Skip to content

Think Tank

Setting Priorities in Health Care Special Session and Beyond

California’s march toward health care reform may be picking up speed after clearing several hurdles over the past year coupled with the election of a supermajority of Democrats in the state Legislature.

Three major obstacles slowed and threatened to halt the process in 2012: a Supreme Court challenge, the presidential election and voters’ approval of new taxes.

Now, by most accounts, it’s full speed ahead. As a precursor to shifting into a higher gear, the Democrat-dominated Legislature will convene a special session next month on health care.

We asked legislators and stakeholders to use post-election perspective to tell us what priorities should be in the special session. And looking ahead to the legislative year, we asked what health care issues they see on the horizon for 2013.

We got responses from:

Governor May Try To Slow Pace of Reform

The Supreme Court decision on the Affordable Care Act, the convincing re-election of President Obama and the passage of Proposition 30 were all tremendous victories that added wind to the sails of health reform. Unfortunately, the potential roadblock that still remains is the apparent reluctance of Gov. Jerry Brown’s (D) administration to fully embrace the Medicaid expansion. 

The “all or nothing” guidance on Medicaid that came down this week from the White House is helpful to those of us working to maximize coverage, but I remain worried we may see an effort from the governor’s office to slow reform during the special session — something I consider unwise given the rare opportunity we have in front of us.

My priorities in the special session will be to:

  1. Move forward with the Medicaid expansion that was envisioned by the president and will both maximize coverage and federal dollars coming to California;
  2. Reintroduce an individual market reform bill that will, among other things, ensure Californians are never again denied coverage due to a pre-existing condition; and
  3. Aggressively pursue the Basic Health Plan option so that low-income, working Californians have coverage they can actually afford.

Coverage expansion will be meaningless, however, if the newly covered lack meaningful access to a health care provider. While I am optimistic that the ACA will help improve both the efficiency and effectiveness of how we deliver health care in California, it will actually exacerbate the serious health care workforce shortage we face in many regions of the state. That is why my focus will be on moving a package of bills to help ensure that the very people who will soon be mandated to purchase coverage are actually able to use that coverage to see a provider.

We need to look at both short-term and long-term solutions to address this problem. It is critical that we find ways to train more physicians, and I will have at least one bill in the coming year to increase funding for graduate medical education. However, if we were able to wave a magic wand and double the number of students entering medical school tomorrow, they would not be ready to practice for 10 years or more. If we are serious about addressing this shortage now, it means making more efficient use of our existing health care workforce, including allowing a broad spectrum of health professionals to practice to the full extent of their training.

2014 the Beginning -- Not End -- of Transition

The immediate priority in the special session is to put into place laws necessary for successful implementation of the Affordable Care Act in California. The Supreme Court ruling and the re-election of President Obama this year provided certainty about the future of the ACA.

California’s own election created even more opportunities for health care reform. 

California leads in ACA implementation, but there is still a great deal to do at both the state and federal levels. As the federal government is now releasing many ACA-related regulations, California needs legislation by mid-2013 to expand Medi-Cal and set rules for the Health Benefit Exchange, which begins operating Jan. 1, 2014. However, 2014 is not the end, but rather the beginning of a health care system transition. 

Issues including preserving the safety net for those not covered in the ACA, incentives for health care delivery improvements, wellness incentives, health professions work force capacity and the Basic Health Plan will also be debated. 

Even as California addresses the tremendous changes resulting from ACA implementation, the state also is transitioning many of the most vulnerable Californians into Medi-Cal managed care plans, including seniors and persons with disabilities, Medicare/Medi-Cal-eligible beneficiaries, beneficiaries in rural counties and children in Healthy Families. If done with input and cooperation from patients and their caretakers and health care providers and with a priority on sufficient access and quality of care, the Medi-Cal transitions can benefit patients and the state. With the addition of the ACA’s Medi-Cal expansion, Medi-Cal reform that transparently demonstrates quality and assures equal access to providers and services is needed. Legislative oversight of Medi-Cal will be a priority in the coming session.

As a practicing physician, a small business owner paying for employee health care coverage, a children’s health initiative leader working with health plans to assure access to care, and a legislator who votes on state budgets, I have experienced trying to make California’s health care system work from many different perspectives. Through the ACA, government can seek to create an environment that rewards providers and plans for preventing illness and providing cost-effective, high-quality care to patients with chronic and acute diseases and diminish incentives to avoid the sick or provide unnecessary services. Ultimately, our goal should be access to affordable, quality health care for every Californian.

Medi-Cal Expansion, Individual Market Reforms Are Critical

The U.S. Supreme Court’s decision, the presidential election and passage of Prop. 30 clear the way for California to realize the dream and the promise of the Affordable Care Act. The Legislature needs to act quickly to ensure timely availability of coverage for enrollment starting just 10 months from now.

The special session is the forum for addressing two critical topics: Medi-Cal expansion and individual market reforms.

The big elephant in the room is expanding Medi-Cal to 138% of the federal poverty level and establishing the rules thereunder. This is essential to maximizing federal dollars and ensuring affordable care for the neediest Californians. “Doing good” for low-income Californians also means “doing well” for the state since federal reimbursement comes in at 100% for the newly eligible and the enhanced federal revenue stream will have a multiplier effect on the California economy — securing jobs and expanding health care industries here in the state.

Also, a small group health insurance reform bill was enacted in the last session, bringing California into compliance with the ACA for that market. Two other approved bills reform the individual insurance market.

SB 961 and AB 1461, by the health committees’ chairs, Sen. Ed Hernandez (D-West Covina) and Assembly member Bill Monning (D-Carmel), targeted the most dysfunctional part of the health insurance system and amended California law to comport with federal requirements. For example, the bills barred exclusion of applicants due to pre-existing conditions, set age bands and rating factors, and added a few additional, carefully crafted protections for consumers to prevent unauthorized medical underwriting through the back door. Those bills were vetoed, but now these reforms must be enacted with the special session’s quick effective date.

For individuals to get the coverage they need and to give Covered California the framework it needs to set up the benefits and the enrollment system under the ACA, the Medi-Cal expansion and individual market rules must get established quickly. The special session is the place where an open, robust policy discussion can take place in the expedited time frame required. October 2013 is just around the corner.

Medi-Cal Expansion First, Foremost

The 2013 special session will address both public health insurance programs and commercial market components. In this piece, I will focus on the former.

First and foremost, California should expand Medi-Cal as required by the Affordable Care Act to “childless adults” with incomes up to 138% of the federal poverty level ($15,415 annually for an individual). While the Supreme Court decided that the federal government could not withhold all Medicaid funds for states that do not expand coverage to these adults, failure to do so would be foolhardy for California, our residents, our health care industry and our state economy. With full expansion, California stands to draw down several billion dollars in federal funds depending on enrollment success. Enrolling these poorest adults into health coverage will improve their health and even save lives.

An important decision tied to the Medi-Cal expansion is what benefits to give to newly eligible Californians. The state can provide them with the same benefit package as existing Medi-Cal beneficiaries or a more commercial package. Providing the existing Medi-Cal benefit package makes sense because it was designed for low-income individuals and overseeing two different packages would be complicated and administratively expensive. There will still be medical necessity and authorization requirements for costlier services.

The ACA necessitates changes in Medi-Cal eligibility rules, including using tax rules for counting income and eliminating the assets test for most people. We have to streamline the process of renewing Medi-Cal, and in most cases, give up burdensome and administratively costly practices such as requiring paperwork with applications. We must expand Medi-Cal to former foster youth up to age 26 — the corollary to allowing young adults to stay on their parents’ coverage.

It is also important to establish exchange eligibility rules. The legislation establishing California’s exchange left open the specifics of an appeals process. With federal guidance forthcoming, establishing a clear process for appeals in our exchange should be a top priority.

The California Healthcare Eligibility, Enrollment & Retention System — CalHEERS — is being built as we speak and must be ready to take applications Oct. 1, 2013. There isn’t a minute to lose in finalizing the eligibility rules so they can be programmed into CalHEERS and assisters can be properly trained. All of these pieces should be resolved in the first quarter of 2013. Working together, the state and stakeholders can ensure the success of Obamacare in California. Our state’s health is too important to fail.

Interesting Challenges Ahead

The absence of a bright line between those health care policies that should be considered in the Legislature’s special session and those that may arise in the regular legislative session presents interesting challenges to the governor and lawmakers. What is clear is the number and breadth of pending health policy issues.

The passage of Prop. 30 – combined with the Supreme Court’s decision upholding the Affordable Care Act and the results of both the state and national elections — create certain imperatives. 

While Prop. 30 will help put the state in a better fiscal position, at least for the short-term, it is not a permanent solution. Further, California cannot grow itself out of the structural deficit. 

Consequently, programs and obligations that annually increase state expenditures must be addressed. The major cost drivers are public employee compensation (salaries and benefits), education and health care. All three categories are important. 

Each cost driver must be addressed in constructive, innovative ways if the state is to achieve long-term economic viability. Another challenge is the burdensome regulatory environment, which is regressive and oppressive. 

Key health care issues that must be addressed this year include:

Basic Health Program: The ACA authorizes states to establish a BHP to provide low-cost health care coverage to individuals who meet specified income criteria before the ACA’s coverage expansion begins on Jan. 1, 2014. Approximately 800,000 Californians with incomes between 133% and 200% of the federal poverty level would be eligible to enroll in a BHP. Legislation to create a BHP in California failed to pass in the last legislative session.

There are conflicting viewpoints on whether a BHP should be established. Some people believe that providing this population with coverage immediately should be a top priority. Others are concerned that a BHP will siphon off healthier individuals who would otherwise enroll in the state’s health benefits exchange, leaving the exchange with sicker individuals and higher costs. Research has produced conflicting conclusions to these questions.

Covered California: Formal implementation of health care reform will be launched when the open enrollment process for the state’s exchange begins in October. The Legislature should monitor policies and progress of Covered California and ensure that the goals of the ACA are achieved and that a balance is maintained between government and the private sector to gain maximum benefit of both.

Coordinated Care Initiative/Duals Demonstration: The ACA authorized demonstration projects aimed at improving the coordination of care for people who are eligible for both Medicare and Medicaid. There are approximately 1.2 million dual eligibles in California, and 380,000 of them reside in Los Angeles County.

Many questions remain about the state’s proposed dual eligible demonstration project, including the size and structure of the initiative, passive enrollment and “out-opt” provisions, separation of Medicare and Medi-Cal funds and payments, appeals processes, duration of the demonstration, and how savings are determined. Once the federal government and the state reach an agreement in the anticipated memorandum of understanding, implementing legislation will likely be required to capture the final terms of the agreement.

Medi-Cal Hospital Fee Program: The current Medi-Cal Hospital Fee Program expires Dec. 31, 2013. The supplemental funds generated by the fee program cover less than half of the Medi-Cal payment shortfalls to hospitals. In 2012, the Medi-Cal payment shortfall will exceed $5 billion. 

The California Hospital Association has sponsored three hospital fee programs since 2009 and likely will sponsor a fourth in 2013. This will require action by the Legislature.

Other Issues: Regardless of what happens at the federal level, many legislative and regulatory matters create a full plate for the Legislature and governor. Beyond the public arena in the private sector, market changes are occurring at an exponential rate and will influence public policy.

The confluence of existing laws, legislative actions, regulatory rules and market forces is producing the most dynamic period in history. The challenge to all of us is, “Do we have the vision, ingenuity, commitment to innovation and collaboration, and discipline to take advantage of this once-in-a-century opportunity?”

Expand Medi-Cal, Avoid Basic Health Plan

The Affordable Care Act faced many challenges over the past year, but the uncertainty surrounding the law is now behind us and it’s time for California to move forward and implement it in its entirety.

During the special session that Gov. Jerry Brown (D) is expected to call in January and over the coming year, lawmakers’ focus around implementing the ACA should include:

  • Passing an individual market reform bill to conform state law to the ACA. The sooner California evolves its health care model to adapt to the law’s requirements, the sooner entrepreneurs and the public will see its benefits. This is important for many elements of reform, including ensuring guaranteed issue for the self-employed, standardizing age band ratios and helping end “job lock” — a phenomenon in which an individual stays in a job simply for health benefits. In September, Brown vetoed a bill that would have modified state law to comply with health care reform out of concern that the bill was not tied to the fate of the ACA. Now that the law is here to stay, legislators should send the governor another bill that addresses his concern.
  • Regulate stop-loss insurance sold to small employers. In recent years, insurers have been increasingly marketing stop-loss coverage to entrepreneurs, encouraging them to self-insure. This is concerning, because self-insurance is financially risky for small businesses. Additionally, if small employers with healthy workers purchase stop-loss insurance instead of participating in the small group market, plan premiums could increase for small businesses that choose not to self-insure.
  • Review policies encouraging small businesses to implement workplace wellness programs. Entrepreneurs are increasingly interested in these programs to help reduce injuries, save money and increase workers’ productivity. These programs are also proven to reduce absenteeism and increase morale and loyalty. Policymakers should seek policies that encourage reasonable workplace wellness programs that benefit employers and employees and protect workers against discrimination.
  • Expand Medi-Cal. The Supreme Court made Medi-Cal expansion optional, so lawmakers should expand California’s program. This will benefit small business workers, many of whom are low-income and will qualify for the expanded coverage. It also ensures that more Californians are insured, thus stopping the cost shift that is driving up employers’ rates to cover the uninsured.
  • Refrain from passing any bill that would create a Basic Health Plan. A BHP would create a new public health insurance program that would likely underpay providers, thus shifting costs to small employers. Furthermore, the BHP would remove as many as one million people from the health benefit exchange, shrinking its negotiating power and possibly raising rates.

Consumers Need Useful Information More Than Ever

Rising health care costs have only accelerated the trend toward consumer-driven health care, as employers have asked consumers to shoulder a larger share of their medical costs. Millions of Californians who will soon have coverage through the exchange will also share in the cost of their care. Now, more than any time in history, California consumers need actionable information about health care quality and prices so they can choose the right care that is affordable.

The private sector has made important strides in the last year — health plans, other vendors and employers have built better consumer shopping tools. But such tools will be hampered by the voluntary nature of health plans and providers making such data available. On the national front, we now have more quality information available across most providers than ever before. But we have a long way to go making price information relevant and actionable for consumers. This is an area that could potentially benefit from smart public policy in 2013.

In California, one solid approach would be adding teeth to SB 751, legislation passed in 2011 that “permits” health plans to share provider price data with consumers, even when contracted providers used “gag clauses.” By some accounts, the plans have been meek about asking for this data due to concerns about rocking the boat with large provider systems. Plans also have progress to make before the price information they share with members is comprehensive and actionable. Last summer, the Pacific Business Group on Health conducted a secret shopping expedition of plans’ online shopping tools and found many wanting.

Another approach would be a law that requires providers to give consumers “good faith estimates” for charges for common procedures, taking into consideration their insurance coverage and share of costs. Websites like the Office of Statewide Health Planning and Development’s Chargemaster Program could be enhanced to provide more detail about what a typical consumer would pay out of pocket, given the most common types of coverage and cost sharing in California. The California exchange could also provide an opportunity to build a platform comparing a growing number of procedures and estimated consumer costs, based on coverage type and level.

There will be a lot of conversation about the exchange and the newly insured in the next several months as we get ready for 2014. Now is a critical time in both the private and public sectors to put ourselves in the shoes of the California consumer, and get strong and creative as we think of ways to get them the information they need.

Decisions Made in 2013 Will Set Stage for Long-Term Change

Over the next two years, Americans will experience the biggest change to our health care system in a half century. Many of the decisions made in 2013 will set the stage for the long-term viability of our changed system.

From the day the Affordable Care Act was signed into law in 2010, California health plans made a conscious choice to look forward and work with policymakers and stakeholders to ensure a successful implementation.

The health care reform law expands coverage to millions of Americans, a goal health plans have long supported, but this goal can only be sustained if health care coverage is affordable. 

Each year, lawmakers are faced with a slew of proposals, including benefit mandates for a range of health care services that ultimately drive up the cost of medical care. In 2012, the governor vetoed several such cost drivers.

Major provisions of the reform law will cause premium increases:

  • A new $100 billion premium tax;
  • Age rating restrictions that will cause significant premium increases for younger individuals;
  • Limitations on how plans can price policies based on geography. In a large state like California, the price of medical care varies as greatly as the state’s topography; and
  • New benefit mandates that will force millions of consumers and employers to purchase coverage that is more comprehensive — and more expensive — than they have today. 

There is a lot at stake as 2014 rapidly approaches. As policymakers face a range of health care policy options, factoring the impact any proposal has on long-term health care affordability will be critical — as will focusing on only those issues that are most essential to implementation of the ACA in California.

Biggest Obstacle Left Is the Clock

If 2010 was the year the Affordable Care Act was passed, 2012 is the year it became real. With the Supreme Court decision and the election results, Obamacare is here to stay. In fact, hundreds of thousands of Californians already have new coverage under the law, and millions are already taking advantage of new benefits and consumer protections.

Earlier this month, Health Access hosted its 25th anniversary celebration, where we celebrated the progress made, but also the significant work to fulfill the promise of health reform. Hearing from legislative and administrative leaders, a couple of key tasks emerged for the next few months.

During the special session of the Legislature expected to be called for January, one order of business is to adopt the new rules for the individual insurance market. This goes beyond the basic ACA consumer protections that need to be placed into state law, such as the rule to prevent denials or even price discrimination due to pre-existing conditions, caps on charging for premiums due to age, or limits on excessive cost-sharing. The ultimate goal is to change the way insurers do business, so instead of competing based on avoiding sick people, insurers compete on cost, quality and customer service. The Legislature needs to pass the ground rules, but the regulators at the Department of Insurance and Department of Managed Health Care need to be vigilant so that we have a transformed and improved health insurance market that is affordable, transparent, organized, regulated, consumer-friendly, and geared toward lower cost, better quality care and providing greater financial security.

The other major task of the special session is to adopt the Medi-Cal expansion and make the key decisions to maximize the benefit of the federal law for the state and its families. We can cover hundreds of thousands of people in California, and the federal government will cover 100% of the cost for the first three years, and from 90% to 95% for every year thereafter. As the Legislature decides the benefit level for the newly eligible, and other changes to streamline the enrollment process, there’s an opportunity to maximize the federal dollars coming into our health system and our economy. We already have a half-million Californians in an early expansion of Medicaid coverage through county-based Low-Income Health Programs, and we can and should do more. Ultimately, California should seek mass enrollment of coverage on Day One, Jan. 1, 2014, through improvements in eligibility and enrollment, and the outreach effort to scale. Every day in 2014 that eligible Californians are not enrolled is a day we are leaving dollars in Washington, D.C. 

Finally, a priority for policymakers through all this work is to be mindful that even if California goes beyond covering half of its uninsured and is very successful, enrolling two-thirds, the state will have still have millions of uninsured to serve. So policies need to ensure the funding and support for a robust safety net that survives and thrives in a new environment. That means helping community clinics and public hospitals be medical homes for the newly-insured. We will need all the capacity we can muster.

The ACA is not the end of the work, and there will need to be continuing efforts to support improvements and additional reforms, from increased affordability, to new transparency, to providing help for those left uncovered, to specific new oversight on insurers. But the ACA provides a historic opportunity to make huge progress with its framework and funding — but only if California acts to take advantage. After close Congressional votes, court decisions and a consequential election, the biggest obstacle left is the clock. To meet the goal to start signing Californians up for coverage in October 2012, we have 10 short months. Let’s get to it.