Q&A: John Baackes, CEO of LA Care Health Plan, on the Coexistence of a Public Option and Private Insurance – State of Reform
John Baackes is CEO of LA Care Health Plan, a public health insurance company that covers over two million underserved people in California. Baackes describes LA Care as the only functioning public option in the country, serving as an anchor in the state health insurance market to ensure the availability of affordable health care for low-income Californians.
In these Q&A, Baackes describes that while he believes the public health insurance options are a great solution to high uninsured rates, they should exist in conjunction with commercial plans rather than completely replacing them. He also talks about LA Care’s ongoing efforts to capture more undocumented people, its frustration with the lack of safety net-focused laws, and how its organization is addressing health inequalities in California.
Eli Kirschbaum: Recent laws have given undocumented greater medical coverage, with California now ignoring immigration status for those under the age of 26. The legislature and Gov. Newsom both support extending this provision to seniors. How does LA Care feel about this and how do you want to integrate more undocumented people into your services?
John Baackes: “The important thing here is that it is 100% state money. So for all other Medic-Cal beneficiaries, there is a federal contribution that, when you are done with all the math, almost two-thirds of it is paid by federal agencies. So the missions take on the undocumented – they pay one hundred percent of the bill. So many of us naturally think that an undocumented person should provide medical assistance because now they are going to community health centers and state qualified health centers and being treated almost like charitable care, because that is the mission of these organizations.
But we have seen that this is not a good solution because they do not have continuous support. If you have an emergency you end up in the emergency room and again you are a non-paying patient, and then we have all these other programs to try to help the safety net providers that are going to see you. So it seems a lot more logical, just simple [say]”Let’s just find out what it’s going to cost to provide the care for them and make it be more direct, and then we don’t need those safety net programs to sort of put that thing in.”
For example, when I was in New York – and there are safety net programs for the uninsured – they paid for it through taxes on every person with health insurance in the state. There was a poll tax. And every time someone was in a hospital bed, there was a bed tax. And that money was generating about three billion (dollars) a year in the 90s, and so they then compensated the hospitals and clinics that people went to for free who didn’t have insurance.
We’re spending the money anyway, it just seems more logical to use it directly and then not have to rely on these other gimmicks to create the safety net we need. “
EK: You said that you view LA Care as a form of public health insurance option and have written about how it can serve as a model for other states to have their own public option initiatives. What should other states planning to implement such programs – such as Colorado and Nevada – learn from the success of LA Care?
JB: “We speak of ourselves as the only working public option in the United States. And we use the definition of the public option, but within that of the. adopted draft law [U.S.] House of Representatives in 2010 – their version of the Affordable Care Act. Then they sent it to the Senate and the Senate dropped it so it wouldn’t be included in the final bill.
But in that law eleven years ago, the House of Representatives defined the public option as a government agency that competes with commercial insurers in the individual market. And the thought was that if you had a public entity that had no shareholders and could operate on lower margins, you’d be good competition for the commercial plans. So the most important part of the definition is that the government did not set the level of reimbursement to providers – that was left to the plan, the public option. The public option was believed to be on par with the commercial plans, and that is exactly what happened here in LA.
We have to make an offer at Covered California every year to take part in the single market exchange here in California. We also need to involve a network of doctors and we need to propose the price so we have to do something to get doctors to participate and give us a competitive premium. And we’ve been doing that since 2014.
There are sixteen public plans in California … They are all public entities and operate as nonprofits and with complete transparency. Of those sixteen, we are the only ones in the private California insured insurance market. And our record is pretty good. We’ve been in for seven years now, we’ve covered 100,000 lives, and only do business in Los Angeles County, where we’ve had five competitors all along. And in the fourth year of the program, we hit the lowest price we’ve enjoyed in two years.
Then, in the sixth year, our competitors sharpened their pencils and lowered their premiums, and we were in fourth place. And then we came back in the seventh year with a rate drop of four and a half percent. And nobody got out, we had the same competitors all along, and it worked. And that’s the point about the public option. It’s not a single payer, it’s not Medicare for everyone. It is a public body with no shareholders and competes on an equal footing with the commercial plans. We have to follow the same rules as the commercial plans to stay in Covered California. “
EK: What specific bills are you looking at during this session? What do you hope for from the legislature in terms of health insurance coverage?
JB: “After the pandemic, we are obviously pursuing efforts to increase coverage for the undocumented. Whatever they can work out, the wider it is, the better. Ultimately, we feel that everyone needs to be covered.
[For] As for the rest of the bills currently in the legislature, we have been very concerned about the development of health information exchanges, which we support, but we want it to take place on a regional rather than a national basis. The bill looks like it’s on hold. I think it’s more the bills that we don’t see.
What the pandemic showed, in my opinion, is that Medi-Cal in California was likely the form of insurance used by most of the people who contracted COVID or were hospitalized. Because if you look at the demographic data of who got sick, who was hospitalized and who died, it is people who are eligible for Medi-Cal. And we certainly saw it in our demands during the height of the pandemic, and our financial performance has been heavily influenced by it over the past year.
So what I don’t see in the legislature is a discussion of how they will protect the safety net providers who really have borne the brunt. Let me give you an example. MLK Hospital is a 130-bed community hospital in South Los Angeles. At the height of the pandemic in January, all 130 beds were occupied by COVID patients. They had other patients they put in beds and conference rooms [in] the gift shop – they kept walking, and all at once they were up to a few hundred patients.
They go to another teaching hospital in town, and at the height of the pandemic, 42% of their beds were occupied by COVID patients. So the difference is that the teaching hospital had a mix of payers in its advertising [patients] as well as Medicaid and Medi-Cal, while for the MLK hospital all these patients are patients [eligible for] So Medi-Cal who were there got the lowest reimbursements and yet they had the biggest boost in terms of community response.
We’re not taking the lessons we’ve learned and trying to strengthen the safety net by giving it the resources it needs. So there is no law in that direction and I think the legislature needs to talk about that and it has to be a long-term, multi-year perspective.
[In] Medicaid is at the bottom of the basic architecture of how we pay for health care. Yet the people who got sick during COVID were Medicaid members. Think about it. Most people don’t know that nearly a third of our Medicaid members work. It’s not a program for people who don’t work – people work.
… we have had higher rates of COVID infections, hospital admissions and deaths among ours [Medi-Cal] Members. If Medicaid is going to be the relapse in a pandemic because the pandemic follows the people who are most disadvantaged because they cannot do the things that other people with more resources can do, then we should treat them better than treat them it as that kind of “Oh yeah, and then there’s Medicaid” and [giving it] a much smaller portion of the cake. “
EK: What is LA Care doing to address the increasingly apparent racial differences in California health care?
JB: “One of the things we noticed when the pandemic started was that many of the people who had Medicaid – who worked and had Medicaid – had health insurance when they lost their jobs. But they had no income, so they had no food either. So we saw – and we don’t care – that the Department of Public Social Services reported to us that the number of applications for CalFresh had increased by 200%.
Because of this, we launched a series of pantries that we created from our community resource centers. We have eight of them across the county and are building six more. And these are essentially health education centers and roadside customer service points. So we organized pantries at these events together with other community organizations that could take over the food part. We took over the logistics and the advertising and the funding for it … And [with] Everyone we’ve ever had we’d be giving away the food in two hours and there would still be a line.
So we felt that this was a way for us to provide basic nutrition to people during the pandemic, which is a very important concern for our members. We then ran a number of flu clinics in the fall trying to get people to get the flu vaccine so people wouldn’t get the flu and then compete with COVID patients for hospital beds and other resources. ”
This interview has been edited for clarity and length.