations and universities and a private sector that look at the data, invest in options, and create a pathway for doing what’s possible, it makes a difference. A lot of states went into ACA implementation without the kind of roadmap that you did. California had foundations that funded analysis of implementation options for the state. Someone actually read them, and then the state implemented them. When you’re thinking about the strategic choices needed to maximize the potential of this law, it makes a difference.
Every time I come out here, I get a taste of California’s envy of New York. You’ve got the cheapest Medicaid system in the country. They’ve got the most expensive. New York doesn’t feel like it’s flush with money, but compared to you, they are. But I think there’s something about that history that enabled California to do better with delivery system reform in this round. After all, low payment rates here led to a heightened focus on primary care. When we look back at the Big Apple from the Citizen Hotel here in Sacramento, we see academic medical centers and tremendous investment in high-end specialty care. And although many people have worked hard to change it, overall New York has weak primary care systems. In California, resource constraints have highlighted the need for primary care and greater understanding of the role of social determinants. That thinking in California, I believe, may have been farther along than would have been the case if the state were flush with money.
And while the state’s county-based system is somewhat challenging for an outsider to understand, I also think the existence of robust local systems set the stage for reform — and the term “DSRIP” (Delivery System Reform Incentive Payments) becoming a household term. Debates over realignment generate local discussions about resource allocation that I don’t think have happened much elsewhere.
The sheer scale of Medi-Cal (13.1 million enrollees) and Covered California (1.3 million customers) have forced the overall delivery system to adapt. As ACA enrollment expands both through subsidized coverage in the exchange and through Medi-Cal, the wall separating them is eroding. Kaiser now has more than one million Medi-Cal lives.
California, with its tremendous local creativity, is breaking down barriers. Pressure on prices is forcing providers that are consolidating to focus as much on clinical integration as on some of the financial integration — precursors to delivery system improvement.
Republican and Democratic governors in California have been committed to coverage expansion, and that is public policy 101. When the window of opportunity opens, you’ve got to be ready to go through it. When the ACA was enacted, California was ready.
California’s evolving demographics and the end of the white majority eliminated some opportunities for divisiveness more common elsewhere. I don’t mean to romanticize it, but here it’s just a given that the state needs to move forward. These things are still very much up for debate in the rest of the country.
The California story I’m telling you is about the positive potential of the ACA. It’s a story about a state that embraced the law and is doing what it can with it. One last thought. California made a lot of progress in what in some ways has been a hospitable economic environment for the last decade. You are a state with high income inequality. So I have to ask this: If the economy falters, can you hold together the shared values that have allowed you to make progress on coverage and delivery system reform? I certainly hope the answer is yes.