CalPERS Sacramento Town Hall: California Health Benefit Exchange - August 9, 2012

Uploaded by CalPERSNetwork on 28.08.2012

>>Good afternoon everyone.
It's a pleasure to see you
all here.
On behalf of the CalPERS
Board of Administration, I want
to welcome you to our town hall
meeting here this afternoon.
My name's Rob Feckner,
I'm president of the CalPERS
Board of Administration.
We're pleased that you're able
to join us today.
Our town hall meeting is
designed to promote a greater
understanding of our health
policy challenges and
opportunities that are going to
be affecting CalPERS
members and employers, as
well as the impact that these
issues are gonna have on
California and our nation.
But more importantly, we hope
to explore the opportunities that
are available to create a
competitive, cost efficient, and
member engaged health
Today we bringing some of our
partners to the table to share
their experiences and have an
open and constructive dialogue
around healthcare reform, the
infrastructure of our healthcare
system, health outcomes, as
well as wellness.
Before we begin the panel
discussion, I'd like to take a
moment to introduce the
CalPERS Board members that
are with us here today.
My colleagues that are here in
So we have J.J. Jelinsic
who's elected representative
of both the active
and retired members.
There's J.J.
We have representing the
State Treasurer Bill Lockyer,
we have Grant Boykin and
Robbie Beagler.
Ralph Cobb, who's
representing Julie Chapman,
Director of California
Department of Human Relations.
WE have a couple of more
board members that will joining
us, they're a little caught in
traffic I believe.
Our chair of the Health
Committee, Priya Sara Mathur
will be joining us, as well as
Ruth Holton Hodson of the
Controller's Office will be on a
panel with Ralph a little later.
So now that we've introduced
the Board members that are
here I'd like to introduce our
host for this afternoon's activity,
our panel discussions,
Ann Boynton.
She's our CalPERS Deputy
Executive Officer of Benefit
Program Policy and Planning.
Ann provides executive
leadership for health policy and
planning, health policy
research, health plan
contracting and administration,
retirement research and
planning, and the CalPERS
Center for Innovation.
Thank you again for taking your
time to be with us here this
afternoon and enjoy this
wonderful opportunity to ask
questions and get some good
insight from our panel members.
With that, I'll turn it over to Ann.
Thank you.
>>Good afternoon.
Thank you Rob.
As Rob said, our goal today is
to help you gain a better
understanding of some of the
policy issues CalPERS faces
on the healthcare front.
We provide health benefits as
you know for more than 1.3
million members, retirees and
their families.
Last year we spent nearly 7
billion dollars on healthcare
This is a challenging time in the
world of healthcare delivery.
But I'm optimistic that we are
approaching a time of real
Change that comes about
when the right forces converge
and align along similar goals.
Those being quality and
affordable care for all.
It's CalPERS responsibility to
ensure members get the best
possible care for their
healthcare dollar.
And we've been successful in
helping members receive
improved care in a very
competitive and frankly
sometimes very expensive
market place.
Part of that success stems from
working with our health plan
partners and other
stakeholders to find creative
ways to address healthcare
We've been looking at
solutions for example to
enhance coordinated care,
improve employee wellness,
and reduce overall costs
through innovative projects.
Today, our three one-hour
panels feature state and local
experts who will address these
They bring a wealth of
knowledge and experience to
our discussions.
The first panel is focused on
the Health Benefit Exchange,
which was established under
the Federal Affordable Care
Act to provide a market place
where people can purchase
health insurance at competitive
The panelists are Peter Lee,
Executive Director of the
Health Care Benefit Exchange,
and Dr. Micah Weinberg,
Senior Policy Advisor for
the Bay Area Council.
Panel 2, and I'll re-introduce
them again before so you don't
forget who they were.
Panel 2 will focus on a 19
million dollar federal grant
given to the Pacific Business
Group on Health to implement
an innovative program for
intensive medical homes for
Medicare populations in
The panelists for this will be
Diane Stewart, Senior Director
of PBGH and Alan Antoven,
Eccles Professor of Public and
Private Management at the
Knight Management Center at
Stanford's Graduate School of
Business and there will be a
quiz on that.
Our final panel will focus on the
importance of creating a proper
environment for successful
work place wellness programs.
Our panelists include, as Rob
indicated, Ruth Holton Hodson,
who sits on the CalPERS
Board as a representative for
the State Controller; Ralph
Cobb, who is part of the Board
as a representative for the
California HR Department;
Sara Zimmerman who is
Deputy Chief of Staff for SEIU
1000; and Marie Monrad, Vice
President of Strategy and
Policy in the Office of Labor
Management at Kaiser
Permanente Health Plan.
We will be taking questions
after each panel.
You have, if you have a
question, we ask that you write
it down on a card and there are
staff in the room that have
cards, and they're available at
the back, and they're in your
And once, if you have a
question, staff'll be circulating
around but if you could pass
them to the end, this side and
this side, it'll be hard to get up
on that side.
Okay, the outsides.
Then staff'll collect those and
bring them up to the panelists
as we go on.
So thank you very much for
And Peter.
>>Uh, Ann thank you very
And thank you to the CalPERS
Board for hosting this session.
As some of you know, for ten
years I was the Executive
Director of the Pacific Business
Group on Health and had the
pleasure of working very
closely with CalPERS over that
period of time.
And it's nice to be back in
California running the Health
Benefit Exchange with an
opportunity to work with
CalPERS and other purchasers
I'm gonna, very briefly, in about
15 minutes, do three things
then throw it to Micah at a, be a
little bit of Oprah or Jerry
Springer depending on how
challenged he wants to be, and
then try to get some of your
But what I'd like to do briefly is
first provide a context for what
the Exchange is.
Second, tell you what the
Exchange is doing.
And third, talk very specifically
about some of our proposals of
how we as a large purchaser
can address costs, which is the
subject of today's forum.
First, the context.
And I think it's very important,
people often, you know, looked
at the Supreme Court case and
said it's all about this mandate
issue or this penalty for non
I don't think folks have a handle
on how big the transformation
in healthcare under the
Affordable Care Act is.
And up until now, uh,
healthcare has largely been a
game for insurance companies
of risk avoidance.
It's not been about doing what
Ann says CalPERS does,
which you actively do, which is
trying to promote quality and
For insurance companies, the
game is to avoid sick people,
that's how they've generally
made money.
And I've worked very well with
very good insurance
companies but the model is if
you get more sick people, it
costs more money, you'll make
less money.
Come January 2014, the game
has totally changed for
healthcare and health
insurance in America.
And this will affect CalPERS, it
will affect every Californian.
So come January 2014, every
Californian knows forever they
will not be denied healthcare
because of their health status.
This is a game changer.
This means people that have
employer-based coverage
today can say you know, I may
want to start that business, I
can do that and not be worried
that my asthma is not going to
be covered.
Number two, though, health
plans are gonna be required to
spend the vast majority of their
dollars, 85% in the case of
large employers, on healthcare.
Third, health plans are going to
be required to move money
around if one plan plays the old
game, so to speak, and attracts
a sicker bunch of people and
another plan a healthier bunch.
That health plan that collects
healthier people needs to give
money to the other plan.
And the last element that is big
and where the Exchange fits in
is under the Affordable Care
Act, we're going to dramatically
expand coverage.
One of the problems we have
in the American healthcare
system is we have a constant
shell game of uninsured people
in essence being paid for
because they go to emergency
rooms, get expensive care by
you, by me, by the government.
And with the Affordable Care
Act, we are across the nation
expanding coverage to close to
30 million people, that's about
5 million Californians, will be
newly covered under the
Affordable Care Act.
You can't address costs without
having everyone in the tent.
You can't not have that shell
So, per this agenda, how do we
address cost drivers.
One of the key things the
Affordable Care Act does is get
everyone in the tent.
So the Exchange is part of the
vehicle of getting healthcare
coverage to those 5 million in
We have one of the highest
rates of uninsurance in the
Those 5 million Californians,
about 2 million will be eligible
for Medi-cal, the state Medicaid
About 3 million will be eligible to
get a tax credit to buy the
private plan of their choice
through the California Health
Benefit Exchange.
And how this is going to work is
those individuals will say here's
my income, and if they make
less than 400% of poverty, and
let's be clear, this is not a small
This means for a family of four,
someone making $90,000 a
year would be eligible for
health, for buying their health
They would get a check.
That check wouldn't go to
them, that check would go to
the private health plan they
pick through the Exchange to
make it more affordable.
And you all know, we know that
you know, I'm an employee of
the state, the state pays a big
chunk of my health insurance
I contribute some.
Would I be able to afford it
even at what I make, if I had to
pay all of it?
It'd be tough.
The Affordable Care Act says
everyone needs a leg up to
afford to buy healthcare.
And it will improve the entire
system if we get everyone in.
So, the Exchange is a vehicle
where it's gonna help
individuals with a tax credit that
is sent directly to the health
plan to pick and spend on the
health plan they choose
through us.
So what's the Exchange
First we're going to be picking
health plans.
And we have a process that in
many ways is similar to what
CalPERS does.
The legislation that formed the
Exchange and we're an
independent body of the state,
said we can be an active
We can pick plans.
We have a lot to learn from
what CalPERS has done as a
good picky purchaser to push
value, to push quality.
We're right now in the process
of our health plan selection
So that's first, we'll select plans.
Second, we'll be doing
You may be shocked and
surprised to know that there's a
lot of misinformation and
disinformation of what the
Affordable Care Act is.
People have no clue.
They hear about Obamacare,
they hear about this, they hear
about that, they don't really
know what it means, again in
particular for the 5 million
Californians that will get help to
buy healthcare, or for the 30
million Californians that are
covered now but have new
protections they never had
We will be doing a very large
marketing and outreach
program to educate people in
So effective January 1, 2014,
we have as many as possible
of those 5 million Californians
enrolled either in Medi-cal or in
the Exchange.
And the third leg of what we do,
as far as the Exchange's
efforts, is to have effective
enrollment systems.
And so we've contracted with
Accenture to build the IT
system so I like to say to make,
to make buying health
insurance as easy as buying a
book on Amazon.
It won't be quite that easy.
Health insurance is a little bit
more complicated.
But we need to make it really
Health insurance, as you know
is complicated, but what's not
complicated is the fact that
people will have financial
support, they can choose the
plan that has their doctor in it,
that they can understand the
network and understand what
they're choosing.
And the Affordable Care Act
does a lot of things not just in
the Exchange to standardize
what health plans are doing so
it's clear.
What you, many of you people
who are in CalPERS have, is a
clear description of what the
benefits from one plan to the
You know what you're
shopping for.
Outside of where large
employers are doing that, or
CalPERS is doing that, it is a
forest of confusion for
The Exchange will make it a lot
easier, a lot clearer to make
their purchasing.
So finally, the third area I want
to cover briefly is what
specifically will the Exchange
be doing to engage to address
cost drivers.
The first thing we're doing is
expanding coverage.
The, all purchasers pay a lot for
the uninsured that go to
emergency rooms, that are
then cost shifted on to the rest
of us.
By getting more people in to
insurance, we will be reducing
costs across the board.
So that's a core part of our
Beyond that though, there's a
number of areas where our
board, we have a five member
board, has said central to the
Exchange's mission, is to be a
catalyst to promote delivery
To promote the changes in how
care is actively delivered by
doctors, nurses, medical
groups and hospitals.
And so we have a range of
recommendations that our
board is looking at right now.
I won't go through all of them
and leave it for some of the Q
and A, but central to them are a
couple of things.
The first is alignment.
It's one of the things that Ann
CalPERS is big, the Exchange
is gonna be big.
We're gonna grow to probably
have two million lives.
We aren't big enough alone to
change the incentives to
change the delivery system.
So our board has said how do
we partner with other
purchasers, both here in
California like CalPERS,
private employers, but also with
CMMS, the Center for Medi-
care and Medicaid Services.
I've worked for a while back in
Washington for the Center for
Medi-care and Medicaid
Innovation which you'll be
hearing from one of the grant
recipients in a moment.
And CMMS is big, Medi-care is
Medi-care gets it that they're
not big enough alone, that they
need to work in alignment with
So, the Exchange is gonna be
looking actively for ways to
partner with other purchasers.
We're also going to be holding
our plans to account for how
they pay and deliver care.
In the end, delivery is not done
by health plan, it's done by a
doctor, by a nurse, by a
medical group.
But plans can make a
difference by who they choose
to contract with, do they have a
narrow or a network that is
integrated and effective?
Do they promote care
Do they do effective wellness
We'll be holding our plans to
account to do that.
Finally, and I know this is one
of the other panels you have,
we've been looking a lot at
And we've recommended to
our board a whole range of
initiatives to make sure that the
individuals in the Exchange
have the benefits of getting
preventative services.
But also, and again this is
another issue of alignment, is
that the Exchange is working in
partnership with other
purchasers and also with
Public Health, because the
issues around addressing
obesity, addressing smoking,
etc., even if you're as big as
PERS or as big as the
Exchange, are issues that go
beyond our borders.
And so we need to look at how
do we engage actively in the
broader issues around health
wellness throughout the state
of California, as we're focusing
on expanding coverage to 5
million Californians.
So with that, I think I was close
to my 15 minutes, which I
promised Micah I'd stay too.
He was worried by remarks
would go to 47 minutes and
give him 2 minutes of
And with that, I'm happy to take
questions from Micah first and
then questions from you in the
>>Thank you so much Peter.
And thank you to Ann and the
rest of the folks at CalPERS for
hosting this very important
I think I might end up starting
sounding a little bit more like
Oprah than Jerry Springer
when I say that, you know, as I
think about Peter Lee, I don't
know if I should describe him
as the Hercules of healthcare
reform or the Atlas of
healthcare reform.
He's the Hercules in the sense
of, and this is not necessarily a
good thing, that the folks at the
Exchange have 10 or 12 nearly
impossible tasks ahead of them
that they have to complete in a
fairly short period of time.
I believe that they are only
nearly impossible tasks and
that they will in fact be
successful, but whether it's the
IT implementation or reforming
the insurance market, or
coordinating with public
programs or what have you,
these are not easy things to do.
Or perhaps he is the Atlas of
healthcare reform in a sense of
healthcare reform is a state-
based solution and the lynch
men of healthcare reform are
these health benefit
And California as we all know is
the largest state.
So on some days it seems like
all of healthcare reform, the
whole globe, is resting on this
man's back.
And you seem to be holding up
fairly well, which is good.
But don't get in any small
So, I thought that the right,
really the right thing to do here
uh, would be to start out our Q
and A session with a little bit of
shameless pandering.
By asking you what is it that the
Exchange can learn from the
experience of CalPERS?
What are some of the best
things that CalPERS has done
that can be adopted in the
Exchange process?
>>That's a great question and
appropriate pandering.
Across the nation, as Micah
noted, there will be an
exchange in every single state,
Some of those will be run by
the federal government, some
will be run by states.
Some of those states have said
we're gonna run an exchange
and we're gonna be what I call
an any willing plan state.
We are gonna say if you're a
plan you can be in our
Other exchanges, like
California, said we're gonna be
an active purchaser.
We're gonna select our plans,
we're going to engage them
actively, we're gonna look at
what they do, we're gonna
seek to improve what they do.
That's exactly what CalPERS
has done historically, is to say
we serve, us being CalPERS,
serve our members better by
actively looking at what our
plans do, helping shape what
they do, hold them to account
for what they do.
That's exactly what the
Exchange is gonna do.
And so we're gonna be doing a
solicitation process, an RFP
process that we have a lot to
learn from what CalPERS has
done in saying if you want to
play in the Exchange, tell us
what you're doing on chronic
disease management.
Tell us what you're doing on
wellness programs.
So that's one example.
Another example is we're
specifically asking our plans to
say the status quo isn't
What are you as a health plan
doing to innovate?
To create new ways that we
can deliver care?
And again you'll hear from the
next panel an example of that,
which is a effort to take
innovations that can be proven
and then spread.
We want to make sure that we
aren't just saying the old
system is always going to work
How do we support those
clinicians that want to change,
that want to actually be
rewarded for better
coordination instead of
rewarded for doing more?
So we're gonna be looking at
some of those lessons.
The last thing I'd note that
we've learned from CalPERS is
again the thing I noted before,
is the need to work in
partnership with others.
One of the recommendations
before the board is that actually
the Exchange join the Pacific
Business Group on Health.
CalPERS has been a
longstanding member.
I think has benefitted from the
partnership, learning from the
private sector, and helping
shape the private sector.
Just an example again of
where I think we've learned a
lot from CalPERS already and
we'll learn more as we work
>>As a follow up to that, you
know, CalPERS has had this
project which is the partnership
between you know, Blue Shield
of California, Dignity Health and
Hill Physicians, which has really
at least shown some very
promising initial results.
Is that the kind of product that
could be offered within the
Or are there things about the
ways in which CalPERS and
the Exchange are different that
would mean that that product
would have to look different?
>>It may look a little different
but that is exactly the kind of
product that we would be
excited if it came to our doors.
So we will be offering health
plans, product choices
throughout the state of
The number one element that's
important to us is affordability.
So I noted the issues of people
who get subsidies, and you
know, again up to $90,000 a
year, you can get help buying
your health insurance.
But if you make $20,000 a
year, the federal government is
going to pay for 80% of your
They're going to be given a
check to that, so that said,
affordability is still key.
It's still a purchasing decision,
it's still a decision of a low
income person who's saying
am I going to buy this health
plan or am I gonna, you know,
pay rent this month.
Am I gonna buy food.
And it's that kind of struggle, so
affordability is job one.
Given that, we're gonna be
welcoming and looking for
health plans that say how we're
gonna address this is in this
area we're gonna have an
integrated delivery system.
And that's what we want to
compete on.
So we would absolutely
welcome those sorts of
arrangements, and we've been
encouraging that in our
discussions with health plans,
providers, delivery systems.
Well, you were one of the
people that I was the most
disappointed to lose to DC
when you went and worked
with the HHS Office of Health
Reform and then with the
Center for Medi-care and
Medicaid Innovation.
I was so excited when we stole
you back.
So if there are other good folks
in DC we need to steal back,
let's get on that.
But I want to dig a little bit
You mentioned the issue of
You mentioned the issue of
even Medicare not being big
enough to do, to drive delivery
system reform and value-
based healthcare as much as
we want.
What exactly does that mean?
How exactly do you partner
with the state Medicare
program, the national Medicare
program and so on?
And how do we make sure I
guess is sort of a separate
question, that the pilots created
through the CMMI process
actually take off?
Because there's a sort of knock
on that process that we don't
actually build on what we have
learned about what works.
So one of the things I tried to
learn in Washington is not
speak in acronyms, so the
Innovation Center, just to give
people a thumbnail or
background of what that is, it's
the Medicare agency that's part
of the Affordable Care Act was
charged to set up the Center
for Innovation.
They were given 10 billion
dollars okay.
But more than 10 billing dollars,
they were given the authority to
test new things in Medicare and
in Medicaid.
Recognizing the innovation's
important, but innovation isn't
just about creating something
It's about spreading what
Some examples of what the
Innovation Center is doing and
has done that are about
alignment that we will look for
to partner with, is for instance,
you note the example of the
CalPERS initiative that's an
accountable care organization
like structure, where a
organized delivery system
that's integrated.
There are 16 what are called
pioneer accountable
organizations in the state of
More than any other state.
These organizations, the
Innovation Center has said you
are doing the right thing of
being organized to take care of
a population.
And what we're gonna do with
you is we're actually gonna pay
you to coordinate care not to
do more care.
We'll share the savings with
The shared savings model
which is similar to the model
that CalPERS has done.
The Innovation Center said one
of the rules of the game to
become a pioneer was to show
how a significant portion of your
business as a delivery system,
is paying for value, not just
paying for volume.
So the selection of those 16
were because those delivery
systems had contracts with
CalPERS, or with purchasers
that said we want to pay
The Exchange is going to look
very actively at how we nudge,
push, cajole or require, we
haven't picked which option
we're going to use, my board
decides that, the health plan to
pay differently.
The central thing that's a
problem in healthcare is
historically we paid for volume.
We paid doctors, nurses and
hospitals for doing more, not
for doing the right thing, not for
coordinating better.
So we will be looking at having
common measures to align
with what Medicare is doing,
align with what other private
purchasers are doing.
We'll be looking at aligning in
terms of payment types, and
we'll be looking at aligning in
terms of public health
So those are some examples.
>>Great thank you.
So the organization that I work
with, the Bay Area Council, is
an organization about 300
Has been historically focused
on other areas, transportation,
land use and so on, but has
gotten very involved in health
care and is in some ways a
sister organization to your
former organization, the Pacific
Business Group on Health.
So I realize this is beginning to
sound like Peter Lee this is
your life, as we move
So you were in Washington DC
and guess who's here.
>>Kindergarten, let's go to
Well I mean I've heard a little
bit about your family history...
>>No, don't go to kindergarten.
>>This is actually a family
business for you.
But just not to go quite that far
back, again let's dig, let's dig
into this issue.
So, you know, the Exchange
joins the Pacific Business
Group on Health.
How does that work?
What is the relationship
between the Exchange and
other large businesses, and
how do they partner together?
And maybe this is a little bit I
guess of a curve ball, I mean,
and there's been a concern
right that the Exchange may
end up being the home for
some of the you know, folks
who currently work for large
And so I'd be interested in your
perspective on that as well.
>>Well the first part then the
Is one of the things that I've
learned in quite a few years
working in healthcare both as a
consumer advocate
representing business in
government, and now with the
Exchange, is there's no one
place with all the right ideas.
We have to be learning from
each other.
And so one of the things I think
is important about the
Exchange, we're gonna be
pretty big.
We will seek to be thoughtful,
we'll have some good ideas.
We will always have ways that
we can learn from others, that
we can learn from CalPERS,
we can learn from private
I think it's very important that
some of the things, there's no
sort of front dog all the time.
Learning from others is how
innovation works, implementing
it based on those lessons.
So I think working with other
organizations whose job is to
buy healthcare to get value, is
something the Exchange
needs to do.
I really can't say enough about
Ann's note of the goal of
CalPERS is our goal.
Which is to make care more
affordable, higher quality, and
the third element that I'd add to
that is to keep people well.
And this is often called the third
part aim.
That three part aim of better
care, better health and
affordable care, the folks that
really own that goal are
individual consumers and
those that represent them in
We found very willing and able
partners in the provider
community that have
championed those triple aims.
But it's us that are writing the
Us that are, you know,
representing people that have
chronic illness, that need to be
carrying that all the time.
And we need to learn from
each other.
So that's how the partnership I
think with PBGH and private
purchasers will play out as we'll
learn from each other, based
on the common aims that we
have, and take different
strategies that work, and adapt
them for our specific
In terms of the curve question,
the, just for folks as a
background point, the
Exchange when we open our
doors, is mostly about the
individual market.
People that do not have
If you have what's called
qualified coverage some place
else, you can't get coverage in
the Exchange, okay.
You can't get a subsidy.
We will also have products for
small business, businesses of
two to 50 employees.
The law in California says that
2018 we report to the
legislature on the issues and
potentials of expanding the
Exchange to be available for
other purchasers, larger
That is light years away.
I mean it'll pass quickly but we
have a lot to do to be up and
running in 2014.
The issue around large or small
purchasers, I noted at the
beginning one of the things
that's changed about
healthcare is getting everyone
in the tent.
Part of our job is to keep
people in the tent where they
Encouraging small businesses
to buy when they haven't, or
keep buying when they have,
to encourage large businesses,
the vast majority of which buy
healthcare, a core part of our
agenda is to say don't dump
em on us.
Keep in the game.
We have a employer-based
healthcare system which is how
the vast majority of Californians
get their health insurance.
We want to be part of sort of
keeping that a robust system.
>>Great thanks.
Just as a reminder, I see a
couple of people scribbling but
if you have cards with
questions, please get them to
the outside and we'll move on
to them in a little bit.
So one of the Herculean tasks
that not only you but some of
your other state partners in
particular, have in front of you
is the implementation of the IT
And CalPERS and some other
folks have had some
challenges in implementing IT
They are absolutely not unique
in that regard, in fact I'm not
sure that anybody hasn't had
challenges and had projects be
maybe more difficult than they
were anticipated to be.
And of course the worry is
because this isn't just an IT
implementation where you're
going to an IT vendor and
saying please build us this
snazzy system.
It's an IT implementation where
you have to interface with a lot
of other systems that are
currently existing.
You have to bring a lot of other
stakeholders on board.
The concern is it'll end up
looking like a Jerry Springer
episode with people hitting
each other over the head with
chairs and so on.
So what is the, talk to me about
this IT implementation process,
and the reasons why, and sort
of the things we've learned and
the reasons why we may be
able to get this up and going
when we need to.
It's a really good question.
Because the, I noted there's
three sort of foundations for the
Good health products, the
plans that are gonna be
affordable, marketing so you'll
know we're there, and then
And that enrollment system is
vital because when you think
about, and I know folks in the
CalPERS crowd are savvy
folks but risk mix means a lot.
We want to get those young
healthy kids, as well as the
older folks, into the Exchange.
We want, and the more we
have everyone in, the better we
all are.
Part of what that means is if we
have a clunky enrollment
system, you know, takes a long
time to work its way through
and it's complicated, that
person who's not healthy is
gonna spend the time to work
through it.
That young invincible gonna
say God this is the fourth
screen, I don't get it, I'll do it
next week, I'll put it off.
So having a very effective
enrollment system is critical.
It is a big build.
It's going to be a fast build.
The reason we're confident, it's
actually, it's interesting, we
looked very closely at the
federal build, so the federal
government is building a
federal exchange that will be
operating in somewhere
between 30 and 40 states.
They had started eight months
before us, they're doing very
very good work.
But what we did right out of the
gate is the design itself baked
in issues of concern to
constituents, consumer groups,
health plans, doctors, the
whole range.
So the first thing I think we've
done to be a platform for
success is the design itself.
We actually did what's very
rare for something as big as
what we're doing, and this is a
very big build, hundreds of
millions of dollars will be spent
building this IT system.
We actually shared in draft the
RFP, the request for proposals,
and before it went out to
vendors, we posted it publicly.
We had vendors say you got it
wrong, we can't do it that way,
are you crazy.
We had consumer groups
saying wait a second, are you
doing this elements in 13
languages, because we need
13 languages when you think
how diverse California is.
So the first element was the
build, the design for what we're
The second is the checkpoints.
And we have checkpoints
literally weekly to make sure
we're hitting the toll gates, so
we're gonna be ready and up
and running.
And they're both our toll gates
and federal toll gates.
To the designated state-based
Exchange come this
November, the federal
government needs to give us a
So in some ways back to the
issue about failure not being an
option, if we aren't ready then
we rely on the federal system.
The third element though, and
this is where failure's not an
We're gonna be offering
coverage, and offering a way
for people to enroll as of
October 1, 2013.
For enrollment that's effective
in January 2014.
The other thing we're building
into all of our planning is we
want to launch this system with
every bell, every whistle, but
we're gonna launch this
system, and maybe we have
two bells outstanding that we
add the next year.
So part of the planning is one
that is we have to up and
running, we will be up and
running, but it may be with
some of the bells coming in
later years.
>>So now I'm gonna be
reading from some of your
We have a few more minutes.
And I think this is a very
pointed question but it's a very
good one and I think this is
something that is a question
about healthcare reform
generally but also a question
specifically about the
As a CalPERS member, we're
asked why should I care about
what the Exchange does when
I'm already covered by
CalPERS even after my
>>Yes it is a good question.
And this is again healthcare
costs are going up for all of us.
Healthcare costs are the
biggest reason we have a
federal deficit.
Healthcare costs are the
biggest challenge to Medicare.
If we collectively don't bring
down healthcare costs, we're
all sunk.
I'll be very clear about this.
The issues of health reform,
the Affordable Care Act starts
by saying we can't really get
our arms as a nation around
healthcare costs unless we get
everyone in the tent.
So you all should care about
getting everyone insured so we
aren't playing the shell game
which means your costs for
healthcare are baring the costs
of uninsured who are not
staying healthy, who are going
to emergency rooms and being
So, having everyone in is a
core element.
The second piece though is
you know, CalPERS is you
know, one of the most
thoughtful purchasers in the
And if you look over the last 10-
15 years, your costs have been
going up.
You know.
And you know what that
experience is.
CalPERS alone cannot change
We have healthcare
representing now 17% of the
gross domestic product.
That's dollars and it's going up
right now at a rate of about 3 to
4% faster than inflation is.
If that keeps happening, what
does it mean?
It means less money for
retirement benefits, it means
less money for education, less
money for schools, less money
for roads.
It really is taking money out of
all of us, and so without having
a system that says we're going
to make healthcare not take
more out of all of our pockets,
we're gonna have a system
that's gonna cost all of us.
And so the Exchange in
partnership with CalPERS and
others is part of an agenda that
has to be saying we need to
get our arms around the
healthcare costs which this
forum is trying to talk about.
>>This next one is a couple of
questions that I think are on
everybody's minds, or on a lot
of people's minds.
You hear about them a lot on
the radio and television
And it's about access.
You talked a lot about getting
healthcare coverage for 5
million more Californians, and
what a lot of people ask is are
there enough doctors-and I
think it's important that the
question says doctors -to be
able to give care to these folks.
And then the second question,
you know, if the Exchange
ends up, and this is an
assumption that I think it's
important to challenge, if the
Exchange ends up aligning
with Medicaid in terms of its
provider rates, how is that
going to affect access when we
know that there are a lot of
doctors that are concerned
about the level of
reimbursement provided by
Medicaid in this state.
I'll answer those upside down.
First, the Exchange, like
CalPERS, doesn't set payment
rates for doctors or hospitals.
We negotiate with plans, the
plans will negotiate those rates.
We aren't a regulator, a price
setter, like Medi-cal,
Medicaid is.
So we're gonna be having
plans coming to us saying this
is what the premiums will be,
here's our network of
providers, etc.
We will be making sure that the
networks are adequate to meet
the needs of everyone
And this comes to the first part
of the question, is there are
some challenges around
clinician supply.
But what often gets forgotten,
but I think work with CalPERS
and others has highlighted, is
that healthcare is not just a
doctor business.
Medical care is a team sport.
It's a team sport delivered by
nurses, by physical therapists,
by psychologists, by
nutritionists, by physicians.
And one of the things we have
right now is a system where
people are getting care.
Those 5 million people are not
dying in the streets.
They're going to emergency
They're seeing doctors and
nurses throughout California,
but they aren't seeing the right
mix of doctors, nurses and
other professionals.
So a core thing the Exchange
is doing, is in contracting with
our plans, saying what are you
doing as a plan to do
coordinated, integrative care
that is team based.
The supply issues are not
single answer issues.
And I really, I know a very little
bit about what you're going to
be hearing about from Diane
and Alan in a moment.
But I think it's a good part of
that story, is that it's, care isn't
just doctor based care.
It's about having a team care.
So we're gonna be looking at
what do we do to support team
The other thing that we'll be
looking to do is the Exchange
will not be either the cause of
all the world's healthcare
problems, or the solution to all
the problems.
And I want to be clear on that.
So, one anecdote on this, I
had, I was speaking to a group
on rural health and a very
articulate advocate got up and
said "for the least 25 years I've
been noting that there aren't
enough doctors in rural
communities and how is the
Exchange gonna fix that
I was going, okay
you've been doing this for 25
years and we aren't the
problem or the solution.
There are problems.
The main problems really about
clinician supply are not
number, they're location.
A lot of doctors, in particular,
don't want to live in rural areas.
So there's, in rural areas
there's real challenges.
This is where we need new
initiatives that look at tele-
health, supporting plans
through different ways to
deliver care.
The issue's not gonna be more
every time.
The last thing I note on this is
I'm actually a big believer in
Paying makes a difference.
Historically, we in the American
healthcare system, have paid a
lot of money to both hospitals
and clinicians that do
That's what we reward.
You put in a stent in someone's
heart you get a lot of money.
We've not paid a lot for the
time spent with a person with
chronic illness to talk about
their disease.
We haven't spent and paid
much for coordination.
Which means that medical
students look down the road
and they say hmm, I think I'll be
a dermatologist instead of a
primary care doc.
We need to be part, and this is
back to the alignment issue, of
changing payments so we
reward care coordination.
So medical students say you
know I think that future in
primary care looks pretty good.
So that's a role the Exchange
can play but never alone.
We'd never be big enough to
change the financial dynamics
of doctors making choices
unless we're doing that with
PERS, with the Center for
Medicare and Medicaid
Innovation, and then with CMS
>>So let me give you a quick
fairly easy question before we
dive right back into the hard
Well I don't know how easy this
one is.
So, regarding the IT
implementation, we know that
some large percentage of
Californians perhaps
particularly in the group that will
be involved in the Exchange,
which for those of you who
don't know, is a group that
maybe a majority have English
as a second language, majority
Latino, you know, coming from
the uninsured and therefore,
you know, not a bunch of tech
entrepreneurs in the Bay Area.
With the IT implementation,
how do we make sure that we
can secure information from
people that are not connected
to the internet?
>>That's a really good
So that 3 million, I think it's
important how you framed it
Micah, I appreciate it.
So eligible for acceptance into
the Exchange, about 3 million
Californians, about 50% are
Latino or Hispanic.
Of them, a majority of them are
not proficient English speakers.
Beyond that though, and this is
really both exciting in the
challenge and I feel a little bit of
the Herculean nature of it, to
give you a sense of the
diversity, we have eligible for
expanded coverage in
California, about 700,000 Asian
and Pacific Islanders.
But as you well know that
doesn't mean one thing, it
means there's 100,000
Mandarin speakers, there's
Cantonese, there's Korean,
there's Farsi.
And we need to have a
program that brings them all in.
So we're gonna have a good IT
system, but far more than that,
we're gonna have one-on-one
outreach in every community in
the state.
We're gonna be setting up a
program called Navigators for
Assisters, that will trained to
help someone understand what
does it mean to enroll in the
Exchange, what are the
benefits, speaking their
And I mean that both
linguistically and culturally.
And these trained individuals,
we will actually pay to help
people enroll.
They will be in every
community around the state.
So yeah, we're gonna have a
great IT system, but we can't
rely on that.
To get everyone enrolled, we
actually need to be reaching
out in communities, in
languages that are appropriate
for the diversity of the state of
And I will note that, I use that
note around Asian Pacific
Islanders, that 750,000
number, that's bigger than the
entire population of the state of
Now the state of Vermont's a
great state, you know, but you
think about it, and this is just
those that are eligible for
expanded coverage who are
Asian Pacific Islander.
And it is one of the
opportunities and challenge we
have in California.
We are a very big state.
You know, the county of San
Bernardino is about the same
size population wise as the
state of Utah.
And you go through, again and
again, which is part of the
challenge but it's also part of
the opportunity.
It means that we can do the
investments we need to make
to actually have material
translated into 13 languages.
And Utah has people who
speak Mandarin, they have
people who speak Farsi.
But will they make that
investment, probably not.
California will because we're
big enough to make those
>>So this is in some ways a
follow up on a question that I
asked you, but I've gotten a
few questions about this so it
looks like the audience really
wants us to dig into this a little
bit further.
Just, you know, how do we
encourage to stay where
they're at, and not leave their
current healthcare coverage.
And specifically employer-
based healthcare coverage,
and there's a question that we
address this employer penalty
Is it true that it may be less
expensive for companies to
pay the penalty and just not
offer healthcare coverage to
their employees, and if so, is
the Exchange itself going to be
able to do anything to address it.
You said you would prefer for
folks to stay in their place, but
does the Exchange itself have
any policy levers to encourage
that, within the context of the
employer penalty?
>>Yeah, um, so Micah may
know the details much better
than I and I probably should
know them better but the
Supreme Court case was
about the penalty for
Which is if you're an individual
and you can afford coverage,
that can afford coverage very
important, you'll owe the
You'll need to pay what the
Supreme Court has called a
It's not much money.
The bigger issue for expanding
coverage for individuals is the
subsidies, the tax credits to
help people buy.
For employers, if you're a large
employer, and this doesn't
relate to small business, small
businesses do not have a
mandate to provide health
insurance coverage.
For larger employers though
there is a substantial penalty.
But that penalty I think is
Is that right Micah?
It's slightly more complicated
than that but it's, it's you know,
minus your first 30
So ballpark, $2,000 okay.
Family coverage for a family of
four could be north of $10,000.
So on a pure cost benefit
decision, might a large
employer say $10,000 and I
pay 80% so that's $8,000 or
Well the $2,000 sounds like a
better deal.
But these are employees.
These are employees who
have negotiated a deal that
includes health insurance.
So the issue of employers
exiting means changing their
relationship dramatically with
their employees.
That's number one, so that's
one reason I don't think there's
going to be a flight of coverage.
The other thing is if in
Washington and in California,
we saw a flight of coverage, I
can bet you dollars for
doughnuts that $2,000 would
start increasing to $3,000,
$4,000, etc.
Is that you know, the goal of
having everyone in the tent,
everyone insured is a core
thing that we need to get costs
under control.
>>Yeah and to add on to one
of the technical policy details,
speaking as somebody who
works with employers, the
penalty is actually the small
piece of it.
Employers also get a tax
advantage status by
contributing to their employees'
healthcare and if they were to
try to make their employees
whole, which is to say you know
not just, let them out on their
own, but say oh here's some
money to go purchase
insurance through the
They'll pay the penalty, they'll
lose the tax advantage status
and they'll pay payroll taxes on
the additional amount of money
that they would otherwise
spend on healthcare.
So the numbers just don't add up.
And you know, certainly if we
end up seeing this there'll be
policy solutions to that.
But the important thing to
understand is that all these
changes that are occurring in
employers are not occurring
because of the Affordable Care
The real, one of the big
healthcare reforms that is going
on in the country right now, is
that employers are making
major changes to their benefit
designs because of the
economic environment they
find themselves in.
And in a lot of ways, the
healthcare reform helps shore
up those employers through a
lot of the delivery system
reforms it engages in that will
make healthcare more
affordable in a way that is likely
to promote more employer
And indeed that's what we've
seen in Massachusetts.
That rates of employer
sponsored health insurance
have actually gone up rather
than down since they passed
their own Romney care.
All right.
So two more minutes.
Do we have any more
questions from the crowd?
If not, I've got, we have a little
bit of time, do you have some
closing thoughts you'd like to
share, or do you want another
>>I'd love another question.
Throw out the curve...
>>We addressed this a little bit
already but let's pick up on it a
little bit more.
So, actually the Exchange from
the perspective of its enrollees,
is going to be nothing like
So not only is the
demographics almost exactly
opposite of CalPERS but also
the amount of time that people
spend in the system is the
exact opposite.
So CalPERS is very unique in
that it has its folks for years and
years, where as for the
Exchange, I mean the average
amount of time you might have
these folks is a year or so,
when they're between jobs or
what have you.
So, how does that impact the
tools that you're able to use to
bring down healthcare costs,
and how is that gonna
influence what you do in ways
that might make it very different
than what CalPERS does?
>>Great question.
You know, CalPERS makes
investments in wellness for two
It's the right thing to do.
But also it pays off because the
vast majority of CalPERS
member's lives stay for a long
So, if you invest in a smoking
cessation program, that person
doesn't have costs 10 years,
15 years down the line.
It takes a long term view.
And Micah's right that in the
Exchange, you know, 30% of
the people that enroll in the
Exchange won't be there next
Because they get a new job.
That's wonderful.
But that would challenge us for
making investments in wellness
and prevention except for one
The change I noted in the
entire health insurance system
that takes effect in January
2014 is those individuals, right
now insurance companies say
I'm not going to invest in
wellness because they're
gonna leave, I don't care.
Now we all need to care.
We are all sharing the risks
across all insurers and all
So in the individual market, that
risk adjustment process I noted
is something that sicker more
costly populations, every plan
will be paying for them.
So the Exchange has the
leverage in the individual
market in particular, to say to
all of our plans, we want you to
do this wellness program, this
prevention program, to partner
with public health around
prevention, because we may
not see the benefit next year,
but we will see it four years
from now when that person
actually goes to your plan,
stays in a smoking cessation
program, comes back to us
because they've left their job.
So, you know, we are looking
at wellness investments both in
self interest and in public
I'd like to ask you to join me in
thanking Peter and, for
spending his time here.
>>Thank you both very much.
Please also a round of
applause for Micah.
Peter's not always easy to
contain so we appreciate,
appreciate them taking the time
today to talk to us about the
complex issue.
We know there are lots and
lots of questions about how the
Exchange is going to unfold
and we look forward to
continuing to explore those with
I did get one question, while we
do our little change out here, I
did get one question that is
actually not able to be
answered by one of our panels,
so I will just go ahead and
address that right now.
The question was is CalPERS
considering splitting pools
between employees and
My, right now as you know we
provide benefits for active
employees, what we consider
early retirees, up until they get
to Medicare and then when
they become Medicare eligible
they have a Medicare
supplement plan that we offer,
in addition to their Medicare
The Board and staff are not
considering any change to that
sort of, essentially two party
structure, so the coverage
would stay the same.
What we consider basic, all the
way through to Medicare and
to, and then from Medicare on.
I don't know if that is the
question that was being asked
on that.
If not, just let us know.
If you need more cards, there's
cards in the back, questions
are fabulous.
Peter talked about purchasers
as not always being sort of one
in front, but we sort of take
Then sort of thinking how a
flock of geese flies and
eventually that one in the front
gets tired and moves on to the
back and lets someone else
take over in the front.
And it really is that alignment of
purpose and intent that is
gonna start move major
change in the marketplace for
us here in California and
Our second panel, Peter
referenced them once or twice,
is focusing on the 19 million
dollar grant given to the Pacific
Business Group on Health from
the Centers for Medicaid and,
Medicare and Medicaid
Innovation, focusing on
Medicare populations here in
The panel is Diane Stewart,
Senior Director of PBGH and
Alan Antoven, Eccles
Professor of Public and Private
Management and the Knight
Management Center at
Stanford's Graduate School of
We look forward to hearing
what they have to say, and with
that I will turn it over to Diane.
Well it's always very difficult
following Peter Lee both
figuratively and literally.
But I'm very pleased to be here
and I'm very pleased to be
here with Professor Alan
I, part of what I'll be talking
about today I learned in his
classroom 20 years ago.
So this is, this is a real delight
for me.
Let me, okay, I'm gonna pick
up on two themes that the first
panel introduced.
Whoever set up the order here
did a great job.
I'm gonna show an example of
collective purchaser action to
address the problem that was
really well framed I think in
your, in your handout there,
which is how do we address,
how do we provide additional
support to patients living with
multiple chronic illnesses, that
account for a big proportion of
the purchaser's dollars.
And CalPERS has been
leading that charge here in
PBGH has played the role in
brining additional purchasers to
the party and, and representing
the collective purchaser action
here in California for new care
delivery models, and then
through the CMMI grant will be
able to add Medicare
beneficiaries into the new care
models that are emerging here
in California.
So one theme is around
collecting purchaser action.
And beyond that, private and
public purchaser action.
I'll show you an actual example
of how that works.
And then the second theme is
around quality and cost control
being created in the delivery
I think for a long time
purchasers spent their energy
on managing health plans
which is still important but those
of us who receive care really
understand that how we feel
the cost and how we feel the
quality is is face-to-face with
our doctors, with the nurses
who are taking care of us.
So the opportunities and the
accountability for addressing
cost drivers lies with the
delivery system.
So I'll show you an example
about how we're fostering
innovation in the delivery
system with CalPERS leading
the charge to address the cost
First just a minute on Pacific
Business Group on Health for
those of you who don't know us.
We drove up here from San
Francisco where it's still foggy
and really happy to enjoy your
heat up here in Sacramento.
We are a non-profit
membership organization of
large purchasers in California,
healthcare purchasers in
You can see we span the, span
the public and private
continuum with CalPERS.
We're very proud they're a
member of ours and then also
folks like Cisco Systems and
Wells Fargo and Wal-Mart.
So we represent a wide variety
of large purchasers of care.
Sharing the same mission of
creating a higher quality in the
delivery system in California
and at a affordable cost.
This is just a visual
representation of our members.
You'll recognize a lot of these
We're about to add the
Exchange on this slide so I'm
really happy about that.
So let's take a look at a care
model that's a new way of
delivering care for patients with
multiple chronic conditions, that
we've piloted with CalPERS up
in rural Humboldt County in
And show how it works first
from the patient's viewpoint
because that is always our
starting place.
How it works from a purchaser
standpoint and then how we
need to work collectively across
public and private purchasers
to make this sustainable for the
physicians who are caring for
these patients.
So let's meet Tom, okay Tom.
Tom is a patient that's enrolled
in this intensive outpatient care
program up in Humboldt
The folks who are eligible for
this program right now work for
PG&E and CalPERS.
And in fact some of the lumber
companies and other local
employers are sending their
patients to these programs too
but here's one example of
And Tom as you can see, in
the 18 months previous to
enrolling in this program, you
actually might be able to read
the dollars than I can.
Okay you can see the services
that he required for 18 months
previously to enrolling in the
program adding up to almost
$3,000 per month.
Primarily driving from
emergency department use,
and hospital, hospital
And then I think also of note is
the number of specialists he
sought care from during that 18
month period.
After enrollment in the
program, you can see his
pattern of care, no emergency
department use, no hospital
Seeing fewer number of
specialists, still has a really
strong relationship with his
primary care doctor and
depression scores should go
down for those of you who are
not clinicians.
So depression score being
lower is a good thing.
It means that you're feeling
more confident about caring for
And his charges per month.
So what happened for Tom,
you know, between the 18
months before and the 18
months after?
Oh you also have a flyer in your
packet that shows what Tom
thinks of the program.
So our focus here is on cost
but, but there's still a point in
healthcare design where
reducing costs can also mean
improving quality in patient
It's a sad state but it is where
we are.
So, the change in the care
delivery model is that Tom was
matched with an R.N.
care manager that worked very
closely with his primary care
physician and was in touch with
First of all, sat down for an hour
and a half initial visit to really try
and understand what Tom's life
was like, what his fears were,
what his situation at home was,
what he saw as barriers in
terms of getting appropriate
level of care, or managing his
own disease.
He had multiple chronic
And to hear from him what he
thought was getting in the way
of his own care.
And then this R.N.
case manager working again
with the physician, establish a
care plan that had a lot to do
with empowering him to take
better care of himself, providing
him additional access because
a lot of the utilization was
driven, he just didn't know who
to ask.
He didn't know if he should go
or not, but he didn't have
anyone to call to find out.
Was he supposed to go to his,
was he supposed to ask him
pulmonologist, was he
supposed to ask his primary
care doc, what about his
He just calls the R.N.
care manager now.
And she helps him make, make
decisions about when and
where to select care.
In addition to helping him
manage his multiple
medications, to help him get on
an exercise program that is
helping relieve his depression.
So these are the kinds of things
that are, that are happening
between Tom and his care
manager over time.
So that's, that's the crux of the
intensive outpatient care
It's in a sense a medical home
for high risk patients.
Those of you who are familiar
with the medical home concept.
We're not providing this service
for all patients within a primary
care practice, but for those who
are most vulnerable,
particularly those most likely to
seek emergency department or
hospital care.
So we see how it works for
So can this be scalable, it
works for the patient, what
about the purchaser?
Is there evidence that this can
be scaled for a larger number
of patients and the CalPERS
Board decided to innovate with
this model in California based
on experience with Boeing up
in Seattle.
And I'll briefly describe that for
you too.
So Boeing started this very
similar model in 2006.
And they noted that 15% of
their employees were driving
about 40% of their cost, and
when they went in to take a
look at their claims data to say
what can we say that's
common about this set of
They were patients a lot like
They had multiple chronic
conditions, they were, they
were working, they were living
at home, many of them had
decent relationships with their
doctors, but they were
struggling on managing their
ongoing illnesses on a day-to-
day basis and needed some
extra support and guidance on
how to do that.
These folks aren't gonna be
cured so to speak, but they
need additional support to help
them manage their disease so
it doesn't progress further and
so it doesn't, you know result in
unexpected emergency room
visits, and that neither the
patient nor the healthcare
system really wants to
So Boeing targeted the 10-20%
of patients, some highest risk.
Patients who are recruited into
this, it's an opt-in model,
through their primary care
This is not a 1-800 disease
management program.
It's not the purchaser sending
them a letter saying you ought
to sign up.
It is their primary care doctor
saying here is some additional
services that I can offer you.
What do you think about giving
it a try?
If you want to do it, come to a
visit in my office, let me
introduce you to Jane or Joe,
whoever the care manager is,
and get you started on the right
track with someone who can
really help you on an ongoing
And, and then Boeing in this
case, and CalPERS stepped
up to the plate here, pays the
delivery system a care
management fee so they can
hire the nurses to provide this
Because under traditional
insurance, this is not paid for.
So what kind of results did
Boeing see?
You can, I won't go through it
all but you can see it was a win-
win situation.
It was, you know, reduction in
cost, it was improvement in
patient satisfaction, it was more
days at work, and metrics of
quality went up as well.
So we can see how it can work
from the individual patient
We can see how it worked from
the employer perspective.
And one of the things that we
learned in working side-by-side
with CalPERS and PG&E and
Boeing in California to
implement these models, is
that to be sustainable, this is
where the public-private
partnership comes in.
You can imagine talking to the
primary care doctor up in
Arcata and saying here's your
list of CalPERS and PG&E
patients who cold benefit from
this model.
And he or she will look at that
list and say I can think of
another 20 who could that why
can't you help us with those too.
And they're largely Medicare
And it's very hard, we know for
doctors to treat patients under
one insurance differently than
So the purpose of PBGH going
for the Medicare grant is to say
can we scale this model now
through California for Medicare
patients and commercial
patients that are eligible.
There's no reason that we
should be offering different
services for patients with
different insurance coverage.
And so that's really the genesis
of PBGH's effort to get the
grant and we have, so we'll be
working now with 17 delivery
systems in California and
another 3 in Arizona to help the
delivery, to help these delivery
By delivery systems I mean like
Brown and Tolan or Hills
Physicians or St.
Joseph's Healthcare System,
Heritage Provider Network,
many of those that I'm sure
you're familiar with.
Banner in Arizona.
To set up these, to make the
changes on the ground for
Medicare patients and then
make, and then help those
delivery systems engage the
commercial purchasers to add
those patients in.
So that's really what this is
So let's return to Tom.
So this is a win-win-win, it's
been a win for the patient, it's
been the win for the purchaser
of care, it's been a win for the
Because they're getting extra
help with the patients that
often, they can't take care of in
a 10 minute office visit.
So if this is a win-win-win,
what's the problem?
Why isn't everyone doing this?
And it'll depend on who you
Of course in the healthcare
system it depends who you ask
what answer you get, but since
I have the microphone, I think
it's a couple things.
I come from a delivery system.
Before I joined PBGH I was at
the Palo Alto Medical
Foundation and in order to
make these models work you
definitely need an infrastructure
to allow doctors and nurses
and everyone to communicate
with each other and share
patient information.
So the tremendous, you know,
advances we've made in
electronic health records and
ways of communicating within a
care delivery system have
created the opportunity to really
make these models work
But the other of course is how
we pay for care.
And as you can imagine, the R.N.
at the delivery system level
needs to be hired by a set of
doctors, but the savings comes
from hospital days and ED
So how do you set up a
payment system where the
invest, the people who are
making the investments are
also getting the gain.
And that's really the, you know,
the problem we're trying to
solve with our purchasers at
How can we change the
payment system to make the
delivery system, reward the
delivery systems who are going
to be investing in these.
And so what I'm about to share
with you now is an approach,
and there's lots of work being
done in this, let me tell you,
there's lots of work.
But what I'm gonna share with
you a little bit is a model that's
used in Minnesota by the public
purchasers there that we're just
exploring in California to see if
we can, if we can adapt for use
in California.
So what if delivery systems
who did this well actually got
What would that look like?
What would that look like?
And so let me now, from the
perspective of someone who
signs up for health insurance,
most of our PBGH companies
are offering something that
looks like this.
Kaiser HMO and a PPO, could
be offered by Cigna or Anthem
or whoever.
And so employees have a
choice between, usually one
now at this point, one HMO
product and one PPO product.
And these rates are example
of, they are modeled on one of
our PBGH member companies
down in Silicon Valley.
But we, but remember we said
that cost and quality is created
by the delivery system, not by a
health plan.
And when you take apart, let's
take a look at the Cigna PPO.
That rate is represents cost,
that's an average of cost and
quality of every delivery
system, medical group and
hospital that they contract with.
That's an average.
And when you get underneath
that, for those of you who like
numbers and graphs, you're
really like this next slide.
For those of you that don't, I'll
walk you through it but I think
it's really interesting.
The Integrative Healthcare
Association, many of you know
has done really pioneer work,
really great, we're lucky to have
them here in California too,
they've done some pioneering
work on pay for performance
programs nationally.
And one of their most recent
measures is total cost of care.
So, let's take, I'm just gonna
use San Francisco as an
Let's take Hills Physicians, that
contracts with one set of
hospitals, Brown and Tolan
contracts with a different set of
If you add up all of the care for
each of those systems, how
much does it cost per member
per month?
And that's what they've done in
this graph.
Each dot representing a care
It could be Hill, let me see if I
get this right, Hill and UCSF
and Brown and Tolan and
California Pacific down in the
San Francisco area.
They represent one of these
dots in the Bay Area, which is
furthest to the, they represent
two of the dots in the, in the
distribution furthest to the right.
Along the Y axis is the dollars
per member per month.
Along the bottom are regions in
California, starting with the
Inland Empire, then Los
Angeles, Orange County, etc.
So there's a couple things you
can pick out from this graph.
For those of you who don't like
numbers, you can see that the
average for Inland Empire is
the lowest.
Total cost of care when you're
adding everything up, drugs,
hospital, doctor groups, is on
average the lowest in the state.
You can also see that right
where we're sitting, is among
the highest in the state on
In Sacramento and the Bay
But more importantly look at
the variation within the regions.
In fact, if we know which dot
was Hill Physicians and UCSF
and which dot represented
Brown and Tolan and California
Pacific, wouldn't that be
And wouldn't that be important
to people who are choosing
their healthcare coverage.
I'm gonna skip that number
slide, so, we can come back to
it if you want.
So let's take a look now in a
new world where that same
employee is making decisions
about their healthcare
coverage, we still have Kaiser
Permanente there at the same
rate, although you can image
that they have variation too, we
know they do.
And we give them a quality
rating because we got some
decent information now about
But instead of just Cigna PPO,
what if it was Cigna Brown and
Tolan and Cigna Hill?
And you got to see the price
difference between Hill and
between Brown and Tolan, and
you got to choose, as an
employee signing up for your
healthcare coverage, you got
some information about quality,
and you got to choose based
on price.
Wouldn't that create a different
incentive for Brown and Tolan
or Hill Physicians to implement
some of these models.
So that's I think one way we
can create some, you know,
some market competition
among delivery systems for
quicker, a quicker adoption of
some of the care delivery
changes which are hard,
they're really hard.
But, but to create the rewards
for them to make the
investment in changing how we
deliver care for better quality
and lower cost.
So, and this is what I learned
from Dr. Antoven.
So I'm gonna pause, I think I'll
stop my presentation now and
invite, I hope some Oprah-like
questions, Oprah-like
>>Thank you very much Diane.
That was really interesting and
of course I love the ending
because that's a picture of
what we do at Stanford
For 20 years now we have
said to our employees we are
gonna offer you a range of
choices, Kaiser Permanente at
one end, open ended fee for
service at the other end, and
some variations in the middle.
And the University pays in full
the price of Kaiser Permanente
which is chronically our lowest
priced plan, arguably lowest
cost because best coordinated.
And if you want something
more, probably less
coordinated, then that's fine,
that's your God-given
American right and we don't
want to stop you, but we're not
gonna pay for that for you.
You have to pay the difference
And so over the years, the
Kaiser market share has
grown, and the fee for service,
uncoordinated fee for service
has shrunk.
So we're pretty happy with that
except we would like to see
some more integrated
accountable care organization
in there competing, and I think
to get that we've got to get
more employers interested in
making that happen.
So Diane, this isn't a rhetorical
question, although I've used it
as a rhetorical question, but
I've been speaking on, around
the country about health
insurance and healthcare
ought to be organized for years
and holding up CalPERS as
the model.
This is the way it ought to be,
sometimes I've said you know if
you want a national solution,
what should it be, well it would
be everybody in CalPERS.
So my question is, and I realize
the answer to this is not simple,
it's complex but it might be
good to explore a little bit, is
why can't PBGH be more like
>>We're trying.
We're trying.
I think what we offer is a, is a
learning network of sorts
among purchasers.
I think as Ann pointed out.
If you remember all those logos
up on the screen, they have
very different environments.
You know, we have high tech
companies that'll pay whatever
it takes on benefits.
We have Boeing is very union
We have some companies
where most of their people are
in some other country and very
few in California.
And as Ann, as Ann I think
pointed out, some, it's that flock
of geese.
Some people have
experimented in this way,
others have experimented in
this way and we see PBGH's
role as providing a way for
those to learn from each other.
I think very similar to what
we've done in the intensive
outpatient care program, for
instance where CalPERS
learned about it from Arnie
Millstein and Boeing, and
others of our purchasers have
learned about joint
replacement reference pricing
from CalPERS.
So I think we've, we've sort of, I
hope provided that learning
>>Let me just ask a little bit
also about the new program,
the intensive outpatient care,
which of course is really a great
We're doing that at Stanford,
the evangelist who brought it to
us who is Arnie Millstein.
How, what's the uptake among
the medical groups?
Do you have a lot of doctors
who think gee that's what we
ought been doing a long time
ago, or yeah we'd like to do it
but there's no market for it?
Or what, how is all that playing
>>I think that's a great
I think we can take a look at it
from the medical group
perspective, from the health
plan perspective and the
purchaser perspective.
And, we're finding great
interest from the doctor groups,
from the medical groups, like
Hill Physicians and Brown and
Tolan, were the two examples
that I used.
They see that this is where they
need to go.
What they're struggling with is
how are they rewarded for it.
Even on the HMO product
where you'd think dah, makes
sense, most of the time the, the
medical group that has to
invest in these care managers,
is not responsible for the
hospital cost.
That's what we called shared
Where we seeing the most
uptake is for physician groups,
I'll used Heritage Provider
Network in Southern California
as an example, that are full
They contract with the health
plans to say you pay us to
manage the hospital and the
outpatient side.
So, it's really about around the
payment model.
The health plans are, are not
as pushed to innovate around
this and for them to administer
CalPERS payment, it took a
long time to get the health plan
sort of on board and through
their administrative systems to
make this work.
So the key has been the
emergency of the purchaser, in
this case, CalPERS, Boeing,
PG&E, to make it work so if the
purchasers are willing to make
it work I think we'll find willing
delivery systems to work with
>>Thank you.
That's really good.
I do think it's important for
everybody to understand, as
Peter was saying earlier,
incentives really do matter.
And in our predominant health
insurance scheme in this state
now, it's what we often call the
delegated model, where a
health plan contracts with a
medical group on a per capita
basis for the medical services.
But the health plan carries the
risk for the hospital costs and
the pharmacy costs.
The whole HMO idea originally
was doctors working harder to
keep people out of the hospital,
or keep them just as this
project illustrates.
And so I think in this California
delegated model, it just kind of
got off the tracks.
Really we should've had a way
that the doctors are paid, at
least paid the costs for them to
do this extra work to keep
people out of the hospital.
And so I'm hoping
consciousness will rise across
the employer community now
that we really need to go to a
new model in which those
doctors who do the better work
to keep the people from
needing hospital, at least have
their costs paid if not rewarded.
You, Laura are you gonna
bring questions?
>>Yes, if I can just build on that
Alan if you don't mind.
I think the, the energy around
ACOs which provide the
opportunity to offer coordinated
care even among the PPO,
PPO product line, I think will
help the advancement of these
models because we're
beginning to see energy
around providing coordinated
care, even outside the HMO
product line.
Let me just share some of the
questions that have come from
the audience.
Using Tom as the example, are
there different strategies to
improve care and reduce costs
after the initial intervention, 1, 2
or 3 years, for the 5 or 10 years
>>Really good question.
First of all we image care
managers working with Tom for
a very long time until he really
needs a different kind of care.
So these, these models, I
mean they will have some
graduation rates, but that's not,
that's not the intent.
It's, it's really to help people
throughout their entre lives and
we've seen, actually another on
the CMMI grant, innovation
award grants went to Sutter
System because they have a
really great program for end of
life care.
So, depending on what, where
patients are in their lives, what
kind of health services they
need, I think we need to
develop different care models
to help them at each of the
stages of life.
So this model would certainly I
think, I think help Tom for a
long time.
But not necessarily the rest of
his life, or my life either.
>>You know it reminds me, a
term that's achieved a lot of
popularity among health policy
people and also among
primary care physicians, is the
idea of the medical home,
which I always thought made a
lot of sense.
People need to have a place to
go to get most of their medical
care and that which they don't
get there coordinated and
organized for them.
When some people then
decided to do some focus
groups and test marketing, how
did, how did consumers like the
term medical home.
And it was viewed very
They said well what it sounds
like is we have medical home,
then we go to nursing home,
and then we go to the funeral
So I guess we're not using
medical home as much
because of that.
But I would've thought Tom
with his chronic conditions is
gonna need pretty much that
adapted for the variations in his
condition for the rest of his life.
>>And we hope this will keep
him alive and happy and
functioning longer.
Another question.
How do you truly measure
quality of care by doctors, by
hospitals, by medical group, etc?
That's a really good question
requiring a thoughtful answer.
>>That's a great one.
And I would start by saying for
what purpose.
So what you'd want to know, is
a patient choosing a provider
for the first time, might be
different than what a health
plan should be measuring to
know what to pay that provider.
Might be different than what
let's say Brown and Tolan will
want to know to know whether
their intensive outpatient
program is working well.
So I think you have to start with
what do you, you know, what's
the purpose, what's the
purpose of measurement.
I think there's some common
themes though across the
One it has to be patient
The patient, patient reported
outcomes, if it's let's say knee
replacement, what, if that
patient is functional within a
reasonable amount of time
should be part of the measure
set on quality and PBGH is
trying to do that on joint
In the intensive outpatient care
program, we're gonna be doing
a patient survey to see if, if
their satisfaction with their care
overall, not just with their nurse,
because that's too narrow.
We want to know are you
feeling better about your care
overall, and did this program
give you more confidence in
managing your own care, and
more satisfied with your health
So I think that's an example I
think of how one measure can
differ depending on the use.
But we're all used to going to
say Amazon, we got all those
stars on Amazon, I know which
books to buy by how many
I know Yelp, I know I choose
my restaurants on Yelp.
And we've, Consumer Reports,
I never do anything without
Consumer Reports.
I never spend more than $500
without checking Consumer
So, we're gonna have to
develop that kind of publicly
available information for
healthcare which is I spend
certainly more on that than I do
on books or dishwashers.
You know, 20 years or so ago
people said how, meaning a
rhetorical question, how do you
measure the quality of care.
Like it's impossible, nobody
knows how to do that because
there's so many different
But in this country and to some
extent around the world, we
have made remarkable
progress in the last 20 years.
And if you look at let's say for
examples the measures of
quality that we have in the
Integrated Healthcare
Association, there are many
now, and we try to aggregate
them into fewer categories like
at first diabetes care was
control blood sugar, etc.
Now there's a use of IT, now
there's kind of a consolidated
score for diabetes care.
And so I think a lot of progress
has been made and this is a
work in progress.
So I don't think that raising the
question meaning how can you
measure the quality of care,
suggesting it's not really
possible, I don't think that's
tenable anymore.
That is, we've really come so
far on measuring quality of
care, we can certainly measure
now things like do doctors
please their patients or not, in
lots of different dimensions like
is the doctor a good listener, etc.
Does the doctor take into
account my particular
So we're getting better and
better at that and at the primary
care doctor's performance on a
lot of important indicators.
Did the ladies in the relevant
age range have their
mammogram or not.
Why is it in some groups they
have 90% and other groups
they have 40%, etc.
And that's a quality indicator.
And as you were saying with
respect to outcomes, people
with join replacement you can
ask them 1, 2, 3, 4 years later
are you able to walk around,
are you able to go up and down
stairs, etc., and get a pretty
good idea that's
definitely a work in progress.
Then the next question
following up on that, thank you
whoever sent this, is are these
measures really fair?
Do total cost of care and risk
adjustment mechanisms fully
take into account existing
infrastructure, cost for provision
of specialty care, etc.?
So what do you think?
>>It has to.
We don't have another
measure besides total cost of
care, to, you know, that, you
know from a purchaser view, I
think you take a look at what it
costs for our country to provide
care on average, compared to
any other country.
We look at the variation that we
just saw on that graph and the
graph I didn't show was the
correlation between total cost
of care and quality.
There was virtually none.
Virtually no correlation and it is
It is not perfect.
But we know that it's where we
have to start from.
And that we also know that
there's a number of doctor
groups in this case talking
about total cost of care, that
have very effective strategies
to reduce it.
Either to reduce hospital days,
use different specialists,
augment primary care.
Those are all strategies that
those near the bottom are
So, there's a lot to be learned
by looking at our imperfect
data, I guess would be a
summary point.
>>The question makes me
think of something that
happened in my much younger
I was serving in the
administration of John F.
Kennedy and apropos of
something like calling up some
of the National Guard to send
them to Europe to deter the
Russians, somebody said well
isn't that unfair.
And Kennedy replied "life is
You know, you can
obsess over fairness to the
point that you're not able to
move forward.
Well, I think with total cost of
care, for one thing, total cost of
care is way too high.
We've just got to get it down.
And so I don't care what your
excuse is, I'm not interested in
your excuse, I'm interested in
less costly care that keeps the
patients healthier and more
satisfied, and so forth.
>>You know I could add to that.
Again it gets back to the use of
the measures.
I come from the delivery
system as well, and what you
use for public reporting, what
you use for bonus payments,
versus what you use to learn
on what best practices are I
think can be different.
And you want to be sensitive to
the statistical validity, risk
adjustments of the measures
and use them appropriately but
we have to use them.
>>Right, yeah.
And also there's a question of
with whom do you share the
You want to be careful not to
motivate inappropriate action by.
>>Yeah good point.
>>By people wanting, going to
all kinds of tricky measures to
manipulate the data.
>>Good point.
>>Okay, another one.
The HMOs appear to be
providing care in highly
populated areas.
How will you improve care and
lower cost in the low population
That's a good question.
Well Tom lives in Arcata,
Humboldt County.
And so I, I'm heartened by the
example of how we can reach
rural populations.
The community clinics up there,
and I went to visit and the use
of tele-health in the community
clinic systems begat to some
very remote areas up near the
Oregon border, it was just so
impressive to me.
So, there are models.
The trick is spreading them I
Because it takes, it takes,
some very innovative
leadership within local
communities who are
committed to a, you know, who
can work together well as they
have in Humboldt County.
But I think they've shown it's
>>Yeah, there are models.
I remember years ago being
asked to be on the board of an
organization that was trying to
improve primary care access in
the Rocky Mountain west.
And the big problem was how
do we get doctors to be willing
to go to some of these.
And I think what we were
finding is there are, there are
I mean doctors want to live
where there are good schools
for their children, where there
are cultural advantages to
themselves, and one thing, not
only tele-health but just the
internet in general, you'll soon
not care whether there's a
movie theater in your town or
not because you'll be able to
get it on Netflix or what have
And I don't know, schooling it
might be that we're gonna have
more, gonna move more in the
direction of online learning and
taking advantage of it.
So I think as Diane said, there
are models out there.
I remember early in my time,
studying health organization
and policy, I was visiting Kaiser
Permanente in Hawaii.
And one of the things they
really wanted me to do was to
visit their outpost in Kahuku.
I gather Kahuku is less
unpopulated now than it was
then, but it was a very
unpopulated area.
And so we went to their clinic in
Kahuku which was very
And there was kind of a
barefoot bearded doctor that
looked a lot like the people he
was taking care of.
And so I said well how is it for
you out here?
I mean, do you feel
professional isolation, lack of
support, and so forth?
He said well no actually, if a
patient comes in and I'm really
scared, I don't know quite what
it is I can, this is in the days of
telephones now, I can dial up
my brother and sister doctors
down in the big medical center
in Honolulu and they'll talk me
through the episode.
You know, I get professional
Then once a month they send
out for a few days a relief
doctor who takes over while I
go back into the big city and
get professionally refreshed
and updated working in the big
medical center.
And so I think as well as the
internet and all that, there are
opportunities for just better
medical organization, if
regulations would make it
I think now it's hard to start a,
you know, for the big HMOs to
go up into the unpopulated
areas because the regulations
that require them to bring the
whole army, you've got to have
a hospital, you've got to have
this, that and the other thing.
And, so it's, in part it's
something that the regulators
could look at is to make it
easier for some of our big
systems to set up outposts in
low populated areas.
But then as Diane pointed out
at the beginning, a lot of this
innovation started up in
Humboldt County within the
context of an IPA up there, and
a forward thinking doctor who
now I'm happy to say is on the
Stanford faculty.
>>So what are you doing for
world care Alan?
do better care of the people we
have working for us.
But I think, I think there are,
there are potential answers to
that question.
Not easy but possible.
That covers my list of
Are there any other, oh here.
Thank you.
Thank you Laura.
So, wow.
I see this person was not
satisfied with how things
So, let's see.
It seems this Exchange has
high healthcare standards that
will cost more than what the
costs are to us presently, for
the taxpayers.
What is in place to indicate
enough counseling has been
provided in this high cost care?
This care seems more higher
healthcare than offered to us
already in the healthcare
Hard to believe it costs less to
us taxpayers than currently.
>>Is that the Exchange?
Is that regarding the
>>Well, I think also, no it's
regarding the, the kind of high
touched connoisseurs care that
you are providing and doesn't
that cost a lot of money and I
guess it does cost a lot of
money but not doing it costs
even a whole lot more money.
>>Yeah, yeah.
>>It's like somebody,
somebody said once education
is awfully expensive.
To which the answer is if you
think that's expensive, try
ignorance, which can be an
awful lot more expensive.
>>Yeah, yeah, I think you can
see the, you know part of what
makes these, you know,
intensive touch, high touch
models financially sustainable
really is that they have to save
more money than they cost,
and that's what CMS is asking
us to prove in the grant.
And if a care manager we're
finding on the commercial side
can handle about 150 to 200
On the Medicare, for Medicare
patients, more like 80 to 100.
And those of you who could
understand that graph and
were comfortable with numbers
can do the math from here too.
That pays for a couple nurses
really, the kind of cost savings.
So, but you have to find the
right patients.
That's part of what makes
these models effective and
what we, and the learning we
hope to share through the
innovation grant so that all
delivery systems can take
advantage of what we're
>>I suppose in a better more
developed chart, we would also
have a line at the bottom which
is kind of care management
>>Yes, yeah.
Yeah so the, we keep track of
net savings and early results
here in Humboldt County, really
after six months, is we're
showing some net savings.
That's net of the care
manager's salary.
There's also some additional
mental health services
provided because this set of
patients often has anxiety and
depression issues.
About a third.
So, a net of all of those
investments, there was still
savings, if we're able to provide
a high quality program.
>>And if we measure all the
costs to society, including lost
work and suffering and
everything else, bring those
into the balance, then this, the
net benefit here is even great.
>>Yeah, yeah.
That's what Boeing is.
>>At Stanford, I think like a lot
of employers, we started
thinking in terms of what can
we do to bring down the
medical costs, but then we
pretty soon widened our
aperture to say wow, you know,
we really want these people to
be at work, and not on sick
You know you want them to be
healthy and productive at work,
and so there's a question here
of the cost accounting.
Did we have here, note, well
didn't one of the things about
Tom talk about the days of
work he missed?
>>Uh, that was the Boeing, the
Boeing program.
Yeah, which, which shows.
>>So, if you properly cost
account it, optimum medical
care can be pretty economical.
>>Yeah I think what we're
learning for those of you who
are purchasers yourselves, if
an average yearly cost per
employee is about $12,000 or
13,000 or so, probably less, up
around 30,000 per year, cost of
30,000 per year in investment
of a care manager, if it's
chronic condition's that are
driving the costs, that's what
we're learning.
That's the sort of level which
this kind of investment makes
Thank you very much.
>>Thank you very much.
We appreciate your insight to a
very exciting program, one step
in the continuing journey to
improving care coordination for
and driving down costs for all of