Note: This transcript has been created with a combination of machine ears and human eyes. There may be small differences between this document and the audio version, which is one of many reasons we encourage you to listen to the episode!

Dan Gorenstein: President Joe Biden has nominated California Attorney General Xavier Becerra to lead the Department of Health and Human Services.

President Joe Biden: Xavier spent a career fighting to expand access to health care, reducing racial health disparities, protecting the Affordable Care Act.

DG: If confirmed, Becerra would be the first Latino Secretary of HHS.

He would oversee a $1.3 trillion budget and be taking over in the middle of a pandemic.

Obviously a huge and influential job. 

So today, who is Xavier Becerra? 

What drives his views on health policy?

And what could he do about one of his health care priorities — addressing the country’s health care consolidation problem?

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein, and this is Tradeoffs.

DG: Before becoming California’s Attorney General, Xavier Becerra served in Congress for 24 years.

Rep. Becerra: Thank you to all our witnesses. We appreciate your testimony…

DG: Becerra sat on the powerful Ways and Means Committee, the committee that crafted much of the Affordable Care Act.

Rep. Becerra: Would the public option be a way to help make the private insurance industry truly compete for all business?
Witness: Ah, yes, Congressman, I think it would.

Peter Lee: The vast majority of members of Congress were nowhere close to his involvement in shaping the ACA.

DG: Peter Lee was a health care advocate at the time, and he got to know Becerra while making the rounds on Capitol Hill.

Peter says Becerra’s support for the controversial law struck him as more visceral than philosophical.

PL: He was supporting and helping craft the ACA, not out of an abstract policy perspective, but out of serving a district that had a boatload of uninsured people.

Rep. Becerra: The people in my district want this.

PL: Lower income people that had jobs weren’t offering them health insurance.

Rep. Becerra: They’re desperate for this.

PL: Or were offering them really crappy health insurance. 

Rep. Becerra: I get letters all the time from people who need this.

PL: And so he saw the need and responded to it.

DG: For some Congressional Democrats, passing Obamacare was “Mission Accomplished.”

At the same time, the ACA became a 4-letter word in some parts of the country.

News clip: Liberty, yes! Obamacare, no!

DG: Fueled by partisan anger, misinformation and a sloppy rollout, standing by the law could be tough.

By then, Peter had become the head of Covered California, the state’s Obamacare exchange.

He says Becerra remained an outspoken supporter of the ACA and kept working to make it work, flying back to his Los Angeles district urging people to sign up.

PL: He actually stepped in and said, part of my job is to look out for my constituents, and I’m going to be on the ground. I’m going to be at a library. I’m going to be at a press event because they will listen to me.

DG: And they did.

Two years into the ACA, the uninsured rate in Becerra’s district dropped 15% — the biggest insurance gain of any district in the country.

Becerra was persuasive, in part, says Peter, because he could relate to his mostly Latino, working-class district.

His own parents immigrated from Mexico. His dad built roads and his mom was a clerical worker.

PL: Some members of Congress, some muckety-mucks are brilliant on policy, but making the bridge from what a policy means to the felt lived experience of the people in their district. It’s a leap. And it was not a leap for Xavier.

DG: Peter saw it every time he watched Becerra urge his constituents to get coverage.

PG: It felt like, you know, I’m not trying to show off. I’m just trying to show up.

DG: “Not showing off, just showing up” is how a number of people we talked to described the former congressman.

Becerra himself declined to be interviewed for this story.

But Peter Lee says leaving Washington to become California’s attorney general in 2017 gave Becerra even more of a chance to help people who had been left behind in health care.

PL: He saw the potential of having a bigger and different impact than he could have had as one of the hundreds of members of Congress.

DG: As attorney general, Becerra sued the Trump administration over the ACA…

AG Becerra: We stand ready to respond to all threats to the Affordable Care Act.

DG: … drug companies over unfair business practices…

AG Becerra: We challenged drug companies and their so-called pay-for-delay backroom deals, and we got $80 million in a settlement against them.

DG: And then there’s Sutter, a California health care giant with 24 hospitals and more than 50,000 employees. 

In 2018, Becerra sued the hospital system on the heels of a similar case brought by a group of unions and employers a few years earlier.

The suits alleged Sutter illegally jacked up prices after decades of buying up hospitals across Northern California.

Let’s be clear: Bringing this case was a risk for Becerra. 

His predecessor, Kamala Harris, had investigated Sutter for six years but stopped short of filing suit.

PL: It’s one thing to have unions and some private purchasers sort of kvetching about costs. It’s another very different thing to have the attorney general of the largest state in the nation saying, “You as a hospital system are doing something that is against the public good.”

DG: Historically, courts — and the public — have tended to view hospitals as good guys, the places people go to get better and often one of the biggest employers in town.

Many hospitals have the clout and the resources to defend themselves.

If Becerra lost, it could dent his reputation as a rising political star and make an enemy out of a powerful industry.

PL: That’s the thing that I respect most about it. It’s the fact that he was ready to do the right thing, which means being ready to maybe lose a case that would be high profile, is to use a Kennedy term, is a profile in courage, is the right thing to do. You don’t just want to bring slam dunks. You want to bring cases that push the envelope, and that’s actually what he did in that case.

DG: For all the political risk, Becerra’s involvement signaled a willingness to tackle one of the most pernicious and important problems in health care: high prices.

The move earned Becerra credit among the ranks of policy wonks, health economists and employers.

Several days before the AG announced the suit, he called Berkeley professor Richard Scheffler.

Richard had sent embargoed copies of a major report to several stakeholders including the AG’s office.

Richard Scheffler: The big result was we were able to document with reliable data that prices for the same services in hospitals, more or less, were 30% higher in Northern California than Southern California. 

DG: This finding matched a large body of research from across the country showing that concentrated hospital markets drive up prices.

The words “Sutter Health” appear nowhere in Richard’s report.

But the paper’s results suggested to Becerra that some of the hospital’s tactics were to blame, particularly a clause found in many Sutter contracts.

So-called “all or nothing clauses” meant insurers or employers who wanted to contract with one of Sutter’s 24 hospitals had to contract with them all.

RS: This would be like saying if you go to a particular store and you buy wine or you buy milk, you have to buy the rest of your groceries there, you can’t go to another store. You might get a better price at another store for meat or fish. But no, if you wanted to buy that, you had to buy all of it there.

DG: Becerra called Richard on a Saturday in March 2018.

Over the course of the call, Richard came to see he was talking to a student of the California hospital market.

RS: He asked very deep and searching questions about the report. It just wasn’t he read the abstract. You couldn’t have asked those questions unless you spent a couple of hours actually looking at the report.

DG: To Becerra, these findings epitomized what his office had learned over their 7-year investigation into the hospital system. 

And he wanted Californians to know it.

So two days later, the AG touted Richard’s report in a press conference.

AG Becerra: A particular thanks to Professor Scheffler, whom I will introduce in just a moment…

DG: Richard didn’t know it at the time, but while the professor explained his paper…

Scheffler: In East Los Angeles, this service would cost over $15,000. But when you have the same service in San Francisco, it would cost almost $25,000.

DG: Becerra was using this moment as a media offensive, laying the groundwork for his next move.

AG Becerra: It’s time to hold health care corporations accountable and bring down illegally inflated health care costs that are imposed on California’s families.

DG: Four days later, Becerra sued Sutter.

In October 2019, Becerra and Sutter agreed to settle the case.

Sutter would pay $575 million to the unions and employers that had launched the original suit and stop using anti-competitive practices like all-or-nothing clauses. 

AG Becerra: This first-in-the-nation settlement is one of the largest actions against anti-competitive conduct in the health care marketplace across the country. 

DG: The settlement still needs to be approved by the court, but for Becerra, suing Sutter was about more than just what happens in California.

Hospitals have spent the last few decades merging to the point that today, the Health Care Cost Institute says nearly three in four cities nationwide have highly concentrated hospital markets.

And as Becerra told 60 Minutes’ Lesley Stahl last year, he sees the Sutter case as a blueprint.

Lesley Stahl: You called this case a “big effing deal.” Why?
AG Becerra: This settlement is gonna change the life for hundreds of thousands of Californians. And I’d say millions of Americans because I think you’re gonna see other states take what we did and say, “Ah-hah. We’ve got some facilities that are behaving the same way. Let’s push.”

DG: When we come back — the power of HHS, the department’s tools to combat consolidation, and how competition could make the GOP smile. 


DG: Welcome back.

If Becerra is confirmed to lead HHS, he’ll be overseeing some 80,000 people working in some of the most influential health policy positions in the federal government.

The FDA, CDC, Medicaid and Medicare will all be under his control.

He will not, however, be in charge of the federal government’s antitrust enforcement agenda. 

That happens at the Justice Department and Federal Trade Commission.

Given all of that, we wanted to understand how Becerra might be able to use his new job to continue fighting against health care consolidation.

Aditi Sen: I think it’s really hard to see a future where these big systems end up broken up. I’ve heard it referred to like it would be trying to get toothpaste back into a tube. And so I think it’s more about handling and dealing with the system that we have in place.

DG: Aditi Sen is an assistant professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.

Aditi studies how health care markets respond to different incentives, and she previously worked on competition issues at HHS in the Obama administration.

DG: What can Becerra and HHS do directly on this issue? Because we know he cannot bring these lawsuits.

AS: So his and his staff’s main tool is regulation. HHS regulations touch nearly every part of the market in health care, determining how physicians and hospitals get paid, which services Medicare covers. And so in writing these rules, I think there really is the potential that at the very least, the rules don’t incentivize further consolidation and potentially even reduce sort of anti-competitive behaviors in health care markets. 

DG: And are there examples that jump to your mind, Aditi, of pro-competition rules that you could see a Becerra HHS pursuing?

AS: So I think one area where we’re going to see a lot of rulemaking is around telehealth and specifically telehealth payment. Right, so we’ve seen this explosion of telehealth during the pandemic. And I think one particular benefit could be that in very concentrated markets, telehealth could be a new provider in that market. And I think a critical piece of whether telehealth can achieve that potential is how Medicare is going to pay for telehealth and whether that payment policy will support entry in these very concentrated markets in a way that can increase competition.

DG: In addition to telehealth, Aditi says Becerra’s HHS could also push rules increasing price transparency, lessening administrative burdens on providers and reducing incentives for big hospitals to buy up small physician practices.

But HHS’ most powerful tool could be changing the requirements for providers who want to get paid by Medicare.

AS: So they could, for instance, tell hospitals and physicians that if you want to participate in Medicare, you have to make some changes in your commercial contracts in a way that might promote competition more broadly in markets. 

DG: Right, these hospitals need to get paid by Medicare and that’s really the leverage that HHS has here. And they can say, look, you want to stay in our program, you want to keep getting paid, then you’re going to have to drop some of these anti-competitive business practices that you’re using.

AS: That’s right, exactly. It’s really using their purchasing power and leverage as a payer.

DG: Some of these rules would almost certainly face pushback from the industry and perhaps even legal challenges.

The American Hospital Association has endorsed Becerra’s nomination, citing his work defending the ACA.

At the same time, the industry group slammed his settlement with Sutter, and folks in Washington say they’re hearing rumblings from a small group of hospitals concerned with Becerra’s position on mergers. 

DG: Aside from the department’s leverage as a rulemaker, Aditi, what else could HHS do about consolidation?

AS: So, Dan, I think that there are a few other things they could do. One example of this is the office of the Assistant Secretary for Planning and Evaluation, or ASPE, which is a bit like an internal HHS think tank. And it’s intended to advise the secretary on policy development through research and analysis. So, for example, if we have this new policy coming down the road, what’s the impact on competition likely to be. They also do publish a lot of reports which are public and so can sort of bring more sunlight to these issues of competition. Another thing they can do is they could use these reports and their general knowledge of health care markets, how they’re working and not working, to inform the work of the FTC and DOJ in those agencies’ antitrust efforts. 

DG: So coming into this job, Becerra has really made a name for himself, in part because of this big, huge Sutter case. But it sounds like what you’re saying is that at HHS, Becerra would really sort of infuse the entire department with this sort of more pro-competitive lens. But there’s not one big Sutter-like take down that’s going to come.

AS: I think that’s right, and that’s really the nature of the process of regulation is that we would expect to see a lot of incremental changes, adjustments, across a whole set of policies and maybe even think of innovative ways to bring competition to health care markets.

DG: And I got to ask one personal question here. Like as an economist who focuses on competition and thinks about antitrust issues as you do, do you and your colleagues around the country, are you guys sort of excited about Becerra, given his background in this area?

AS: Well, certainly I am excited about Becerra. I have heard some similar things from colleagues as well. You know, our whole system is a market-based system. And for a market-based system to work well, you need competition. And I think that Becerra would be a secretary of HHS who really understands that, could push for broader federal action and use the kind of direct tools of HHS to promote competition.

DG: Aditi, thank you for taking the time to talk with us on Tradeoffs.

AS: Thanks so much, Dan. It’s been a real pleasure.

DG: With Democrats in control of the Senate, Becerra is expected to be confirmed.

But that doesn’t mean he’ll start tackling consolidation on Day 1.

Lanhee Chen: If you look at the Biden health care plan, I think there is some mention of rising costs and consolidation as being a concern. But no, it’s not been one of the top issues that I’ve heard them concerned about.

DG: Lanhee Chen is a fellow at the conservative Hoover Institution and was a senior official at HHS during the George W. Bush administration.

Chen notes that we’ve heard a lot more from Team Biden about things like Obamacare, reproductive rights and, of course, the pandemic.

It’s these big issues, he says, that are likely to dominate Becerra’s early days as secretary and be a source of tension with Republicans like Arkansas Sen. Tom Cotton.

Sen. Tom Cotton: I woke up this morning with a message from a friend in California who said that Xavier Becerra is so far to the left, he makes Bernie Sanders look like a Tea Partier.

DG: Indiana Sen. Mike Braun also pointed out that Becerra took a lot of money from the health care industry when he was in Congress.

But Chen says Becerra could find some common ground if he makes a big push to improve competition.

LC: That’s something I think you would see some pretty good bipartisan support for because it is a concern that certainly those of us who are conservatives have, and I’d imagine a number of progressives share those same concerns as well. 

DG: Tackling health care consolidation and promoting competition tend to take a back seat to increasing access in Democratic administrations.

It remains to be seen how far Xavier Becerra would advance that agenda.

But tapping someone with his background leaves people who are worried about the ever-increasing prices we all pay with a little hope.      

I’m Dan Gorenstein, and this is Tradeoffs.