Did We Get It Right? A Behind the Scenes Look at California’s Healthcare Strategy

Back in 2010 — before two elections, before the Supreme Court ruled, before the word “crisis” stopped following the words “California budget” — Kim Belshé settled on a guiding principle: “2014 is tomorrow.”

And now, it almost is.

The Affordable Care Act’s individual mandate takes effect in less than 100 days. The nation’s health insurance exchanges go live next week.

And for nearly a year, Belshé — secretary of the Health and Human Services Agency under former Gov. Arnold Schwarzenegger — was at the center of California’s efforts to begin implementing those Obamacare provisions and many others.

I interviewed Belshé, Schwarzenegger, and nearly a dozen other ex-officials and experts about whether California’s quest to lead the nation on ACA implementation actually paid off — and what it brought the state.

Why California? Why Not?

Every expert suggested that the ACA’s rapid implementation in California could be traced back to Schwarzenegger’s efforts in 2007 and 2008 to enact universal health care.

(And in some cases, even older efforts at reform. “We learned a lot from the 1990s,” says Belshé, noting that failed attempts to create purchasing cooperatives in California helped set the foundation for designing insurance exchanges more than a decade later.)

Although the Schwarzenegger plan ultimately failed, many of its components — from big elements like the exchanges to smaller pieces like guaranteed issue — ended up in the ACA. And because state leaders had already done much of the foundational work, they were better positioned to speedily roll out the national law.

Daniel Zingale, senior vice president of the California Endowment, says that Schwarzenegger’s efforts were a preview of the national ACA battle to come — which meant that many stakeholders in California had already made peace with the law’s key provisions by 2010.

“We’d had our big fights over the individual mandate here” in 2007 and 2008, says Zingale, a former health care aide to Schwarzenegger. “Democrats and labor groups had been through it [and] were ok with it.”

“But the nation hadn’t been through that yet.”

Still, California’s support for Obamacare was hardly assured. As late as January 2010, Schwarzenegger wavered on the ACA — but by April that year, he was the first Republican governor (and one of the first governors in the nation) to throw his support behind the law and begin crafting a framework for implementation.

“It gave us a bit of a head start,” Belshé acknowledges.

Key Decisions: Early Expansion, Exchange Launch, Prompt Legislation

Within the year, Schwarzenegger and his aides had pushed through a number of key bills, leaving the task of implementing them to his successors — who promptly seized the reins of reform.

Diana Dooley, who inherited Belshé’s job as the state’s HHS secretary, was one of the ringleaders.

When Joel Ario, who was then-director of HHS’s national insurance exchange effort, complemented California’s leaders for being a “pace car” for the nation’s health reform efforts, “I told him we don’t want to be a pace car state,” Dooley told health reporter Sarah Kliff in early 2011. “We want to be the lead car.”

It was a memorable line, one that Dooley has repeated in the subsequent years. And with it, she gave voice to a shared aspiration in the state’s health policy community, experts told me.

According to consensus, the Golden State made three key moves to grab the checkered flag.

1) Building ‘the Bridge to Reform.’ The decision to pursue a Section 1115 waiver, which began under Schwarzenegger, helped California expand health coverage to more than 600,000 uninsured residents ahead of the Medicaid expansion that takes effect next year.

2) Setting up Covered California. The Golden State was first in the nation to set up its exchange; first to announce which health plans would participate; and first to release its rates. As a result, the exchange’s board had time to work through major decisions, such as empowering the exchange to be an “active purchaser” and standardizing benefit packages.

3) Quickly enacting laws to ensure new insurance benefits and protections. For example, the Legislature banned coverage denials for children with pre-existing conditions in 2010 and mandated maternity coverage as a basic benefit in July 2012.

Many of “these elements, way back, prompted me to call [California] the pace car state,” Ario told me. “And I still would.”

Advantages of Being First

And by racing forward, the Golden State reaped a number of real, tangible benefits, experts told me, repeatedly citing the following five major areas.

Innovation: California’s Bridge to Reform set a national precedent, says Peter Harbage, a health policy consultant who recently wrote a study on the waiver for the California HealthCare Foundation.

By petitioning CMS to receive a first-of-its-kind waiver, California got to “set the agenda [and] design the program” in a way that best benefited the state, he says. For example, the waiver also includes the Delivery System Reform Incentive Pool (DSRIP), a program that’s incented improvement in safety-net hospitals. A handful of other states — including New Jersey, New York and Texas — have pursued similar DSRIP waivers, but “all of those states have had to follow the framework [that] California already set,” Harbage adds.

Enrollment: More than half a million state residents are enrolled in the Low Income Health Insurance Program, which will enable California to quickly “flip the switch” on Jan. 1 and simply transfer them into Medi-Cal, the state’s Medicaid program, several experts said. It should be a “huge victory” by demonstrating that California has made enormous progress toward meeting its ambitious coverage expansion goals, according to one state official.

Talent: By taking the lead on implementation, California “got to draw from the top tier of talent” in the health policy community, says Ario. The exchange’s director, Peter Lee, “is a force of nature … from top to bottom, Covered California has an all-star cast.”

Exchange readiness: While every state has rushed to meet the ACA’s ambitious goals and tight deadlines, California’s comparatively moderate pace of implementation allowed for more preparation and testing. That’s evident in the readiness of Covered California’s information technology systems, experts said. While Oregon and Colorado have opted for contingency website plans — and the federal exchanges cope with their own glitches — officials on Tuesday said that California’s exchange website will be ready to go next week.

Outreach: California’s early decision to support the ACA ensured more “boots on the ground” to help with enrollment and awareness, experts stressed — a combined effort that’s unlike any other campaign in the nation. The state has distributed more than $37 million in navigator grants to help with enrollment, and a range of stakeholders moved quickly to reach out to low-income, uninsured and underserved groups.

Not Without Hitches

But rolling out reform has led to some expected — and unexpected — bumps in the road, experts say.

Last year’s Supreme Court ruling to make the ACA’s Medicaid expansion optional for states spurred a months-long debate in California’s Legislature, UCLA’s Dylan Roby notes.

Although state officials had long planned to expand Medicaid, “all of a sudden, they needed statutory authority,” Roby says, and the debate opened up questions over the role of California’s counties and the funding process.

And the process of signing up residents for coverage is still incredibly complex, experts cautioned. Zingale shared the story of recently trying — and failing — to help a friend obtain health insurance, getting stymied by paperwork.

“My job description says I should enroll 1 million [people],” Zingale told me. “I couldn’t enroll one.”

The Race Still To Run

Some of those challenges will be ironed out, as the exchange launches and officials figure out how to simplify and tweak their processes.

And moving forward, some of California’s triumphs still bear close scrutiny.

Several experts touted Covered California’s rates as a benefit of the state’s prompt implementation, suggesting that “active purchasing” secured lower rates — insurers were forced “to push the actuarial pencil one more time and try to get to the best price point possible,” Ario said. But new HHS data released on Wednesday reveals that California’s rates are roughly middle-of-the-pack nationally.

In fact, states like Florida and Texas — which have actively resisted Obamacare implementation — ended up with lower average premium prices in their federally facilitated exchange.

Still, there’s a more important figure to watch than the rates, experts say: the enrollment numbers. That’s where the Golden State is much better positioned than Florida, Texas and a number of other states. And that’s why, nearly four years after the ACA was signed into law, the story of its implementation in California will end up being a story of success, they conclude.

“As we move from the political debate to the practical benefit, millions more will benefit next year from these new options, benefits, and consumer protections,” according to Anthony Wright of Health Access.

“I’m really proud of what we did on health care,” says Schwarzenegger. “Our initial push for health care reform in California set the stage for widespread health care reform and now California will lead the way [nationally].”

“There are a lot of reasons to celebrate California’s place in what is still a pretty precarious [position] for the nation,” Zingale adds.

But don’t unfurl the “Mission Accomplished” banner just yet, he cautions. California has failed at every previous attempt to enroll millions of eligible people in public programs, Zingale adds.

“I say that with a lot of humility because I’ve been involved in several of them.”

Dan Diamond (@ddiamond) is Managing Editor of the Daily Briefing, a CaliforniaHealthline columnist, and a Forbes contributor. An earlier version of this post appeared in California Healthline.

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5 replies »

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  2. Kentucky governor wrote in the New York Times today that his state tried to be fast, faster than pretty much everyone else at obamacare too. But Kentucky did not have a health reform debate like California, so I wonder how much that really mattered. Thoughts on that?

  3. Thank you for reading, BFP.

    The benefits for the California economy came up a few times: The flow of more dollars via Medicaid, the extra funds for doing outreach, plus the trickle-down effect of all of this for jobs.

    One expert raised the point that California’s move to quickly expand coverage also reduced some job lock pressure on low-income/uninsured individuals

    Keep in mind, many of these folks worked on implementation though, so they weren’t likely to be critical.

    A successful implementation means different things for different stakeholders. Dylan Roby, I think, made the point that in states still fighting for the Medicaid expansion, hospitals have to devote their energy to lobbying their governors to opt into the law, rather than staffing up to prepare for the surge in demand.

  4. Excellent overview, Dan. Did officials give you any indication of what they think the impact on the California economy is likely to be? Also interested in what you think the short term implications are going to be for healthcare in California? A “successful” implementation is going to mean things are going to happen more quickly than are in other states …