A service of the California Health Care Foundation

Five Years of California Health Reform: ‘A Tremendous Designed Experiment’

Nadereh Pourat, director of research at the UCLA Center for Health Policy Research, gives an involuntary gasp when she’s asked where California’s health care system would be without the reforms and changes of the past five years.

“It’s not fathomable,” Pourat said. “I don’t know where we would be right now. California has made tremendous progress. It’s staggering what has happened in five years.”

The state has launched the Covered California health benefit exchange, which has helped enroll 1.4 million into coverage. The Medi-Cal program has added 2.7 million more beneficiaries and now provides health services for more than 12 million Californians, or about one-third of the state’s population. Medi-Cal is California’s Medicaid program.

On top of all of that, California has shifted almost 80% of its beneficiaries away from a fee-for-service system into Medi-Cal managed care plans. It did all of this during one of the worst recessions in recent memory.

Five years ago the health care system in California was nearing crisis levels, said Anthony Wright, executive director of Health Access California.

“We had a status quo that was rapidly deteriorating,” he said. “California was on the top 10 list for the highest percentages of the uninsured. The trend lines of coverage were going down, costs were going up.”

Employer-based coverage was on the decline, budget cuts were hitting health care, California had a high unemployment rate and counties were closing their public hospitals.

“We were approaching a tipping point of a major crisis,” Wright said. “It was not just trend lines going in the wrong direction, but if it continued, it looked like it could be a tipping point, a fundamental collapse of parts of the system.”

Wide Scope of Reform Effort

The influx of federal dollars from the Affordable Care Act — funding individual subsidies in the exchange, temporarily paying full freight for the Medi-Cal expansion in California and underwriting reforms from the Low Income Health Program to information technology upgrades — came at just the right time, Wright said.

“I don’t think you need to grade on the curve to say it’s been a success so far,” Wright said. “Even acknowledging the problems the state has had, California clearly has met enough of the targets to be considered a huge success.”

That’s in part because of how far California had to go. For the most populous state to have one of the highest rates of uninsured made the health reform hill a steep climb, Wright said.

“Some of our glitches are bigger than other states’ programs,” he said. For instance, the backlog of unprocessed Medi-Cal applications hit 900,000 in March 2014 — which is a bigger number than some states’ entire Medicaid programs, he said.

“When you see four million additional people in coverage [between the exchange and Medi-Cal] and when you see the percentage of uninsured reduced by over half and probably more by this point, that’s a system that’s been fundamentally changed.”

Mari Cantwell, chief deputy director of health care programs at the Department of Health Care Services that oversees Medi-Cal, has become adept at describing the size of California’s Medicaid program.

“The way I tell people about it is … California’s program is twice the size of any other state,” she said.

“The size of our [Medi-Cal enrollment] increases would have been the fifth-largest program in the nation,” Cantwell said.

Coverage Expansion

California health officials are aiming to create a “culture of coverage” throughout the state, which would reduce the churning in and out of public programs and eventually result in fewer non-emergent trips to expensive emergency departments and also cut down on preventable hospitalizations. To achieve that culture of coverage, the state needed to enroll as many people as possible into the exchange and Medi-Cal.

“The biggest change in the last five years is the significant expansion of coverage,” Cantwell said. “California fully embraced the ACA from day one.” The success in signing people up for health care coverage led to the next steps — namely, delivery of care, she said.

“With that level of change in coverage, we then began the journey about how do we actually change the delivery system — not just to expand coverage but also figure out how the program itself would be sustainable over the long haul,” Cantwell said.

That’s what prompted the shift to Medi-Cal managed care, she said. “What we’ve been able to see in the last five years with expansion of managed care is a way people can get the care they need, as well as answering how we pay for care. We’re continuing to look at it from a broad perspective: How do you pay for value instead of just paying out cost? How do we drive the way care is delivered?”

The state still has a long way to go, Cantwell said. The payment reforms included in the next proposed 1115 federal waiver (the current waiver expires in October) should help that effort. And there’s still a long path to get full integration of physical and behavioral health, she said.

Missteps and Lessons Learned

The state has had its share of problems in making these changes over the past five years. The transition of seniors and persons with disabilities into managed care was fraught with miscommunication and confusion. There has been upheaval connected to loss of services in the Healthy Families transition and the elimination of the Adult Day Health Care program and eventual court-influenced creation of Community Based Adult Services. There were computer issues that hampered the launch of Covered California and created a massive backlog in unfinished Medi-Cal applications. There has been wariness and confusion around the Cal MediConnect program, threatening the viability of the Coordinated Care Initiative.

With so many concurrent projects, changes and shifting objectives, Wright said, there were going to be problems.

“California is a big enough state that you can have overall success, even if you still have issues and problems to handle,” Wright said.

Pourat said the success in coverage increases is a notable achievement, and everyone knows there’s still a lot to do.

“California has been able to cover so many more people, and to make it affordable, the coverage expansion has been a tremendous success,” Pourat said. “But we still have people who fall through this particular net. It takes time to work out the kinks. If anybody thought this could be implemented without any flaws, well, that’s not realistic.”

Wright said there are four categories of progress he would like to see in the next five years:

  • Make the system more consumer-friendly. “There’s the work associated with making this all work better,” he said. “Making the consumer experience easier and more streamlined, whether that’s a better website, a more accurate provider directory, better quality-rating tools or targeted ratings, or getting more of the eligible enrolled. We are making progress but we’re not quite there.”
  • Enroll more people. There are still two to three million residually uninsured in California, including a large undocumented population. “It’s critical for the health system as a whole for everyone to be insured,” Wright said. “The system is stronger when everyone’s included.”
  • Refine the delivery of care. After enrollment, people need access to care.
  • Ensure sustainability of the system. “And finally there’s the agenda of improving the triple aim of cost, quality and value,” Wright said. “How do you sustainably improve the health of all Californians? How can we have the right incentives to get the right care at the right time?”

Five Years a Long Time?

Pourat said the multiple efforts the state has undertaken — coverage expansion, shifting to managed care and creation of the exchange — have transformed the health care system in California to a point where it’s hard to think back to a time when they didn’t exist.

“The idea has been to convert the safety net from a provider of last resort to almost like an insurance product,” Pourat said. “That includes support services and a designed benefit package. Elimination of denial of care because of pre-existing conditions, all of those things together are huge,” she said.

“It has been a tremendous designed experiment,” Pourat said.

“You have to think of the ACA as a platform,” Wright said. “It’s not a ceiling or a goal, it’s a platform for ongoing reforms.”

If California had maintained the status quo, Cantwell said, the state would likely have needed to make more budget cuts to health care than it already has made.

“We would have been in a place where we would’ve lost our safety-net systems,” she said, “and probably lost all of our public hospitals.”

“Five years ago,” Wright said, “the health care system had all of these outward problems but had incentives that went the wrong way. Now we have the tools to take these additional steps.”

“The coverage gains from the ACA is just part of the bigger picture,” Pourat said. “We still have many other issues we have to deal with. We still need to do something big about how we deliver care.”

And that pretty much sums up the next five years.

Categories: Insight, The Health Law

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