California Health and Human Services Agency head talks President Barack Obama’s health-care rollout

Earlier this month, SN&R CEO Jeff vonKaenel sat down for a wide-ranging conversation with Secretary Diana S. Dooley, leader of the California Health and Human Services Agency. The former head of the California Children’s Hospital Association is a key figure in the state’s much-anticipated installment of the Affordable Care Act, a sweeping attempt to reform and improve America’s existing health-care system. The following is an edited version of a much longer conversation.

Jeff vonKaenel: I heard you give a speech around a year ago about the rollout of the Affordable Care Act, and you said, “We first need to recognize that the current system is broken.” Do you think we’re there yet?

Diana S. Dooley: I think there is recognition now that the system isn’t working. There’s agreement that health care costs too much, it isn’t accessible and that we have too many uninsured. But how you fix it on the ground is going to be a huge challenge. From a cost standpoint, every dime that is spent on health care is in somebody’s pocket, and nobody is going to reach into their own pocket and pull out those dimes and give them to anybody. So, the change is going to be a dislocation of certain practices.

Many people have a negative reaction to the idea of managed care.

I said from the day I stepped into this job that I thought one of the biggest challenges to implementing health-care reform was going to be changing the way people think about managed care. In the 1990s, managed care became HMOs—health-maintenance organizations. Even crossword puzzles put in: “Who denies your care? HMOs.” So, managed care has a very bad connotation, because it is perceived to be denying care.

Actually, managing care is more like having advice nurses, having social workers come to your house to look for ways you can remodel to avoid falls, reduce injuries and illnesses. That is managing care. But the Affordable Care Act was built on a private economic model. It was built with the insurance companies and the doctors and the hospitals and everybody staying as they are—in a private as opposed to a single-payer government-run program.

Our current system is fundamentally a fee-for-service one. … It’s all about volume. It is piecework, basically—you get paid by procedure, you get paid by office visit, you get paid by diagnostic test, you get paid by device sold. So, creating incentives to change that private economy in ways that lead to the coordination of care instead of paying for volume through the fee-for-service system is a heavy lift. But that is what we are trying to do as we prepare for 2014 [when most changes should have taken place].

I’ve heard you talk about it as a three-legged stool. One leg of the stool is coverage?

Yes, the essence of the Affordable Care Act deals with coverage, ensuring the uninsured. I think it is much better understood now that those who are paying for heath insurance are also paying for those that don’t have it through the cost of their premiums. Those hidden costs are not so hidden anymore. People recognize that it is like no-fault auto insurance, where everybody has to have it.

A second leg of the ACA is this issue of delivery reform and aligning incentives in ways that can reduce costs. And the third leg is prevention—all of the wellness and prevention. Those are the three big pieces of the Affordable Care Act.

Does California have a better chance of getting this going than other states, such as Texas or Florida?

We are further along in a lot of ways. So, I think if it is going to succeed anywhere, California has the best chance. For one thing, health care hasn’t been as polarized here from a partisan standpoint. The previous governor was a Republican, and he proposed health-care reform that almost passed the California Legislature, and almost all of its elements are in the ACA. … So, California not being as politically polarized around health care is a significant difference.

Having the exchange established in law [where individuals can purchase health insurance eligible for federal subsidies] has given us the leg up on getting it going. In the year-and-a-half that we have been in office, we have made great investments. We have received over $40 million from the federal government for the exchange; we just made another $196 million application, most of which will go to build an [information-technology] system that will integrate our eligibility and enrollment processes in California.

The total number of Californians who do not have health insurance is about 6 million. In crude numbers, the Affordable Care Act will wind up with about 4 million new people coming into the system, correct?

Yes, roughly, and over a five-year window, from 2014 to 2019.

We have a shortage of general practitioners. How are we going to deal with this mass increase of people coming into the system?

That is where we are going to have to manage the care in a different way. We are going to look to physician “extenders”—people who are trained in the medical field but aren’t physicians, like nurses, techs, pharmacists, social workers … a whole-team approach to care. The physician will be the captain of the team, but all of the care won’t be provided by physicians; there aren’t enough of them.

But … I think we also need to seriously look at some scope-of-practice issues, since there are many professionals who have training that our licensing process doesn’t allow them to use. Pharmacy is a good example. Pharmacists are highly trained, and yet have very little opportunity under the licensing laws to actually provide advice. They do their pharmacy calculations, but there are a lot of services that I think could be provided in Rite Aids and Walmarts and Walgreens around primary care and care management with diabetes and asthma, and some of the conditions that are expensive because they require a lot of management.

So, I guess we’re on to the second leg of the stool?

Yes. It involves reforming the payment and delivery of care. It involves creating incentives for these elements to be aligned for the payers—both from the insurance companies and those who are paying premiums to the insurance companies. There will be changes in the structure of plans in terms of co-pays and deductibles—and getting patients to have skin in the game, as they say in the business.

I assume there are entrenched people and forces at work that are going to make all of this very difficult?

Well, I think that the conditions are going to force some things that we couldn’t do in another environment. But everybody wants to protect [his or her] own. Everybody’s got a margin. As I say, this is a private-market model that we are looking at. … Everybody is making money in health care. All of your economic stories say that it’s the only growth industry; it’s the only category where employment is expanding. … Health care is an economic engine. So, I am not addressing the rightness or wrongness. I did enjoy, however, the opening ceremonies at the Olympic Games … with the emphasis on the National Health Service. I felt like it was just a tweak to America. (Laughs.)

Thanks, Mitt!

Well, I mean, here they were on the world stage talking about how fabulous the National Health Service is—and it’s roundly criticized in this country. But that is sort of on the side, because it is a private-market economy in health care in this country. Managing it and creating the right incentives within a market economy is the opportunity that we have.

Let’s talk about the exorbitant amount that specialists are being paid compared to the amount general practitioners are paid. No health-care analyst thinks it makes any sense, and it is leading to incredibly dumb outcomes. How do we change it?

Remember what I said at the very beginning—that every dime is in somebody’s pocket, and getting those dimes out of those pockets is not going to be easy?

So, how do we take that $50,000 out of the specialist’s pocket and put it over into the general practitioner’s pocket?

We are not. We are not going to do that. I don’t see a way in the world to do that. I think what we have to do is change the trends—they talk about bending the curve. We are not going to go backward in health-care costs: They are going to continue to increase. But they can’t increase at the rate that they have been increasing in the past. … We have got to do things differently and not let the top increase at the rate that it has been increasing. And then bring it closer by actually increasing the pay and incentives of the less expensive providers, so that you are providing more home care, for example. You are creating opportunities—and we have been doing this in the Medi-Cal program and through the In-Home Supportive Services program—so that we help people manage their own care and stay in their own home and avoid the expensive hospitalization.

Can’t you just go, “Look, we are paying you $700,000 to be a heart surgeon, but, frankly, I think you can make it on $400,000.” After all, we have 40,000 Americans who are dying, because they don’t have health-care insurance.

Right. I don’t know how to do that. I don’t disagree with what you’re positing. And certainly, there were strong advocates for single-payer or some other more dramatic way to reform the system. But it didn’t succeed. Our political system drives the decisions—there is no one person paying that physician the $700,000 who can say, “I will only pay you $400,000.”

What about end-of-life decisions? We have 40 percent of Medicare funding going to people in the last two months of their lives. With hospice and other options, it seems there is a real possibility for better outcomes and cost savings in this area.

Well, this is a very sensitive subject for government to discuss. It is very much in the academic conversation around medicine and a provision of care. But when, in the debate around the Affordable Care Act, it was suggested that there be a Medicare rate code for a 15-minute [physician] consultation on advanced illness—that turned into “death panels.” I mean, the storm in August 2009 around death panels resulted from a simple provision that would have doctors consulting with their patients about advanced directives and what are called POLST, the Physician Orders for Life-Sustaining Treatment. But there is no code in Medicare for that, so that time that they spend with the patient having that conversation is not billable to Medicare.

It’s nearly impossible to have this conversation in the political environment we exist in today. But it is happening in churches, in homes. … The sensitivity in talking about how we want to live and how we want to stop living is always going to be there.

Let’s move to the third leg of the stool—prevention and wellness.

The governor signed an executive order in May for the “Let’s Get Healthy [California]” Task Force. I made the appointments, we had our first meeting in June, and we will finish in the middle of December. And the goal is to come up with a 10-year blueprint for how to make California the healthiest place in the nation and what the steps are to do that. There are about 45 members of the task force and a group of expert advisers.

One of the reasons I created the task force was because in the first year-and-a-half that I have been in this office, I have been absolutely overwhelmed—sometimes excited, but mostly overwhelmed—by how many good ideas there are out there. There is so much going on in schools and with employers in work places … they are walking, they are putting better food in the cafeterias. So, part of the goal of the “Let’s Get Healthy [California]” Task Force is to set some metrics and some goals, but also to assemble these good ideas and try to put them in one place. … I mean, there are thousands of ideas of how people can be empowered to take charge.

If you had a final minute here to summarize where health-care reform is going in California, what would you say?

The Affordable Care Act is designed to improve the system that we already have. It is not revolutionary—it is built on a market that is a private-sector provision of care, it is built on fairness where everybody uses health care, so everybody has to pay something for health care. And it is designed to create incentives to move away from paying for volume and toward paying for value.

The elements of the act when identified separately almost always poll very high, but it is so heavily charged with the partisan political atmosphere that is difficult to get to the truth about what the provisions actually are. But covering the uninsured, letting young adults stay on their parents’ health plans, banning insurance companies from denying care to people with pre-existing conditions, requiring 85 percent of the premium to go to health care … who can’t agree with that?