Q&A: John Baackes, CEO of LA Care Health Plan on the Coexistence of Public Option and Private Insurance – State of Reform


John Baackes is the CEO of LA Care Health Plan, a public health insurance company that provides coverage to more than two million underprivileged individuals in California. Baackes refers to LA Care as the only functioning public option in the country, serving as an anchor in the state’s health insurance market to ensure the availability of affordable health care for low-income Californians.

In this Q&A, Baackes describes how, while he believes public health insurance options are a great solution to high uninsured rates, they should coexist with commercial plans rather than replace them entirely. He also discusses LA Care’s ongoing efforts to cover more undocumented migrants, his frustration with the lack of safety net-focused bills in the legislature, and how his organization is addressing health inequalities in California.

Eli Kirshbaum: Recent laws have extended Medi-Cal coverage to undocumented migrants, with California now banning immigration status from eligibility for coverage for those under 26. The legislature and Newsom government both support extending this provision to seniors. Where does LA Care stand in this, and how do you plan to integrate more undocumented migrants into your services?

John Baackes: “The most important thing to remember is that this is 100% state money. So on all other Medi-Cal beneficiaries, there’s a federal dues, which, by the time you’re done with all the math… So it’s about undocumented migrants – they pay one hundred percent of the bill. So many of us, of course, think that someone should provide health care to undocumented migrants because now they go to community health centers and federally qualified health centers and are treated almost like charitable care because that’s the mission of those organizations.

But we’ve seen that’s not a good solution because they don’t have continuity of care. If they have an emergency, they end up in the emergency room, and again, they end up as a non-paying patient, and then we have all these other programs to try and provide support to those safety net providers that they’re going to see. So it seems much more logical to just [say]”Let’s see what it’s going to cost to provide the care for them and do it that way so it’s more direct, and then we don’t need these safety net programs to build the thing in.”

For example, when I was in New York — and they have safety net programs for the uninsured — they paid for it through taxes on every person who had health insurance in the state. There was a main 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 that’s how they made up for the hospitals and clinics that people saw for free, who didn’t have insurance.

We’ll spend the money anyway, it just seems more logical to use it right away, and not depend on those other gimmicks to provide the safety net we need.”

EC: You have mentioned that you view LA Care as a form of public health insurance and have written about how it can serve as a model for other states pursuing their own public option initiatives. What should other states planning such programs, such as Colorado and Nevada, learn from LA Care’s success?

JB: “We talk about ourselves as the only functioning public option in the United States. And we use the definition of public option, but within the bill passed by the [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 didn’t make it into the final bill.

But in that legislation of 11 years ago, the House of Representatives defined the public option as a government agency that competes on the individual market with commercial insurers. And the thinking was that if you had a public entity that had no shareholders and could operate at lower margins, you would offer good competition to the commercial plans. So the most important thing to remember in the definition is that the government didn’t set the amount of compensation to the providers – that was left to the plan, the public option. It was assumed that the public option would be on par with the commercial plans, and that’s exactly what happened here in LA.

We have to bid every year to Covered California to participate in the individual market exchange here in California. We also have to include a network of doctors and we have to propose the price, so we have to do something to get the doctors to participate and allow us to have a competitive premium. And we have been doing this since 2014.

There are sixteen public plans in California… They are all public entities and operate as non-profit organizations and with complete transparency. Of those sixteen, we are the only one participating in the California private insurance market. And our record is pretty good. It’s now seven years later, we’ve covered 100,000 lives, and we’re only active in Los Angeles County, where we’ve had five competitors all along. And by the fourth year of the program, we hit the lowest price, which we enjoyed for two years.

Our competitors then sharpened their pencils and lowered their premium for the sixth year, and we were in fourth place. And then we came back into the seventh year with a rate drop of four and a half percent. And no one has dropped out, we’ve had the same competitors all along and it has worked. And that’s the point of the public option. It’s not one payer, it’s not Medicare for everyone. It is a public body without shareholders that competes on a level playing field with the commercial plans. We have to comply with the same rules as the commercial plans to stay in Covered California.”

EC: What are some specific accounts you look at this session? What do you hope the legislators achieve regarding health insurance coverage?

JB: “Obviously as we emerge from the pandemic, we will follow efforts to increase coverage for undocumented migrants. So whatever they can work out, the wider it is, the better. Ultimately, we believe that everyone should be covered.

[For] In the rest of the bills now in the legislature, we were very concerned about developing a health information exchange, which we are in favor of, but we want it to be on a regional basis and not a state wide basis. That account appears to have been suspended. So I think it’s more the bills that we don’t see.

What I think the pandemic has shown is that in California, Medi-Cal was probably the form of insurance used by most people who got COVID or were hospitalized. Because if you look at the demographics of who got sick, who was hospitalized and who died, it’s people who qualify for Medi-Cal. And we certainly saw it in our claims during the height of the pandemic, and our financial performance was heavily impacted by it last year.

So what I don’t see in the legislature is a discussion about how they’re going to protect the safety net providers that really take the brunt of it. Let me give you an example. MLK Hospital is a 130-bed community hospital in South Los Angeles. At the peak of the pandemic in January, all 130 beds were filled with COVID patients. They had other patients that they put in beds and conference rooms, [in] the gift shop – they kept running and at one point they were up to a few hundred patients.

You go to another teaching hospital in town and at the height of the pandemic, 42% of their beds were filled with COVID patients. And so the difference is that the university hospital had a mix of payers in their commercial [patients] as well as Medicaid and Medi-Cal, while for the MLK hospital all those patients were [eligible for] Medi-Cal out there, so they got the lowest level of compensation, and yet they had the highest amount of lift in terms of responding to the community.

We don’t take the lessons learned and try to make the safety net stronger by giving it the resources it needs. So there’s no bill to that effect, and I think that’s something the legislature needs to talk about, and it needs to be a long-term vision for several years.

[In] the basic architecture of how we pay for healthcare, Medicaid is at the bottom. And yet the people who got sick during COVID were Medicaid members. Think about it. Most don’t realize that among our Medicaid members, nearly a third of them are working. It’s not a program for people who don’t work – people work.

…we had higher rates of COVID infections, hospitalizations and deaths among our [Medi-Cal] members. If Medicaid becomes the setback in a pandemic, because the pandemic follows the people who are most disadvantaged because they can’t do the things that other people with more resources can do, then we should treat it better instead of treating it like this kind of, “Oh yeah, and then there’s Medicaid,” and… [giving it] a much smaller slice of the pie.”

EC: What is LA Care doing to address the increasingly apparent racial disparities in California’s health care?

JB: “When the pandemic started, one of the things that struck us is that many of the people who had Medicaid – who were in work and had Medicaid – when they lost their jobs, they had health care coverage. But they had no income, so no food. So we saw – and we don’t cover this – the Department of Public Social Services reported to us that they had a 200% increase in applications for CalFresh.

We recognize that and launched a series of food pantries that we did from our community centers. We have eight across the province and we’re building six more. And these are basically street health education centers and customer service points. So we organized food pantries at these events with other community organizations that could arrange the food portion. We took care of the logistics and the advertising and promotion of it… And [with] everyone we ever had we would give away all the food in two hours and there would still be a line.

So we felt this was a way for us to help people with basic nutrition during the pandemic, which is a very important issue for our members. Then in the fall we ran a series of flu clinics as we tried to get people vaccinated against the flu so we wouldn’t have people getting infected with the flu and then competing with COVID patients for hospital beds and other resources. ”

This interview has been edited for clarity and length.

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