California is known for progressive everything, including its health care policies, and, just a few weeks into 2020, state leaders aren’t disappointing.
The politicians’ health care bills and budget initiatives are heavy on ideas and dollars — and on opposition from powerful industries. They put California, once again, at the forefront.
The proposals would lower prescription drug costs, increase access to health coverage, and restrict and tax vaping. But most lawmakers agree that homelessness will dominate the agenda, including proposals to get people into housing while treating some accompanying physical and mental health problems.
“This budget doubles down on the war on unaffordability — from taking on health care costs and having the state produce our own generic drugs to expanding the use of state properties to build housing quickly,” Gov. Gavin Newsom said in a letter to the legislature, which accompanied the $222.2 billion budget proposal he unveiled last Friday. About a third of that money would be allocated to health and human services programs.
But even with a Democratic supermajority in the legislature, these proposals aren’t a slam-dunk. “There are other factors that come into play, like interest groups with strong presence in the Capitol,” including Big Pharma and hospitals, said Shannon McConville, a senior researcher at the nonpartisan Public Policy Institute of California.
Newsom’s plan to create a state generic drug label is perhaps his boldest health care proposal in this year’s budget, as it would make California the first state to enter the drug-manufacturing business. It may also be his least concrete.
Newsom wants the state to contract with one or more generics manufacturers to make drugs that would be available to Californians at lower prices. Newsom’s office provided little detail about how this would work or which drugs would be produced. The plan’s cost and potential savings are also unspecified. (Sen. Elizabeth Warren of Massachusetts, who is seeking the Democratic presidential nomination, proposed a similar plan at the federal level.)
Because the generics market is already competitive and generic drugs make up a small portion of overall drug spending, a state generic-drug offering would likely result in only modest savings, said Geoffrey Joyce, director of health policy at USC’s Leonard D. Schaeffer Center for Health Policy & Economics.
However, it could make a difference for specific drugs such as insulin, he said, which nearly doubled in price from 2012 to 2016. “It would reduce that type of price gouging,” he said.
Representatives of Big Pharma said they’re more concerned about a Newsom proposal to establish a single market for drug pricing in the state. Under this system, drug manufacturers would have to bid to sell their medications in California, and would have to offer prices at or below prices offered to any other state or country.
Californians could lose access to existing treatments and groundbreaking drugs, warned Priscilla VanderVeer, vice president for the Pharmaceutical Research and Manufacturers of America, the industry’s lobbying arm.
This proposal could “let the government decide what drugs patients are going to get,” she said. “When the governor sets an artificially low price for drugs, that means there will be less money to invest in innovation.”
Newsom’s drug pricing proposals build on his executive order from last year directing the state to negotiate drug prices for the roughly 13 million enrollees of Medi-Cal, the state’s Medicaid program for low-income residents. He also ordered a study of how state agencies could band together — and, eventually, with private purchasers such as health plans — to buy prescription drugs in bulk.
California has the largest homeless population in the nation, estimated at more than 151,000 people in 2019, according to the U.S. Department of Housing and Urban Development. About 72% of the state’s homeless slept outside or in cars rather than in shelters or temporary housing.
Newsom has asked for $1.4 billion in the 2020-21 state budget for homelessness, most of which would go to housing and health care. For instance, $695 million would boost health care and social services for homeless people via Medi-Cal. The money would fund programs such as recuperative care for homeless people who need a place to stay after they’ve been discharged from the hospital, and rental assistance if a person’s homelessness is tied to high medical costs.
A separate infusion of $24.6 million would go to the Department of State Hospitals for a pilot program to keep some people with mental health needs out of state hospitals and in community programs and housing.
California has some of the strongest protections against surprise medical bills in the nation, but millions of residents remain vulnerable to exorbitant charges because the laws don’t cover all insurance plans.
Surprise billing occurs when a patient receives care from a hospital or provider outside of their insurance network, and then the doctor or hospital bills the patient for the amount insurance didn’t cover.
Last year, state Assembly member David Chiu (D-San Francisco) introduced legislation that would have limited how much hospitals could charge privately insured patients for out-of-network emergency services. The bill would have required hospitals to work directly with health plans on billing, leaving the patients responsible only for their in-network copayments, coinsurance and deductibles.
But he pulled the measure because of strong opposition from hospitals, which criticized it as a form of rate setting.
Chiu said he plans to resume the fight this year, likely with amendments that have not been finalized. But hospitals remain opposed to the provision that would cap charges, a provision that Chiu says is essential.
“We continue to fully support banning surprise medical bills, but we believe it can be done without resorting to rate setting,” said Jan Emerson-Shea, a spokesperson for the California Hospital Association.
Medi-Cal For Unauthorized Immigrants
California is the first state to offer full Medicaid benefits to income-eligible residents up to age 26, regardless of their immigration status.
Now Democrats are proposing another first: California could become the first to open Medicaid to adults ages 65 and up who are in the country illegally.
Even though Medicaid is a joint state-federal program, California must fund full coverage of unauthorized immigrants on its own.
Newsom set aside $80.5 million in his 2020-21 proposed budget to cover about 27,000 older adults in the first year. His office estimated ongoing costs would be about $350 million a year.
Republicans vocally oppose such proposals. “Expanding such benefits would make it more difficult to provide health care services for current Medi-Cal enrollees,” state Sen. Patricia Bates (R-Laguna Niguel) said in a prepared statement.
Dozens of California cities and counties have restricted the sale of flavored tobacco products in an effort to curb youth vaping.
But last year, state legislators punted on a statewide ban on flavored tobacco sales after facing pressure from the tobacco industry.
Now, state Sen. Jerry Hill (D-San Mateo) is back with his proposed statewide flavor ban, which may have more momentum this year. Since last summer, a mysterious vaping illness has sickened more than 2,600 people nationwide, leading to 60 deaths, according to the Centers for Disease Control and Prevention. In California, at least 199 people have fallen ill and four have died.
Hill’s bill would ban retail sales of flavored products related to electronic cigarettes, e-hookahs and e-pipes, including menthol flavor. It also would prohibit the sale of all flavored smokable and nonsmokable tobacco products, such as cigars, cigarillos, pipe tobacco, chewing tobacco, snuff and tobacco edibles.
Newsom has also called for a new tax on e-cigarette products — $2 for each 40 milligrams of nicotine, on top of already existing tobacco taxes on e-cigarettes. The tax would have to be approved by the legislature as part of the budget process and could face heavy industry opposition.
Tobacco-related bills are usually heard in the Assembly Governmental Organization Committee, “and that is where a lot of tobacco legislation, quite frankly, dies,” said Assembly member Jim Wood (D-Healdsburg), who supports vaping restrictions.
Private health insurance is a conduit for exploding health care spending, and there’s no end in sight.
The big picture: Most politicians defend this status quo, even though prices are soaring. And as the industry’s top executives and lobbyists gathered this week in San Francisco, some nodded to concerns over affordability — but then went on to tell investors how they plan to keep the money flowing.
Americans worry a lot about how to get and pay for good health care, but the 2020 presidential candidates are barely talking about what’s at the root of these problems: Almost every incentive in the U.S. health care system is broken.
Why it matters: President Trump and most of the Democratic field are minimizing the hard conversations with voters about why health care eats up so much of each paycheck and what it would really take to change things.
It was always misleading. Now Democrats are repeating it.
There’s a dangerous talking point being repeated in the Democratic primary for president that could affect the survival of millions of people, and the finances of even more. This is partly my fault.
When the candidates discuss health care, you’re bound to hear some of them talk about consumer “choice.” If the nation adopts systemic health reform, this idea goes, it would restrict the ability of Americans to choose their plans or doctors, or have a say in their care.
It’s a good little talking point, in that it makes the idea of changing the current system sound scary and limiting. The problem? It’s a P.R. concoction. And right now, somewhere in their plush corporate offices, some health care industry executives are probably beside themselves with glee, drinking a toast to their public relations triumph.
I should know: I was one of them.
To my everlasting regret, I played a hand in devising this deceptive talking point about choice when I worked in various communications roles for a leading health insurer between 1993 and 2008, ultimately serving as vice president for corporate communications. Now I want to come clean by explaining its origin story, and why it’s both factually inaccurate and a political ploy.
Those of us in the insurance industry constantly hustled to prevent significant reforms because changes threatened to eat into our companies’ enormous profits. We were told by our opinion research firms and messaging consultants that when we promoted the purported benefits of the status quo that we should talk about the concept of “choice”: It polled well in focus groups of average Americans (and was encouraged by the work of Frank Luntz, the P.R. guru who literally wrote the book on how the Republican Party should communicate with Americans). As instructed, I used the word “choice” frequently when drafting talking points.
But those of us who held senior positions for the big insurers knew that one of the huge vulnerabilities of the system is its lack of choice. In the current system, Americans cannot, in fact, pick their own doctors, specialists or hospitals — at least, not without incurring huge “out of network” bills.
Not only does the current health care system deny you choice within the details of your plans, it also fails to provide many options for the plan itself. Most working Americans must select from a limited list made by their company’s chosen insurance provider (usually a high-deductible plan or a higher-deductible plan). What’s more, once that choice is made, there are many restrictions around keeping it. You can lose coverage if your company changes its plan, or if you change jobs, or if you turn 26 and leave your parents’ plan, among other scenarios.
This presented a real problem for us in the industry. Well aware that we were losing the “choice” argument, my industry colleagues spent millions on lobbying, advertising and spin doctors — all intended to muddy the issue so Americans might believe that reform would somehow provide “less choice.” Recently, the industry launched a campaign called “My Care, My Choice” aimed in part at convincing Americans that they have choice now — and that government reform would restrict their freedom. That group has been spending large sums on advertising in Iowa during this presidential race.
This isn’t the first time the industry has made “choice” a big talking point as it fights health reform. Soon after the Affordable Care Act was passed a decade ago, insurers formed the Choice and Competition Coalition and pushed states not to create insurance exchanges with better plans.
What’s different now is that it’s the Democrats parroting the misleading “choice” talking point — and even using it as a weapon against one another. Back in my days working in insurance P.R., this would have stunned me. It’s why I believe my former colleagues are celebrating today.
The truth, of course, is that Americans now have little “choice” when it comes to managing their health care. Most can’t choose their own plan or how long they retain it, or even use it to select the doctor or hospital they prefer. But some reforms being discussed this election, such as “Medicare for all,” would provide these basic freedoms to users. In other words, the proposed reforms offer more choice than the status quo, not less.
My advice to voters is that if politicians tell you they oppose reforming the health care system because they want to preserve your “choice” as a consumer, they don’t know what they’re talking about or they’re willfully ignoring the truth. Either way, the insurance industry is delighted.
I would know.
Sutter Health, a 24-hospital system based in Sacramento, Calif., has agreed to pay $575 million to settle an antitrust case brought by employers and California Attorney General Xavier Becerra.
The settlement resolves allegations that Sutter Health violated California’s antitrust laws by using its market power to overcharge patients and employer-funded health plans. The class members alleged Sutter Health’s inflated prices led to $756 million in overcharges, according to Bloomberg Law.
Under the terms of the settlement, Sutter will pay $575 million to employers, unions and others covered under the class action. The health system will also be required to make several other changes, including limiting what it charges patients for out-of-network services, halting measurers that deny patients access to lower-cost health plans, and improving access to pricing, quality and cost information, according to a Dec. 20 release from Mr. Becerra.
To ensure Sutter is complying with the terms of the settlement, the health system will be required to cooperate with a court-approved compliance monitor for at least 10 years.
Mr. Becerra said the settlement, which he called “a game changer for restoring competition,” is a warning to other organizations.
“This first-in-the-nation comprehensive settlement should send a clear message to the markets: if you’re looking to consolidate for any reason other than efficiency that delivers better quality for a lower price, think again. The California Department of Justice is prepared to protect consumers and competition, especially when it comes to healthcare,” he said.
A Sutter spokesperson told The New York Times that the settlement did not acknowledge wrongdoing. “We were able to resolve this matter in a way that enables Sutter Health to maintain our integrated network and ability to provide patients with access to affordable, high-quality care,” said Flo Di Benedetto, Sutter’s senior vice president and general counsel, in a statement to The Times.
The settlement must be approved by the court. A hearing on the settlement is scheduled for Feb. 25, 2020.