Dan Gorenstein: Back in 2010 when President Obama signed the Affordable Care Act into law, health policy dreamers had high hopes that it would lead the nation to near universal insurance coverage. 

California’s political leaders embraced this vision.

DG: And there’s a strong case to make that the Golden State reflects the law at its best.

The uninsured rate has dropped to 6%…and more than two-thirds of ACA consumers can find a plan this year for $10 bucks a month. 

The success is thanks, in part to Peter Lee – who runs the state’s ACA exchange Covered California.

Lee is expected to step down in March.  

So today…an exit interview with a man who sees the strengths and weaknesses of the ACA…and what it may take to – finally – reach universal coverage.

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

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DG: Peter Lee was born to be in health care. 

President Truman appointed Peter’s grandfather to help sketch out a national health plan in the 40’s. 

President Johnson tapped Peter’s uncle to help create Medicare.

All told…Peter’s father, his three uncles and aunt all were physicians.

Peter laughs, remembering when his grandfather cornered him in college.  

Peter Lee: He assaulted me with the ‘Why wasn’t I becoming a doctor?’ And even then I said I could probably do more for health care through policy than through being a doc.

DG: A good line to brush back his grandfather, but at Berkeley, Peter did find himself running in policy circles…but his interest in health care really kicked in after he saw the health care system fail so many people he knew in the mid-80’s.  

PL: Seeing the AIDS epidemic sweeping through my community as a gay man and seeing people die in the face of government inaction. I saw some of the best and brightest people truly of a generation die.

DG: Peter became an AIDS activist… He moved to Washington DC where he got arrested for demonstrating outside the White House.

Peter spent the next 20 years working for a variety of nonprofits including the Pacific Business Group on Health – hoping to improve health care.

All that led him back to Washington where then President Obama asked to join the team. 

PL: When I was interviewed and screened, I had to  answer if I ever been arrested. I was so proud to say, ‘Well, yeah. On the other side of the fence from the White House, I was arrested and now I’m looking to come on this side of the fence that’s actually expanded health care coverage.’

And I love the irony, but so much of what we’re dealing with today is similar in disparities in health care, We’ve done a lot better, but some of the lessons of my being an AIDS activist carry through today.

DG: To appreciate what Peter has learned about the ACA …it helps to outline what the ACA has done.

Big picture – it aimed for all Americans to have affordable health insurance.

To that end, the law expanded Medicaid – the public health insurance program for low-income Americans…a later Supreme Court ruling made this optional for states…as of today all but 12 states have done so.

And the federal government offers subsidies to help cover monthly insurance premiums…people who make up to about four times the federal poverty limit – that’s $106k for a family of four – are eligible.

Generally, you qualify if you earn too much for Medicaid, are too young for Medicare or aren’t offered insurance at work.

This is where Peter comes in.

People with subsidies shop for coverage online at what are called exchanges or marketplaces.,

Peter for the last decade has run California’s – which is called Covered California.

So Peter – take us back to 2013. Set the scene and describe your goals.

PL: So, in 2013, you know, about 17% of Californians are uninsured. We ran the numbers and about five million of those were eligible for Medicaid. Great. A little over two million eligible for our financial subsidies. Our job was to get every one of them signed up because the secret sauce of making the Affordable Care Act work in a sustainable way is to do outreach so people that maybe they want insurance, but they need a nudge, they need a reminder. Every year we have 40% of our people turn over. They go back into the workforce or they lose a job and they need insurance coverage and they make a little too much money for Medicaid. The way you make a market work is provide stability and certainty for the insurers and good benefit designs with good networks for the consumers.

DG: That may sound simple…but to get there you needed insurers to buy in.

And what you were pitching them was pretty different…pre-ACA insurance companies offered a variety of plans with various benefits…making it super hard to shop.

You wanted companies to sell the exact same plan…the only difference would be what doctors and hospitals were included…and the price.

So how’d the first meeting go?

PL: We laid out the plan. This is a good business opportunity for you. We’re going to give you a way to make money, but not too much. We’re going to give you the platform of accessing two and a half million people that have subsidies, and we’re going to put gas in the tank with a big spend on marketing. But in doing that, we also told them that these consumers are really price sensitive, so you need to recognize you’re going to be competing for lives, but not on your terms, on our terms.

DG: So one way you got the insurers to play along was by promising them a bunch of customers.

And a bunch of people buy plans every year…so that makes the insurers happy.

You also delivered on that promise of putting gas in the tank. Covered California spent like $290 million on marketing in 2013 and has spent at least 100 million dollars toward marketing each year since.

Today you publish materials in 15 languages.

But yet, UC Berkeley’s Labor Center estimates some 3.2 million Californians will remain uninsured in 2022. Is this a failure of all that marketing?

PL: Yeah, a couple of things, really. When you look at California, the biggest reduction of the uninsured has come from the expansion of Medicaid, not from Covered California. So about one in three Californians now has Medi-Cal, which is the Medicaid program, the state of California. Now, many of those knocked on the door of the Medicaid department because of our marketing. Hallelujah! They come to us. We send them to Medi-Cal. That’s great. But look at that six percent remaining uninsured. About 60 percent of them are undocumented. They are not eligible for financial help at all.

DG: So what you’re saying is a lot of people who are uninsured in the state are not eligible for subsidies through the ACA or Medi-cal, the state’s Medicaid program because they are undocumented. And California’s governor has recently unveiled a plan that would grant all undocumented Californians access to Medi-ca if the qualify financially.

But, Peter, you’ve done all this spending on the marketing and there’s still more than a million people uninsured.

What’s that all about?

PL: I’ve actually gotten a post-doc degree now in marketing because I’ve learned this and now I’ve spent about a billion dollars in marketing. But part of learning that was focus groups, I’ll tell you one of the focus groups I remember, well, there was a guy that was saying, Yeah, I know what, how cheap health care would be. I know I could get health insurance for one hundred dollars a month, but I’ll probably do it when I pay off my pickup truck. And he was making a real life choice. He wants health insurance. The secret sauce, isn’t–it is marketed in part, but marketing supported by affordability. You’ve got to do marketing because people move in and out of coverage, but you’ve got to have true financial help that is meaningful for lower income people.  The ACA did part way there, but not enough. The American Rescue Plan is actually taking the next big steps, I think, to actually round out where the ACA started.

DG: The American Rescue Plan passed by Congress in 2021 expanded who was eligible for ACA subsidies AND made the subsidies more generous.   

In California that means about two thirds of Covered California enrollees can get plans for around $10 a month.

And as you said Peter – people aren’t going to buy these plans unless they’re cheap…but somebody has got to pay…and right now that’s the federal government, really taxpayers.

Do you think this is the most effective and efficient way to get the US closer to universal coverage?

PL: Given where we are today. Absolutely. Health care in America is too expensive for anyone to pay for on their own. The nominal increase in spending that we’re doing to help 15 million Americans have affordable coverage is part of what we need to do as a nation to actually step up and reach towards universal coverage with the tools we have, which are Medicaid expansion and marketplace subsidies. If you want to start from scratch, then let’s pretend we’re in 1920 England and we’d have a system that may be somewhat more efficient. The Affordable Care Act builds on an existing patchwork system and in doing that can do it effectively if it’s run well.

DG: When we come back, Peter Lee talks about the strengths and weaknesses of the ACA and what the ACA 2.0 may look like. 

****MIDROLL****

Welcome back. We’re talking with Peter Lee, the first executive director of Covered California, the state’s ACA exchange. 

Peter is expected to step down in March. 

Peter – you’re talking about doing more to hold health plans – insurers – to account.

Back when you all started at Covered California you said a big part of the goal was to ensure people get access to high quality care.

And you’ve recently announced a plan where – starting next year – insurers will be at risk for up to four percent of their premium if enough patients fail to meet certain quality standards

What are the mechanics? Can you walk us through how this is going to work please?

PL: Yeah, I’d love to. So the mechanics are and this is really important. First, we picked a focused set of things that matter: diabetes, hypertension, cancer and children’s immunization. Second, with that focus, we aligned with Medi-Cal in California, the Medicaid program and CalPERS, the state purchaser. We represent 42% of Californians, which means health plans that choose not to listen and choose not to work, to improve health care are not going to be talking to us. They’re going to be talking to Wall Street. They’re going to be talking to every investor that says, Why are you spending hundreds of millions of dollars by writing checks to folks like Covered California instead of doing what you should have done in the first place? Improve healthcare quality.