Special Episode: Health Care in CA, Panel 2 – Office of Health Care Affordability

CAPITOL WEEKLY PODCAST: This Special Episode of the Capitol Weekly Podcast was recorded live at Capitol Weekly’s conference HEALTH CARE IN CALIFORNIA, which was held in Sacramento on Thursday, October 3, 2024

 This is PANEL 2 – OFFICE OF HEALTH CARE AFFORDABILITY: TARGETS

Panelists: Ben Johnson, California Hospital Association; Lynne Kinst, Hemophilia Council of California; Elizabeth Mitchell, Purchaser Business Group on Health; Dr. Richard Pan, California Health Care Affordability Board 

Moderated by Sigrid Bathen, Capitol Weekly

This transcript has been edited for clarity.

SIGRID BATHEN: I cover health care for Capitol Weekly, mainly mental health care, in recent years. I’m going to introduce the panelists. We’ve got a lot to cover here. So I want to get started and I want to stay in the background. You have the expertise here.

Ben Johnson is group vice president of financial policy. You can consult your programs for more detailed biographies. Ben is group vice president of financial policy at the California Hospital Association. Johnson formerly worked in the California Legislative Analyst’s Office, holding various positions, including principal, fiscal and policy analyst. The Hospital Association represents more than 400 hospitals throughout California and advocates for better, more accessible health care for all Californians.

Lynne Kinst is the executive director of the Hemophilia Council of California, former executive director of the Central California Hemophilia Foundation. Previously, she worked for the California State Board of Equalization and has worked for elected state officials in a variety of positions. And she is also very experienced in the hemophilia experience herself, so she can talk about that.

Elizabeth Mitchell is president and CEO of the Purchaser Business Group on Health, which advances PBGH’s strategic focus of advanced primary care, functional markets and purchasing value. She previously served as senior vice president for health care and community health transformation at Blue Shield of California. She’s a member of the Office of Health Care Affordability Board of Directors.

Doctor Richard Pan is a pediatrician, former California legislator with over 35 years of experience in health care, public health, and health policy, with a focus on the social determinants of health and health workforce. As a California legislator. Doctor Pan chaired the Assembly and Senate committees on Health, including authoring legislation to implement the Affordable Care Act and promote and promote public health.

I’d like to start with each of you describing your role and your perspectives and your organization’s perspectives. Maybe tell us a little bit more about your organizations, particularly on the issue of health care affordability. This is a new office within state government. The department that it’s in, the Department of Health Care Access and Information, used to be the OSHPD, The Office of State Health Planning and Development, which goes way back. I’ve covered a lot of health care reorganizations over the years. So if you can illuminate that, and we’re going to have to be brief because we have a lot to cover. So, Lynne, you want to start?

LYNNE KINST: So thank you so much for having us today. I’m Lynne Kinst, executive director of the Hemophilia Council of California. We represent over 4000 patients with hemophilia specifically, but also many more with other rare bleeding and blood disorders, including von Willebrand Disease and some other incredibly rare disorders. We’ve also in this past year created a new effort and initiative through the work that we’re doing at the Hemophilia Council, which is the California Rare Disease Access Coalition.

So we’re partnering with a lot of other rare disease patient groups to really try to bring the patient voice to these health care discussions. And I think that’s probably the biggest piece, and certainly what I feel like my role is here today when we talk about affordable health care, of course, everyone wants affordable health care. No one disagrees with that as a as an important goal. But from a patient perspective, and particularly from a rare disease patient perspective you know, the the patients that we work with and represent have complex, expensive, complicated conditions.

“My members spend about $350 billion a year on health care for about 25 million Americans, so they are very much invested in improving the value of the US health care system, which, as I assume most people know, is pretty bad.” – Elizabeth Mitchell

And there’s when you start talking about affordability, those patients start getting very concerned about what the tradeoffs are going to be what is going to be sacrificed in order to try to decrease those costs. And so we certainly agree with the mission and the goal, but we want to make sure that we’re really looking at that from a broad perspective and seeing how it’s impacting patients and access to care and, and the quality of that patient care.

SB: Thank you. Ben.

BEN JOHNSON: Is this working? I think so? So happy to be here with this great panel. So represent the hospitals here in California. Over 400 of them including public hospitals, critical access hospitals, teaching hospitals, safety net hospitals of all different kinds. And CHA and our members are deeply invested in improving affordability for Californians. For many years, we’ve been a proud and loud voice in terms of expanding coverage so that when folks visit the hospital, they’re not saddled with bills that instead they have coverage that defrays those costs that can often be extremely, extremely expensive.

Health Care in California, Panel 2: Office of Health Care Affordability – Targets. L-R: Sigrid Bathen, Capitol Weekly; Dr. Richard Pan, California Health Care Affordability Board; Elizabeth Mitchell, Purchaser Business Group on Health; Ben Johnson, California Hospital Association; Lynne Kinst, Hemophilia Council of California. Photo by Joha Harrison, Capitol Weekly

And so our members are doing things really every day to try to improve affordability for Californians, whether it’s when folks enter their the hospital rooms, they’ll help them sign up for Medi-Cal coverage, or they’ll offer free or discounted care and so forth. So hospitals really have been involved and participating in many, many efforts to improve affordability for many years.

We are participating and engaging heavily with this new Office of Health Care Affordability. I think we share a similar perspective as were just shared, that we agree that affordability remains a challenge despite major gains that have been made in recent years, such as through the various coverage expansions that, for example, former Senator Pan helped steward in the legislature. And we want to but we are concerned and do want to make sure that the gains that we have in terms of affordability do not come at the expense of patient care. We need to continue to promote and improve upon access, quality and equity, and we need to make sure that the efforts to to rein in costs are just ultimately supportive of everything that we want in the health care system.

SB: Elizabeth.

ELIZABETH MITCHELL: Sure. Thank you. My name is Elizabeth Mitchell. I represent the Purchaser Business Group on Health. We’re a 501C3 nonprofit. We’ve been around for about 35 years. We are a membership organization of large employers and public purchasers. So think, you know, Amazon, Walmart, Boeing, Apple, really large employers and public purchasers like CalPERS and the Washington Health Care Authority. So we are actually the people basically paying for all of this in addition to government, obviously, and families. That’s that’s who pays for health care.

And on the private side, we are basically the entire profit margin for the US health care system. So we’re well aware of that. My members spend about $350 billion a year on health care for about 25 million Americans, so they are very much invested in improving the value of the US health care system, which, as I assume most people know, is pretty bad.

So we are very committed to affordability. On behalf of the workforce member… my members have been absorbing, you know, double digit increases for the last several years on premiums. They are doing everything they can not to pass that on to employees because we know it’s already prohibitive. But there is only so much a company can absorb. And there isn’t just this endless magical pot of money out there. So we are very much invested in how do we contribute to strategies that actually enhance affordability. Obviously, access and quality are our top priorities.

“A lot of other countries spend a lot more on social services. We tend to spend a lot more on health care. But if you add the two together, we’re somewhere in the middle.” – Dr. Pan

And the good news is, is that not only in other countries, but most innovations in the US show that better care actually costs less. If you have better access to primary care. Our members are seeing 10 to 30% reductions in total cost of care because of avoiding unnecessary hospital admissions and avoiding other complications. So, I think it’s a false choice that we are talking about access versus affordability. And actually affordability is the biggest barrier to access. So we are very much focused on the innovations that enable better care at lower cost.

RICHARD PAN: Yes. Thank you.   Richard Pan. I am actually not representing any organization. I’m proud to have represented the people of the Sacramento region in the California State Senate and prior to that, in the California State Assembly. Just for full disclosure, I currently teach at UC Davis. I teach health policy in the Department of Public Health Sciences. I also continue to see patients at the Sacramento County Primary Care Clinic, and I’m a primary care general pediatrician. A particular focus on social determinants of health.

And so most of the patients I see are either on Medi-Cal or uninsured or a lot of refugees. So that’s the lens through which I often see healthcare, because I spent most of my career actually working at community health centers, taking care of generally, the predominance of my patients are low income patients who tend to be on Medi-Cal or I work with community groups. I used to be the the medical director for the school district, Sacramento City Unified School District. And so, you know, trying to figure out how do we take care of the kids there and be sure they have access to health care – that includes mental health. And also how do we try to address those social determinants as well?

“One of the things that I think is really important to remember is that the healthiest 50%… spends 3.5% of the health care dollar, 3 to 3.5%. The people in the top 10% [spend] two thirds.” – Dr. Pan

You know, in the legislature, you know, I did work on implementation of the Affordable Care Act, and I also worked on the legislation that underlies this office. So because I was chair of the health committee in the state Senate, and I’d previously also been and served on the Budget Subcommittee on Health and Human Services. And I think that’s important because as we think about social determinants, we have to think about, well, what are some of the drivers of health care costs?

And frankly, when you look at different countries, [garbled]. A lot of other countries spend a lot more on social services. We tend to spend a lot more on health care. But if you add the two together, we’re somewhere in the middle. And so we tend to channel a lot of social services, and we’re doing CalAim. And I’m proud to have been part of that. What we’re trying to do more social determinants of health through that.

Now, what I see in talking to my constituents and seeing across the state is, is that people are struggling with affordability of health care, right? We know that for many working families, their actual take home compensation essentially has not really changed because while their overall compensation has gone up, an increasing portion of that has gone to health care. We also know that businesses as employers – and I’m a small business owner, I mean, I understand the stresses businesses are going through. Basically you’re asking their employees to bear a higher and higher percentage through larger deductibles, higher co-pays, and so forth, which actually create barriers, particularly for people with chronic conditions.

Health Care in California, Panel 2: Office of Health Care Affordability – Targets. L-R: Dr. Richard Pan, California Health Care Affordability Board; Elizabeth Mitchell, Purchaser Business Group on Health; Ben Johnson, California Hospital Association. Photo by Joha Harrison, Capitol Weekly

And I really appreciate that we have the Hemophilia Council here, because one of the things that I think is really important to remember is that the healthiest 50%  – the 50% of the population that spends the least on health care – spends 3.5% of the health care dollar, 3 to 3.5%. The people in the top 10%: two thirds.

That’s where the money is. That’s where the money is being spent. But we also have to recognize those are the people with the highest demand for care. Right?

And so that’s the opportunity we need to look at. Like what do we do to help the people there? How do we generate innovation? I appreciate my colleague on the board, Elizabeth Mitchell, talking about innovation. That’s where the innovation is. So when we try to nickel and dime people who are generally like, oh, don’t you know who are the healthiest 50%? We’re not really making a lot of progress.

Well, we have to do is we have to create incentives to improve the quality of care. And I agree with again with my colleague Mitchell that it’s not this is not necessarily direct conflict. It’s not like it’s a seesaw that affordability goes, you know, goes down axis, but that it’s directly you can do both. But you have to do it smartly because you can actually if you just simply cut, then I agree with what was said was that then oftentimes it’s the sickest 10% who are going to get hurt the most. And I see them because I take care of them as a, as a physician.

So we have to do this smartly and well, and we have to really look at the data. And we have to be really straightforward about looking at the the science and the data. If we’re going to do this well, not let ideology trump the what the data is actually telling us. Thank you.

EM: Doctor Pan and I have obviously spent a lot of quality time together over the last 18 months, and we find ourselves in agreement more often than not. And I just wanted to underscore his point about the pressure on businesses and families. We have lost over ten years of U.S. wage growth to health care inflation.

We have school districts, including where my son goes to high school, who are striking because their entire negotiated wage increase is being lost to health care premium increases. So just I thought he really framed that very well. Thanks, Richard.

SB: Well, I’d like to quote from there’s a lot of information on the Affordability Office website within the department, and including many press releases, and I suggest you check it out. They’ve already taken, although they’ve only been around for, you know, a couple of years now, many actions to reduce escalating health care costs by establishing targets for cost reductions.

A recent press release cites data from the California Health Care Foundation that, “more than half of Californians report skipping care in the past year due to cost,” and within this group, nearly half say skipping care made their condition worse. More than 1 in 3 Californians reported having having medical debt in 2023, with more than half of Californians who are Black, speak Spanish or have low incomes, reporting having medical debt. Overall, health care spending has been increasing rapidly, as you pointed out, in California. Up about 30% between 2015 and 2020, reaching $10,299 per person, and $405 billion overall.

The affordability board is approved, and I’d like your comments comments from all of you on this…  has approved, quote, a statewide health care spending target of 3% initially starting at 3.5% for 2526. The target will be lowered to 3.2% for 20 2728, before ultimately reaching 3% in 2029 and beyond. How specifically will those target goals be reached? Doctor Pan, would you like to start on that? And if any of the panelists want to step in, please feel free.

RP: Sure. So the board did vote to adopt these targets. I think some of the discussion that happened leading up to the targets. And by the way, oftentimes the headline is of course about the number, but we need to talk a little bit about what underlies the number as well.

So first of all, one of the things the board did is, is that it did tie the targets to essentially median family income, right? And that so it’s not tied to to a healthcare cost measure. It’s tied to…. And one can argue from affordability point of view that you can say that, well of course if you want to make things affordable we tie it. But one of the things we have to keep in mind is, is that because it’s not tied to the actual expense of providing health care. You know, we have to be careful about if there’s a disconnect that can happen there.

Now, we do want again, we want affordability, but also we know from economics…. Well, sorry, this is probably way back before time… If we just simply you simply put a cap on something and the actual underlying cost is higher. Essentially what you’re doing is you’re going to make that service go away. Right. Because people just can’t afford to deliver it.

So I think that so we need to to monitor that carefully. The other the other part that unfortunately did not happen was is that, you know, there are some underlying factors that we also need to pay attention to. So, for example I don’t think anyone who’s in the health care, health services, researcher or anyone in the health care that doesn’t recognize that an older population generally needs more health care, right? So when we get older, I’m getting older, you know, health care needs go up and the population of California is aging. Right?

And so and you know, we look at that when we ever do our state budget and so forth. And we need to factor that in that a portion of that 3% has to also incorporate the fact that we have an aging population. We can’t deny that demand for health care and health care services will go up. Now. We can do innovations to maybe try to reduce some of that utilization rate. But I think ultimately, as I think, you know, if ultimately you want to be sure that health care is actually there. Right. And so we have to be sure that so we need to monitor that. So that 3% actually would mean that in real growth it would be less.

The other part that also came up was the issue of inflation right. Underlying inflation costs. And so fortunately, thanks to the Biden administration, inflation has gone down. And the Inflation Reduction Act did its job. But that doesn’t mean it’s going to stay down permanently. So that’s but you know, we’re setting some milestones. And frankly I think for the office, you know the big headline is we got the 3.5% scaling down to three over five years. Is is that okay? Well, in the end, when various health entities, and by the way, our we regulate health plans, medical groups and health facilities, hospitals, right? If you’re one of those and you’re over the target, what does that mean?

Right now, technically, you get a, you know, you get there’s a there’s a health improvement plan that you have to follow and exactly how detailed that would be, you know, and what are the guidelines, etc.. So, those are things we still have to work out. So great. We set targets. But as you said if we’re going to. So what happens when someone misses the target?

And by the way this is being applied to every individual entity. How are we going to manage this, right? What’s the consequence. Now the law actually says that the ultimate consequence could be we could even find that entity and take, you know, that money back, anything that’s over the target. But of course, that’s at the end of the path. But exactly how is that going to?… And how do we work with entities to be sure that what we’re doing to get them to the target is going to be done in a way that that leads to positive outcomes, right? People still having access; that the people who work at those facilities are still, you know, getting paid a fair and living wage, right? And things like that.

So those are some discussions we had as we were crafting this legislation to establish the board. Now, it’s important for the board and the office, and the board has certain responsibilities. The office, the staff itself. Is that how it’s you know, these details matter. How we go about doing things and we do in a way that engenders people’s trust and their willingness to cooperate.

“Even even if hospitals, health systems are able to really move the needle on their own processes and the access and so forth, sometimes the benefits of those changes just take years and years to materialize.” – Ben Johnson

One thing that’s really important, you know, we modeled ours after many other states. And when people looked at, you know, Massachusetts is the one that’s been around the longest. And the Commonwealth Foundation did a study, looked at Massachusetts and they said, well, you know, did it work or not? And what made the parts that worked worked well? One of the things they really emphasized is that what made the parts that worked. Work is, is that they were very transparent about what they were doing, and they had rationale that everyone agreed to. There had to be some consensus that people agreed that the rationale made sense, and that it was something that would result in. And they did actually decrease the acceleration of their increase in their … the change in health care costs.

One can argue whether they brought it down enough, but they did decrease it. So I think that’s the process by which we OCHA is going to have to go through as well. And we have to build that trust. We have to build have to be sure we have that transparency and so that everyone is on board. Because ultimately, you know, we can try to find or punish people. But you know, you’ve got… you can’t just punish people to force people to do things. If you’re really going to achieve a goal like improving health care affordability. You have to get people’s cooperation and people, you know, and people have to want to work with you. And so we need to be really transparent about that so that we have that buy in.

SB: Well, there is an enforcement function. It’s not described very in much detail. Yes. Material I’ve seen. How does that actually work, Elizabeth? You two are both on the board. Any of the other panelists?

RP: That still has to be worked out. That’s something we have to work out.

SB: Okay…

BJ: Maybe just a second. Several of the points doctor. Doctor Pan raised has raised questions about whether or not the spending target is going too far, too fast. With an understanding that the types of care improvements that we do think that that we need to also take affordability issues square on, that his will take investment.

“In bleeding disorders and in sickle cell, both, we have had some incredible innovations with treatment that are coming forward right now. There are new gene therapies that are available that are miracle drugs, really. They are transforming the lives of these patients.” – Lynne Kinst

We need greater partnerships with primary care. We need more primary care and doctors and other workforce to serve our patients greater access, new technologies, new treatments and so forth that ultimately will deliver the kind of care we want and we hope at a better at the prices that we want. But these investments and these care delivery changes will take time. They’re not going to all be able to occur next year. And even even if hospitals, health systems are able to really move the needle on their own processes and the access and so forth, sometimes the benefits of those changes just take years and years to materialize. It could take decades, for example, for the improved, you know, regular visits to a primary care doctor to ultimately allow someone to avoid that extremely costly hospital visit.

And so I just want to be mindful. This can be worked out, I think, as we go forward in defining and developing the enforcement process, but that to create the health care system we want, it’s going to take a lot of collaboration, a lot of work, and it will take some time.

LK: I would just add on to that as well. I think Doctor Pan accurately pointed out, obviously we have an aging population. We also have a population with complex needs, as I’ve mentioned. And when we’re looking at the cost targets at a sort of institutional level, we have to recognize that some of the entities that are delivering health care are delivering it to a population, to a specific population that’s more complex and more costly.

So, for example, in bleeding disorders and in sickle cell, both, we have had some incredible innovations with treatment that are coming forward right now. There are new gene therapies that are available that are miracle drugs, really. They are transforming the lives of these patients. And they receive that care at specific specialty care centers that are equipped to deal with those needs. And really, the entire population that’s being seen at that special care center is going to be that high-need patient.

“As a nation, we are paying more than anyone in the world by double, and yet we still can’t get access to needed care, mental health.” – Elizabeth Mitchell

One of the… in some of the public comment, one of the children’s hospitals noted that if they robustly administer these new gene therapies to the patients who are eligible for them in 2025, their pharmacy spend alone would go up by 60%. And so, again, you know, I think we need to think creatively about how do we balance those new opportunities for treatment that patients have and this goal of this goal of affordability. And also keep in mind that while that may dramatically increase the cost in that next year when that therapy is available or the next several years while they’re administering it. In the long term, those patients are going to be healthier, accessing potentially less health care and also able to contribute overall to our society in a different way because they aren’t in the hospital and constantly receiving treatment. That’s not really changing their outcome. It’s kind of just sustaining them in the meantime.

SB: Elizabeth, do you have anything to add to that?

EM: Sure. A couple of things. I actually think that innovation can happen much more quickly.

Health Care in California, Panel 2: Office of Health Care Affordability – Targets. L-R: Sigrid Bathen, Capitol Weekly; Dr. Richard Pan, California Health Care Affordability Board; Elizabeth Mitchell, Purchaser Business Group on Health; Ben Johnson, California Hospital Association; Lynne Kinst, Hemophilia Council of California. Photo by Joha Harrison, Capitol Weekly

And we have evidence of that. We’re happy to share it with the Hospital Association. I mean, as an example, we just did an initiative in Arizona this year where using a new primary care model, we actually saved 14% total cost of care in a year. And we have several members doing that in California and all over the country. So the evidence is there that it really doesn’t take decades. It’s a matter of deciding to do it and starting and then reallocating some of the money. And I mean, I remember sort of thinking that, you know, we should be able to get by on 4 trillion and even if that has to be reallocated…obviously no one wants to, to limit people’s access to care. It is actually the opposite.

What we’re so challenged by right now is that even though premiums are going up by double digits every year, access is actually diminished. There are maternity deserts, there are primary care deserts. We are not getting what we are paying for. As a nation, we are paying more than anyone in the world by double, and yet we still can’t get access to needed care, mental health. So where is the money going and how do we reallocate it?

We’re not talking about skimping on care. I mean, at $350 billion a year, my members are not nickling and diming the health care system. It is about paying for care that actually improves health and is most efficient and is fairly priced.

I would like to add one thing if that’s okay. So there is a federal policy change that went into effect this year called the Consolidated Appropriations Act of 2021. Not a very jazzy title, but what it does is it holds self-insured employers accountable as fiduciaries for only paying fair costs for high quality care. The Department of Labor is enforcing that. And the lawsuits against these jumbo employers are starting. Look up the Wells Fargo case if you haven’t seen it.

So now jumbo self-insured employers are obligated. They’ve always had the obligation, but now they are being held to an expert standard and they are being personally liable. So CFO of XYZ company can be held personally liable for overspending on health care, wasting their employees’ money.

So you’re going to expect a lot of downstream effects from this new obligation, including full transparency, which is why it took federal action to get transparency on health care prices, but nevertheless it is now there. So they are going to be using that data. Identifying the provider, partners and others who are actually delivering high value care and forging new relationships because, you know, it is their fiduciary obligation to do that and it’s the right thing to do.

SB: Thank you. The California Hospital Association, represented here by Ben Johnson, is, not surprisingly, a very active participant in the Affordability Board’s discussions, posting numerous updates, letters and news releases on the CHA website, which I urge you to look at.

A June 27th CHA letter, which I think you wrote, Ben, expressed concern about the, “overly broad notice requirements in proposed regulations,” adopted by the board, and criticized the, “narrow focus on negative impacts as part of its review process.” Encouraging the office to “take take a more holistic approach to ensure prospective benefits, such as preventing the closure of a financially distressed entity.” CHA has also emphasized that, “health care spending must never come at the expense of access to patient care.” Ben, can you elaborate on this? And we’ve got maybe 15, 20 minutes before we need to open up to questions.

BJ: So inviting me to take that full time. Thank you. Please. Absolutely. So one of the office’s main objectives and responsibilities is to review market transactions under the perspective that consolidation, mergers, acquisitions has negative impacts on affordability.

And in our advocacy, we, we are pushing for the office to take, I think, a balanced approach that sometimes these partnerships are better for patients. They help hospitals, primary care physicians and others provide more integrated care within a system where the doctors are talking to the to the hospitals and so forth.

“If you have a delivery room in a rural hospital. And it’s the only one in, let’s say, 100 miles and there’s a low number of deliveries. You still have to fully staff it. You know, you can’t say, ‘oh, well, guess what, I we’re only going to do deliveries on Mondays, Wednesdays and Fridays’” – Dr. Pan

We also think and found out, I think, really starkly towards the end of last year, what can happen when partnerships fall apart and a hospital is not able to step in to save a hospital in financial distress. Financial hospitals statewide have emerged from the Covid 19 pandemic in extremely worrying financial circumstances, and they have increasingly turned to working with other hospitals to obtain simply working capital, to be able to pay their workers living wages and so forth.

And so we don’t want the new OHCA process to ultimately not allow for these beneficial uses of partnerships to move forward. So that was the the main intent. We think statutorily there is a there is a requirement to consider these benefits when the when OHCA is doing that review. And so we’re just pushing them to fulfill that ultimate intent.

SB: Any comment on that from other panelists?

EM: I would just very quickly defer. All the evidence shows that consolidation drives up prices without improving quality or access. So I think it is very fair that we are focused on ensuring consolidation doesn’t make things worse. Obviously, we want to preserve access to hospitals, particularly in rural areas, but but not necessarily just through, you know, more consolidation.

RP: Yeah. Well, I certainly agree that and that’s why it’s part of this bill. You know, when I was in the Senate, Senator Monning authored a bill to look at consolidation, which actually I supported. Unfortunately, it died in the Assembly. But and then in this particular legislation, that’s why that’s part of the OHCA process that we are looking at mergers and acquisition.

I do think that it’s that consolidation has, in many cases shown that it’s led to higher costs. But we also know that greater, more highly integrated care can also lead to better benefits, including some of these cost savings. So we we do need to look at both sides of that. But certainly as we’re monitoring through OHCA the health care spending and cost structure, we want to be sure that the consolidation isn’t just leading to increased price increases.

You know, one of the challenges that we have is really trying to think about, well, for example, let’s just talk about hospitals. I mean, there’s more than just hospitals, but hospitals, you know, if you have a delivery room in a rural hospital. And it’s the only one in, let’s say, 100 miles and there’s a low number of deliveries. You still have to fully staff it. You know, you can’t say, “oh, well, guess what, I we’re only going to do deliveries on Mondays, Wednesdays and Fridays” right? Because, you know, baby’s going to come when the baby’s going to come and the mother’s going to need help, right?

So now you have to have an L&D nurse around all the time, right? And by the way, they don’t always come exactly in sequence either, right? So sometimes you may have 2 or 3 and then you have none for a couple of weeks, right.

And the question is is that waste or not. We have all this staff, highly trained staff, etc. keeping this ward open, but yet it’s the only one open, let’s say for 100 miles. Is that waste or not? That’s an expense.

Okay. So I mean, those are the types of things we have to wrestle with, right? At the same time, I agree with Elizabeth that, you know, when I was chair of the Assembly Health Committee, I one of my first hearings is that I did a hearing looking at actually the Patient-Centered Medical Home model. Right? And actually two pages worth of of pilots, actually each one with a 2 or 3 line description, probably in ten point type.

I know there’s like probably 35 or something of them that were all done that showed they decreased cost, decreased utilizations and guess what? No one ever took them to scale. No one ever took them to scale. So there are opportunities to do things differently that would save money. It’s not going to take decades. It might take more than a year. But that can do that. And yet we don’t do that. And I think we sometimes need to look at what are some of the underlying incentives.

And that’s what… I want to one of the challenges, and frankly, I think it’s a challenge, is for our risk-bearing organizations, including our health plans, is that we’ve created a structure in health care where you don’t want to have too many people who are really sick. The sickest 10% spend two thirds of health care dollars. You don’t want too many of them. You need enough healthy people to balance that out.

In fact, in the ACA, one of the things we tried to do is address that. And but the challenge is that and actually I just want… Anthony Wright, who’s now moved from Health Access… is now at the federal level. You know, he and I have talked about how do we know when health reform is a success, right? And this also includes this office. And we both agreed that when I see a health plan advertising that they want someone with chronic condition, mental health, high blood pressure, diabetes, “I want you in my plan.” That we created the opportunity for risk bearing organization to be successful and to take care of a person with chronic disease, because then it’s worth investing into and innovating and investing more, because that’s how we get this from the old clunky cell phone, right?

But right now, that’s not the incentive. The incentive is the best way to tell whoever you know is that, “oh, by the way, just do a few quick things and then but don’t really and then keep the really sick people don’t make it too attractive to them.”

And then we’re not innovating there. And that’s really where we spend the money, and that’s where the best opportunity is to reduce health care costs while improving quality. I need people to say “I want those hemophilia patients in my plan.”

What’s the incentive for a, for a for a health plan? And I’m not just by the way, this is this is not because the health plans are being evil. This is the incentive structure we gave the health plans or any other that do. I want hemophilia patients in my plan? If the answer is yes, because I can actually, if I do a really good job taking care of them and I can do it for better and cheaper and also higher quality, then then I will be successful. Then we have a system that’s going to innovate to improve that.

That’s our opportunity that I see with this office, not just office alone. We can’t do all of that, but to create that incentive, that and that’s the way we want to try to decrease health care costs. Unfortunately, too often what happens is we say, well, what we do is we try to find a way to avoid people using health care at all. And that’s not necessarily the answer as well.

SB: California includes a mix of for profit and nonprofit hospitals. How is affordability calculated based on those very different models? And how are executive salaries, often criticized as excessive, even in nonprofit health care entities such as Kaiser Permanente, addressed in efforts to rein in costs? How do you wrap your head around that?

Ben, you want to comment on that? Anybody who wants to comment on it. Everybody step in.

RP: I’m going to quickly say something, and then I’ll let you know. That’s why, on one hand, I certainly share the outrage many people have when they see how highly paid some of the health care executives are. All right. And, you know, we can have a whole debate about their being overpaid and etc. but I think we also need to be actually… and I’m not saying that we can’t have a discussion about maybe they should be paid less.

On the other hand, I’m as outraged as I am about that. I also know that’s not really the solution, right? In other words, yes, for lots of other reasons, we perhaps should really say executives shouldn’t. Really. Those boards need to be more responsible and not pay them much. But it’s also, even if you add them all up, that’s not where most of the health care spending is going and it’s not… So it’s great from a, you know, I think from a justice point of view and is life fair in this country and stuff point of view. But it’s not going to solve a health care cost problem. That’s not where the money is.

BJ: Yeah. And I can just jump in my, our understanding of, of how the OHCA statute and so forth is constructed is to have an iterative learning process. It starts with a statewide spending target in 2025 that applies to all regulated entities. No, no differentiation there. It moves into the enforceable target in 2026 following some experience under that spending target and learning there. And it’s only thereafter that the office… has requirements to potentially look at different entities differently as it’s applying the spending target.

“I represent Fortune 10 companies. They’re not known to be socialists. They are not looking for, you know, hardcore government regulation. But the market has failed.” – Elizabeth Mitchell

We think it makes a… we think that this should be an all in effort, that all of health care is responsible for improving affordability, that ultimately it’s going to occur through collaboration between hospitals, workers, health plans, pharmaceutical companies and others to ultimately improve affordability. And so we would just emphasize that that this really needs to be something that we’re working together towards.

LK: So I kind of like to just add to that point about collaboration. I think that unfortunately, all too often the patient voice is again left out of that discussion. At the national level, the National Bleeding Disorders Foundation started an initiative a number of years ago called the Comprehensive Care Sustainability Collaborative, and they actually brought in the payers, the employee groups, as well as the treatment centers, the comprehensive care centers that are treating hemophilia patients, as well as the patients, the pharmaceutical companies. Like all of the players at the table.

And it’s actually been a very successful initiative because, as Elizabeth said, at the end of the day, the employees and the employers that she’s representing are also the patients, right? We’re also the ones receiving the health care and have the big stake in, you know, seeing that we’re getting the quality that we need for a price that we can afford. Right.

 And so unfortunately, I think all too often the way the system is built and the way that sort of the politics of it all play out… You know, the health plans and the patients end up being enemies in the contest, and it feels like we’re fighting with one another, when really we should all want the same thing at the end of the day. And that’s all of our health care needs appropriately met with quality at a at an affordable cost.

SB: OHCA has been criticized, and anyone who wants to comment on this for a lack of patient involvement. How would you respond to that?

EM: Actually, I that was what I wanted to to touch on. So thank you. I don’t know if everyone here has attended one of our meetings. I know Ben has not missed a single meeting. So several people have spent a lot of hours with us.

But what is one of the, I think, most important aspects of OHCA is it creates a public forum for literally anyone to come and talk to us. And trust me, they do. We have hours of testimony from teachers, from carpenters, from patients, from all sorts of folks. And it is an open public forum by design, which I think is very important.

Also. You know, one of the things Doctor Pan and I do is we also help identify members for the advisory committee, and we have gone out of our way to ensure that there is broad, diverse representation. And I think, you know, it’s not perfect, but it is quite balanced. So there is every effort put into making sure that everyone’s voice is heard.

And then I also I also want to say I represent Fortune 10 companies. They’re not known to be socialists. They are not looking for, you know, hardcore government regulation. But the market has failed.

Health care is a case study in market failure. There is no information, there is no competition. And when there is competition, it just drives prices up like any other industry. You know, innovation, technology, competition drive prices down. So this is sort of a middle ground where we’re not seeing a response from the industry to respond to what their customers are asking for. And that’s, I think, why you’re seeing some government intervention here. But again, it’s not intended to be prescriptive. It’s intended to just say, look, we have to deal with the affordability crisis.

SB: We should probably think about opening up to questions. Do you have any other comments before we open it up to questions? Are there any questions? I know this is a very complex issue. Yeah.

AUDIENCE MEMBER: For the whole panel. But I want to start with you, Doctor Pan because you spent many years in the legislature and you had mentioned earlier in your presentation about California’s aging population over 65 is increasing. And I think a few years ago it was at 6.5 million And by 2030, it’ll probably get around eight, nine, 10 million people.

What problems does that present? Because, you know, when people get older, they’re not able to do a lot of things for themselves. So they depend on healthcare providers you know, clinics and in-home nursing and things like that. Could you explain that?

RP: Sure. Yeah. So first of all, of course, from our office’s point of view, when we think about where healthcare costs are going in the US, you know, the per capita, right? It’s going per person. It’s going to increase, because if the average age of the population gets older. Right.

Health Care in California, Panel 2: Office of Health Care Affordability – Targets. Moderator Sigrid Bathen, Capitol Weekly; Dr. Richard Pan, California Health Care Affordability Board. Photo by Joha Harrison, Capitol Weekly

And that’s just the health care side. I mean, one of the things you brought up also is long term care and our long term service and support. So it’s not just nursing homes, but it’s also in-home support and so forth. In fact, I worked on legislation when I was in the legislature on that continue to champion efforts to address this particular issue as well. We haven’t so.. taken it head on in OHCA yet, but I mean, that’s something we need to perhaps look at as well.

But when we think about where our health care spending is going, right, even just to keep things as they are, and I get Elizabeth, we don’t want to keep things as they are… but, you know, just the population aging by itself is going to increase the need for more health care, right? That people are going to have more health care issues and they’re going to need more people to take care of them and other types of things. And so we need to be sure we factor that in as we’re looking at the type of resources that are available to take care of people.

So we want to foster innovation, to do it more effectively, efficiently and hopefully also improve the quality. At the same time, we need to understand that the change in health care spend will also be pushed upward by an aging population who needs that care.

SB: We had a question.

CAPITOL WEEKLY: We have a question actually over here. Then we’re going to go to the back.

CARRI ZIEGLER: Hey there, I’m Carri Ziegler, I’m a communications consultant. And my question is about private equity. You folks have already talked about a fragmented system, a system that doesn’t work. And now we see private equity moving into health care more and more. So, what do we need to be doing now to address the issues that will arise from that?

RP: Great question. I don’t want to be I mean, I’m happy to answer the question, but okay. All right. I don’t want to feel like I’m monopolizing the panel here.

So I mean, this is an issue, for example, what happened Steward Healthcare. Right. Where basically, you know, a private equity came in I think bought up. Was it how many hospitals was it 20… 30? Yeah. Anyway. And then and then extracted money out of them and then they loaded up with that and then bankruptcy. Right.

Interestingly enough, if you talk to the healthcare, the people who worked in those hospitals, the nurses and the doctors and the other staff, right. They just found that basically they were driving, trying to drive down spending. Now, the purpose of that spending was to actually then shift it to their pockets. But basically, I think it’s a lesson both in what happens on the on that end, the greed end. Right. And extracting those dollars. But also it’s also a cautionary lesson on it’s not just enough to just tell people like, oh, “you have less money to work with.” Because, you know, so patient care was affected even before the bankruptcy because basically, yes, it was the owners who were doing it, but they were stripping the health care professionals of resources to take care of patients.

And that’s one of the things that we have to be…. Obviously we don’t we don’t want to become the excuse for anyone to start doing that within their own institution. And so but fundamentally, that’s why we have those cost and market reviews. Because that, to look at that. And then of course we’re going to be monitoring as part of our cost target process also exactly how they’re going, how people are going about spending. We’re going to have the all-payer claim database.

Now. Is it going to be 100%? No. I mean, if someone really wants to hide stuff, it’s… but but I think it does we did put there were things in the legislation to, to try to address some of the issues that would arise. But I appreciate you bringing that up because that’s something that people have concerns about.

CW: We have a question back here.

AUDIENCE MEMBER: My question is about the patient involvement. I looked at the advisory committee membership and there are no patient advocacy organizations on the advisory committee. Has there been any thought of maybe. Maybe you just need a patient advocate advisory committee as well? Or maybe it’s just that we need to get out, sort of like the news to the patient advocacy community to start applying to be on the advisory committee, because right now there are no patient advocate organizations on the advisory committee.

RP: Well… All right. Well, actually, you know, first of all, there is a category for consumer advocates, right? I mean, that that in that umbrella is also patient advocacy groups. And what happens is we take the applicants and actually we’re on the subcommittee that reviews reviews them. And then we work with the staff and then we’ve… So we do have actually in fact, they there are five I think. So they I won’t say they have more because it’s, you know, the whole total… but certainly we want to ensure that they had a voice. In fact, actually, of all the different sort of sectors we have on there, that’s the largest group is the consumer advocacy advocacy groups.

“In the rare disease space, most of these organizations are incredibly small.… I am one of two, two staff people in my organization, and I’m a big rare disease organization comparatively to most. Most of them don’t even have a staff person, right? It’s a mom or a dad who has started this because their kid is suffering and, you know, and so them having the capacity to engage can be challenging.” – Lynne Kinst

Now, when we went back and forth exactly how we balance out the board. The other thing I just wanted it is an advisory committee, so it doesn’t. And if you pay attention, if you watch carefully how it operates, it doesn’t really vote on things. We get a report about the different what different voices are. And also because it is established by statute, their meetings are also public as well. Right.

It’s so both the board and so I do remind people that even if your organization isn’t on the advocacy committee, you can still go to the meetings and speak out, right, both at the board but also at the advisory committee, because that it is a, you know, it’s a public entity. And they hold their meetings in public and they have public comments as well.

EM: But we would also encourage you, if you were so inclined to encourage others to apply because we can’t control which applications come in. We just sort of. Choose from the ones we have, but we are absolutely committed to ensuring patient representation.

RP: I want to emphasize that we can only pick the people who apply.

LK: I just want to comment on that briefly, because I have certainly gotten a lot of that feedback from patient advocates that they that they don’t feel like it. You know, and I don’t necessarily think that that’s okay. That’s like, “oh, we we’re going to keep the patient voice out.” Like that’s not that’s not the message that I’m trying to communicate.

I think and I think that part of the issue is that the whole endeavor is a very, very heavily data driven endeavor. I’ll just be frank. I looked at the application to apply for the advisory committee. It has a zillion questions about your expertise as a data person. And most patient advocates don’t come to their work as data crunchers or number crunchers.

And so I think that that has been just frankly, I think that’s been a barrier to some folks feeling like they can engage in that. And the data is valuable – I 100% understand why that’s important and why that needs to drive so many of the decisions – but I think maybe there could be some tweaks there that could really create an opportunity for patients who maybe don’t feel like their…. their expertise is not in the data. Their expertise is, you know, in the bleeding disorders community, we say these are our lived experience experts, right?

These are the people who are actually utilizing the healthcare at high levels, experiencing what it’s like to get these bills, you know, experiencing what it’s like to get denials and, and maybe, maybe there could be a tweak there in the future that would make that feel more accessible.

Also, particularly in the rare disease space, most of these organizations are incredibly small. There are… I am one of two, two staff people in my organization, and I’m a big rare disease organization comparatively to most. Most of them don’t even have a staff person, right? It’s a mom or a dad who has started this because their kid is suffering and, you know, and so them having the capacity to engage can be challenging. So I just throw that out there for consideration.

EM: Just very quick response. We are always looking to improve the process. We make updates to the application. So we welcome the feedback.

RP: Yeah. And actually one of the criteria we do look at you know if you look at that mass thing is actually experience as both either as a patient or a caregiver of someone with a chronic condition. So that is actually something we that is actually one of the factors we look at for in the applications as well.

I would just comment that, you know, we’re trying to also strike a balance in the advisory… And by the way, that’s not the only that’s that is the one in legislation. So that is the official right. But that’s not the only body that provides input to the office. There’s other work groups and other types of things.

And, you know, we did try to we tried to strike this balance. And I will tell you that I’m like, don’t make it too big because otherwise it’s not going to work either. Right. So it’s just it gets too huge. It’s not going to be able to function very well either. So I. So first of all it’s a public meeting. Please apply. But also that’s not the only venue as well. So in terms of active participation beyond just testifying. So and we can certainly have a conversation with OHCA about, you know, trying to find more space for those voices, because those are very important voices. And we want to be sure they are heard.

SB: I want to thank the panelists. This was an important issue. And the meetings are open, as Elizabeth and others said. So go to the meetings, look at their website. Important issue. Thanks so much for participating. Thank you.

CW: Thank you. Yes, thanks to our panel. And thank you, Sigrid. Appreciate it.

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