Jessica Ashley, JCRC President (00:00:00):
Good evening to everyone. We’re so happy to have you with us here at the magical, magnificent Troy Savings Bank Music Hall. My name is Jessica Ashley. I am the President of the Justice Center of Rensselaer County. We are a nonprofit dedicated to promoting equality and justice by tackling systemic inequalities in our political, economic, environmental, and social systems. We are here tonight for the third annual Robert J. Doherty Memorial Lecture, a series honoring our co-founder’s legacy by shining a light on pressing social issues and offering solutions. I just want to say we are also, as I stated, a nonprofit. If anyone would like, we do accept donations. It is most appreciated. With no further ado, now I’d like to turn the mic over to Noreen McKee, who will introduce tonight’s speaker. Thank you.

Noreen McKee, JCRC Board Member (00:01:29):
Thank you, Jessica. This year’s lecture, “Healthcare Justice: Diagnosis: Code Blue,” couldn’t be timelier. From local battles like the near closure of Troy’s Burdett Birth Center and contract disputes between CDPHP, St. Peter’s, and Albany Med, to national threats like potential Medicare and Medicaid cuts and the growing influence of profit-driven healthcare, we are at a critical juncture. The tragic murder of United Healthcare’s CEO has only amplified the public’s frustration with a system in crisis. That’s why we invited John Baackes to deliver tonight’s keynote. John’s not just a national healthcare leader; he’s one of us, a former resident of the ‘Burgh. He began his remarkable healthcare career in Albany in 1976 with Community Health Plan, later becoming its CEO. Here in Troy, John was among the original volunteers for Unity House, an institution that’s been a lifeline for social justice for over 50 years, helping founders like Mary Jane Smith get it off the ground.

Noreen McKee, JCRC Board Member (00:02:52):
His deep roots here and his decades of expertise make him the perfect voice for this moment. Until recently, John served as CEO of L.A. Care Health Plan, America’s largest public health plan, growing it to serve 2.6 million members while building community resources and training thousands of caregivers. Before that, he led Senior Whole Health to become Inc. Magazine’s fastest-growing company in 2008. Today, he chairs Charles Drew University and serves on the board of VivaLynx, a Latham-based telemedicine startup tied to EverHome Care Advisors, some of whom are with us tonight. For those wondering, VivaLynx is a venture under Apollo Care, where John’s strategic insight helps bridge local innovation to national impact. With a bachelor’s from Southern Illinois University and a career spanning nearly five decades, John Baackes brings unparalleled perspective. Please join me in welcoming a hometown hero, healthcare visionary, and a great friend, John Baackes.

John Baackes, Retired CEO L.A. Care Health Plan (00:04:19):
Thank you all very much. I see so many people I know. It’s good to be back in Troy. I arrived here 55 years ago, and I recall as my wife and I drove over the original Congress Street Bridge with its open-grate deck, she burst into tears. But we persevered. I raised my family here, and I started my healthcare career here in Troy. So it’s a very important place for me. I’ve been to this wonderful music hall many times, always to see the Albany Symphony Orchestra or many of the other wonderful performances, but this is the first time I’ve ever been on the stage, and the view is different. You all wouldn’t mind if I took a quick picture, would you? No? [Laughs] But it is different from up here.

John Baackes, Retired CEO L.A. Care Health Plan (00:05:22):
So I’m glad to be here. I was asked by the Justice Center to, as Noreen indicated, come and talk about the dreadful state of healthcare in the United States today. It was inspired by the experience they had here with the announcement that the Burdett Birth Center would close a couple of years ago, and then the community response, including the State of New York and Trinity Healthcare’s reaction to that response. So what I’d really like to do is have a conversation with you about healthcare here in the United States, from the perspective of somebody who’s been on the health plan side. Now, if someone were here who was a physician, or a CEO of a hospital, they might have a different perspective. So take it with a grain of salt.

John Baackes, Retired CEO L.A. Care Health Plan (00:06:13):
That experience with Burdett is unfortunately all too common now in the United States, and we’re at the cusp of it getting worse if we don’t address particularly reimbursement for Medicaid, for people who are on Medicaid, and the reimbursement that goes to the providers who care for them. I’ll walk through that as we go along here tonight. Health insurance in the United States—a hundred years ago, we didn’t have it. So everything we have today we’ve generated in the last 80 years or so, and there are several points along the way where we had an opportunity to go down a different path. But as a society and a country, we didn’t. I’d like to talk a little bit about those. Healthcare is a huge sector of our economy, and over the years, it’s only gotten more specialized, more fragmented, and more complicated.

John Baackes, Retired CEO L.A. Care Health Plan (00:07:14):
In 1960, 5% of the gross domestic product represented healthcare. For the next 40 years, until 2009, it went up in a straight line till it hit about 17% of our gross domestic product. It’s bobbed along there in the 17% range until 2019. Then with the onset of COVID and the recession, the actual percentage rose to almost 20%. It has fallen and it’s now back around the 17% range. But that means that this year we are projected to spend $5 billion on healthcare in the United States. What do we have to show for it? We have some of the worst outcomes of the industrialized nations, and even worse than some third-world nations. We also have significant disparities in healthcare results across racial, ethnic, and income levels. I will say now, and if I get arrested, so be it: diversity, equity, and inclusion are essential discussions to have in healthcare. If we don’t, we’re irresponsible.

John Baackes, Retired CEO L.A. Care Health Plan (00:08:35):
Nobody’s happy. As Noreen pointed out, the frustration that emerged after the horrible murder of Brian Thompson shows that something had been building for many years, and we need to address it. I have to say that I was on the board of America’s Health Insurance Plans, which is our national trade association for health plans. Within a day or two after that, we had an emergency board meeting. The first thing they wanted to discuss was, how do we provide security for executives? I said, OK, that’s important. The second thing was, how do we tell our story better? I was one of the few people in the group that said, “No, we don’t have to tell our story better. They don’t believe us. Now we have to change the way we’re operating our healthcare system in the United States.” I assert that we don’t have a healthcare system.

John Baackes, Retired CEO L.A. Care Health Plan (00:09:35):
What we have is a system of competitors. I’ll talk a little bit about that. So I think there are a couple of things I’d like you to think about as I proceed. One, think of two buckets. The first bucket is the people who receive healthcare or who pay for their healthcare through private insurance. That would be the people who get it from their employer, which many of you in the room I’m sure do or did when you were working. They get pretty good coverage. The second bucket is the public bucket where the insurance is paid through tax funds, and that bucket is compartmentalized. Let’s think of the compartments this way. There’s one compartment for Medicaid and the Children’s Health Insurance Program. That’s a federal and state tax-supported program based on the income of the beneficiary—they can’t exceed a certain ceiling.

John Baackes, Retired CEO L.A. Care Health Plan (00:10:38):
There are about 80 million people in this bucket, including 800,000 people who reside full-time in a nursing home. Medicare is also a tax-supported program that’s at the federal level, all federal dollars. We all support it through payroll deduction through our Medicare tax. Everyone, when they reach the eligibility point, is entitled to it. So it’s a real public insurance program in that everyone pays in and everyone gets to be a beneficiary of it. There are about 68 million people covered today by Medicare. Now, a footnote is that there are 14 million people who are duals. They qualify for both Medicare and Medicaid, and they’re called dual eligibles. One time I was running a plan that we sold only to dual eligibles, and I tried to convince them that our advertising slogan should be, “It’s cool to be dual,” but nobody bought it.

John Baackes, Retired CEO L.A. Care Health Plan (00:11:44):
So I don’t know. The other two places are the military—they provide insurance, and about 12 million people, or 3.6% of the population, get it there. The last division of the public bucket is the Affordable Care Act, because the Affordable Care Act provides insurance now to 24 million people who get a huge subsidy from the federal government or the state. In California, where I was, the state would add a subsidy on top of the federal subsidy. So for the people enrolled in L.A. Care that came through the exchange, about 85% of them had no out-of-pocket expense except for the deductible and the co-payment. If you add all that up, the private bucket is about half the people in the country. The public bucket is about 45% of the people in the country.

John Baackes, Retired CEO L.A. Care Health Plan (00:12:48):
Then there’s the people who don’t have a bucket. We still have about 27恼million people in the United States who do not have health insurance. I refer to them as the No Bucket Crowd. [Laughs] The people that have these various things—I would contend that the folks who have private health insurance have the best coverage. They have access to the most providers. They have the fewest limitations on where they can go except the panels in their health plan. Medicare is widely accepted. They have good access to care. The Affordable Care Act exchange has pretty good access and is widely received. The military—the only limitation there is you sometimes are limited to going to a military provider. But it is the Medicaid population, which is now 80 million people, that are the most restricted in our population because the level of reimbursement for Medicaid, which is about 70% of what it is for Medicare and probably half of what it is for commercial, has many doctors not willing to accept it.

John Baackes, Retired CEO L.A. Care Health Plan (00:13:59):
So our Medicaid population, who are there because their income is below a certain ceiling depending on the state they live in, have the least choice, the least access. Guess what? Their outcomes are the worst in our system. That’s a problem that I will mention more than once as we go forward. People who know me well know I’m a history buff. As my daughter once said, “Dad cannot pass a historic marker without stopping the car and getting out and reading it.” So I have five historic markers I’m going to walk you through. How did we get to where we are today? This is what these five markers will tell us. The first one is World War II. In World War II, we had wage and price controls, which were put in place because there was a huge demand for personnel to fight in the armed forces.

John Baackes, Retired CEO L.A. Care Health Plan (00:14:56):
There was a huge demand for people to work in the industries supplying the equipment we needed for the war effort. The government wisely said, “Well, to keep this from getting out of control from an inflation standpoint, we will impose wage and price controls.” Along with that, they said to allow employers to have some incentive to attract people, employers could offer fringe benefits, and those fringe benefits would not be taxed as income to the individuals receiving them. The employer could take the cost of those fringe benefits and deduct it from their income. They could provide it without any tax penalty. That set us up. Employers started doing it, and the benefit they offered the most was health insurance coverage. When we got to the end of the war, it was expected that that ruling would disappear because the emergency it was created under evaporated.

John Baackes, Retired CEO L.A. Care Health Plan (00:16:05):
But people had liked it. President Truman tried to introduce a national health insurance plan, but there was no support for it. The public didn’t necessarily support it. It was opposed by the AMA and the Chamber of Commerce. The labor unions didn’t support it either, because they realized that if they maintained the war system, they’d be more successful in negotiating with the employers for better benefits than they would be trying to get the public to accept and pass a national health insurance plan. This was all codified in 1954 when the IRS made a permanent ruling that fringe benefits would not be taxed as income to the employees, and the employers could continue to deduct the cost of those fringe benefits from their own taxes. That’s the point where the United States cemented its private healthcare system. Most of our allies in World War II had gone to public health systems.

John Baackes, Retired CEO L.A. Care Health Plan (00:17:11):
So we were an outlier as far back as that time. Employers started offering more fringe benefits. Insurance companies started saying, “Hey, this is great. We can sell you more stuff.” We began to get some inflation in the cost of healthcare, which leads us to our next historic marker. Elderly people were not included in that, and many of them were finding it hard to pay for healthcare. Along comes the amendments to the Social Security Act in 1965, which introduced Medicare to satisfy this pent-up demand among seniors. At the same time, we threw in Medicaid. Medicaid was not treated the same way as Medicare from the get-go. Medicare was a totally federal program, uniform across the country. Payments varied by states depending on local conditions and cost of living, but it was uniform.

John Baackes, Retired CEO L.A. Care Health Plan (00:18:16):
Medicaid was a partnership with the states. The feds would match the states 50% of what it would cost to provide coverage, but it was tied—and this is very important—to people on welfare. People receiving cash assistance were the first beneficiaries of the Medicaid program. That had been an extension of something called the Kerr-Mills Program, which started in the 1950s because poor people who were getting cash assistance didn’t get enough money to pay their medical bills. The Kerr-Mills legislation was put into place so that extra money went to the state to help them pay those bills. It became codified. But here’s the difference: at the get-go, the reimbursement to the providers from the two programs was different, and Medicaid was lower from the start because it was a program for the poor. That has continued on until today.

John Baackes, Retired CEO L.A. Care Health Plan (00:19:18):
There was a fork in the road there where we could have said, “Alright, if we’re going to have these two publicly supported programs, they should have similar benefits and similar reimbursement to the providers who serve under them.” Just like with the IRS decision before it, that was a fork in the road where we could, as a nation, have said, “No, we need to have a more public universal program rather than rely on the private enterprise of employers to provide health insurance.” So we’ve got those two historic markers. I want to go back and say, think about it: if the first IRS decision hadn’t gone that way, and employees were taxed for the cost of the health benefits and other fringe benefits, and the employers did not get to deduct the cost of that, they’d probably stop offering it.

John Baackes, Retired CEO L.A. Care Health Plan (00:20:19):
They’d probably pay the employees a little bit more. The employers would then pay income taxes on that, and they’d go buy their health insurance like they buy car insurance and homeowners insurance individually. I would contend that most of us know more about our car insurance and our homeowners insurance than we do about our health insurance because we never look at it until we’re sick. That was a missed opportunity. Today, if we had done that, we’d be generating additional income taxes of around $300 billion a year on the cost of the money for the health insurance. Again, a fork in the road, a road not taken. Then we have the discrepancy in Medicare and Medicaid. The third historic marker is the HMO Act of 1973. That was in the Nixon administration, if you can’t recall.

John Baackes, Retired CEO L.A. Care Health Plan (00:21:18):
It introduced managed care, which is now the predominant form of insurance in the United States for healthcare, whether it’s an HMO, a PPO, an EPO, or an ACO—it’s all managed care. It introduced the idea that there would be a primary care physician who would be in charge of coordinating all your care. There would be reporting, and we would be able to control costs. One of the key things that was introduced was prior authorization, which turned out to be probably the biggest irritant for both providers and patients that we ever could have thought of. It took off, and there was one feature of it that, in looking back, was probably a huge irritant: it mandated that any employer with 25 or more employees had to offer an HMO in addition to whatever else they offered.

John Baackes, Retired CEO L.A. Care Health Plan (00:22:22):
I remember I was out selling the first HMO in Albany, and that was hard. A lot of employers didn’t like it. It came with that pall cast over it. People quickly realized that the prior authorization was also something they didn’t like because it interfered with their ability to make a choice individually. But that hallmark has remained with managed care. The best thing about managed care is it introduced data collection. Prior to that, we really didn’t collect data about quality outcomes or cost-effectiveness. Out of the creation of the HMO Act, we created the National Committee for Quality Assurance, which today accredits health plans—not so much on the health plans’ performance, but on the performance of the providers in the health plan. There are 90 measures in NCQA.

John Baackes, Retired CEO L.A. Care Health Plan (00:23:22):
It’s out there doing it. All the plans are accredited. It’s become a gold standard. Medicare and Medicaid now also use NCQA accreditation in terms of qualifying plans to participate in those programs. That program created HEDIS, which was originally the HMO Employer Data Set to measure outcomes because employers were saying, “Alright, if we’re going to be forced to offer this, show us what we’re getting for our money.” So that’s how HEDIS started. HEDIS is now called the Healthcare Effectiveness Data and Information Set because it’s so broad and covers so much. There are 90 measures in HEDIS. If nothing else, HEDIS has given us a window into the complexities of healthcare and the outcomes that we never had before. HEDIS also gives us the information to see there are disparities in outcomes by race, by ethnicity, and by income level.

John Baackes, Retired CEO L.A. Care Health Plan (00:24:28):
That’s very important. We have that out there, but we’re not acting on it. Then we come along to the fourth important historic marker: the introduction of investor-owned healthcare. As the HMOs came along, enterprising people said, “Hmm, this might be a good way to make some money.” We began to have for-profit health plans. At the same time, we also began to get for-profit provider organizations, whether they be hospitals or medical groups. That has been to me a huge factor in distorting the picture of what we’re doing, because investors want returns. I ran an investor-owned health plan, and I can tell you the difference between the ones who do it right and the ones who don’t really do it well. A well-run investor-owned health plan or hospital or medical group—your first concern is the satisfaction of your patients.

John Baackes, Retired CEO L.A. Care Health Plan (00:25:35):
If you’re doing a good job taking care of them, then the profits will take care of themselves. I remember when I was running that plan, Senior Whole Health, I went to an investor meeting. We were doing quite well. The five venture capital firms we had me come to their annual meetings—it’s like going to show-and-tell in kindergarten. You bring your pet frog, put him on top of the shoebox, and he does something. I was there to put on the box and tell them what I was doing with their money. I could tell I was doing something right because one of them came up to me after one of the meetings, looked around to make sure nobody was listening, and said, “I’m glad you’re doing good and doing well.”

John Baackes, Retired CEO L.A. Care Health Plan (00:26:26):
That person recognized that because we were doing the right thing for the members, the investors were getting what’s going on. I think that’s very rare today. Most of the time, it’s “What are we doing for the investors?” That becomes the only operative decision point. I think that’s the frustration you saw after the murder of Brian Thompson. People could see through that there was a for-profit enterprise making decisions about their health, and it didn’t seem that the satisfaction of that customer was more important than the profit that was being made for the investors. We’ve had some really egregious examples. There’s been one over in our neighboring state of Massachusetts that really is the epitome of how things go wrong. While I was working in Massachusetts, the Catholic hospital system, Caritas Christi, was in trouble financially.

John Baackes, Retired CEO L.A. Care Health Plan (00:27:33):
The chief medical officer said, “I think I’ve got the solution here.” They went to Cerberus, a private equity company in New York, and said, “Why don’t we buy it and run it as a for-profit enterprise?” They had to get over one hurdle: for-profit enterprises in healthcare were not permissible in Massachusetts at the time. They lobbied and got the Attorney General to say OK. They bought the entire system of six hospitals for the price of funding the pension plan—800 and some odd million, whatever it was. They got six hospitals in the Boston metropolitan area. They then began buying other hospitals and became international sometime around 2017. They now had hospitals in multiple states.

John Baackes, Retired CEO L.A. Care Health Plan (00:28:38):
They sold the real estate—the buildings and land that the hospitals were sitting on—to a real estate investment trust, also run by private equity. What did they do with the proceeds? They distributed it among the shareholders. In the case of Steward, they had a big boatload of money they distributed. As we roll along and get to the COVID crisis, they suddenly don’t have enough revenue to pay the rent. They have now gone bankrupt. They’re closing hospitals, particularly safety-net hospitals in the most underserved communities. The CEO that had the brainchild to do all this—they can’t get him to come testify because he’s on his $40 million yacht off the coast of Baja, California. He allegedly pocketed over $200 million out of that enterprise. I think that’s obscene—that somebody whose hospital depends on payments from Medicare and Medicaid can walk away with that amount of money.

John Baackes, Retired CEO L.A. Care Health Plan (00:29:49):
I like to get paid well, and I’ve never made that kind of money, but I have a hard time with that. While I think I did the right thing running the for-profit health plan that I had the privilege to run for seven years, I don’t think I’d do it again, because I think there’s an inherent conflict between giving returns to investors who expect what they should expect and doing it on the backs of poor people. I just can’t do that again. The introduction of the for-profit world has been very detrimental. I want to read you something here. It’s the only thing I’m going to read. I’ll read it to you and then tell you about it. “My conclusion is that most of the current problems of the U.S. system—and there are numerous—result from the growing commitment of private for-profit ownership and competitive markets on a sector of our economy that properly belongs in the public domain.

John Baackes, Retired CEO L.A. Care Health Plan (00:31:00):
No health system in the industrialized world is as heavily commercialized as ours, and none is as expensive, inefficient, and inequitable or as unpopular. Indeed, just about the only parts of U.S. society happy with our current market-driven health system are the owners and investors in the for-profit industries now living off the system. The U.S. may be the world leader in medical science and technology, and its major medical centers may provide some of the best and most sophisticated care available anywhere. But taken as a whole, our healthcare system is failing and will need major reform very soon. We have tried private for-profit markets—first in hospitals, in ambulatory care facilities and services, and nursing homes, and then more recently in the ownership of health plans.

John Baackes, Retired CEO L.A. Care Health Plan (00:32:11):
The experiment has failed. Private healthcare businesses have certainly not achieved the benefits touted by their advocates. In fact, there is now much evidence that private businesses delivering healthcare for profit have greatly increased the total cost of healthcare and damaged, not helped, their public and private nonprofit competitors.” That statement was made in 1984, 41 years ago, by Arnold Relman, who was the editor of the New England Journal of Medicine for many years. It’s 41 years later, and it’s worse. Arnold was way ahead of his time in terms of brilliance. The fifth historic marker here is the Affordable Care Act of 2010. Most of it became effective in 2014. There are two hallmarks of the Affordable Care Act. One was that it provided an expansion of Medicaid by raising the ceiling of eligibility to 138% of the federal poverty level.

John Baackes, Retired CEO L.A. Care Health Plan (00:33:22):
Most of you may know that today, that’s about $21,700 for an individual and about $43,000 for a family of four. Maybe that doesn’t sound so bad here in Troy, but in Los Angeles, it’s a non-starter. You really cannot afford to live on that. A third of the population of California, and I think I’ve read that a third of the population of New York, is now on Medicaid because of that. That got challenged and went to the Supreme Court. The Supreme Court ruled that that expansion was voluntary on the part of the states because, just like Medicaid when it started in 1965, it was voluntary on the part of the states. They all eventually joined it. When the Affordable Care Act was passed, and after the Supreme Court decision, only half the states participated in the expansion of Medicaid.

John Baackes, Retired CEO L.A. Care Health Plan (00:34:22):
Today, 11 years later, all but 10 states have expanded it because they realized that, A, it was a lot of federal money that would come in, and there were people hurting who did not have access to healthcare. We expanded Medicaid under the Affordable Care Act. The second thing we did was create a marketplace for people who did not have employer-based insurance, did not qualify for Medicare, did not qualify for Medicaid, but could not afford to buy directly from insurance companies’ individual coverage. That’s the Affordable Care Act marketplace. The press calls it Obamacare. I think that’s a pejorative term, and I never use it except I just used it now. I wrote Norm Levy at the L.A. Times once and said, “Why do you do that? Why do you call it that?” He said, “My editors make me because they think the public won’t understand what it is if I don’t use that.”

John Baackes, Retired CEO L.A. Care Health Plan (00:35:22):
We have now 24 million people, but those individual marketplaces—the only offerings are from commercial health plans. On one hand, we expanded the public sector. On the other hand, we reinforced the private sector in the Affordable Care Act. There was a fork in the road here. In the version that the House of Representatives passed in 2010, it said there shall be a public option in every state that will compete in the individual marketplace. That public option shall be a nonprofit entity, transparent, to compete against the commercial insurance plans. When it got over to the Senate, Senator Lieberman from Connecticut said, “I’ll filibuster the bill to death if you don’t take it out.” You may know that Connecticut is the headquarters of a lot of insurance companies. They caved and tossed it out. We got the Affordable Care Act without the public option.

John Baackes, Retired CEO L.A. Care Health Plan (00:36:29):
The reason I make this point is that in the last 10 years, L.A. Care advertised and proudly said, “We are the only functioning public option in the United States.” I’ll take a little diversion. California, back in the nineties, when they were going to move their Medicaid program into managed care, was worried that commercial insurance companies would be fickle and drop out if the rate dropped one year, which they quite often go up and down based on the economy. They said the counties, which were contributing to the cost of Medicaid, could create county ordinances creating local initiative health plans. They would then be able to participate in the Medicaid program on equal footing with any of the commercial plans. Los Angeles County adopted that, and in 1997 started L.A. Care. We have a board of directors that is appointed by the county, but we’re an independent agency.

John Baackes, Retired CEO L.A. Care Health Plan (00:37:32):
All of our board meetings are transparent, and we’re considered a public entity under California law. I think we met the definition that the House had meant in their passage in 2010. We entered the market as a Medicaid plan getting into this individual market. It took us about three years to get our act together. By the fourth year, we were the lowest-priced of six plans offered in Los Angeles County. We’ve held that position every year. We now have 225,000 lives and are the largest of the plans in that marketplace exchange. I’m proud to say that three years ago, two professors at Berkeley in Public Health did a peer-reviewed study that showed that the public option, L.A. Care, because of our price-leading performance, had really caused the cost curve to actually bend downward. I was very proud of that.

John Baackes, Retired CEO L.A. Care Health Plan (00:38:36):
It caught the attention of some of the other public entity plans, more of whom have now joined the market. I think that was a missed opportunity, not having that public option in there, because the public option would’ve maintained competition between the private health plans and this new public entity. It was that competition that drove us to look for the best ways we could produce the benefits, which are uniform across all the plans. We had to be competitive to get the doctors to participate, and it worked. I think this was a lost opportunity we had when they threw that out. We have the Affordable Care Act, we have all these issues going on. Think about these five historic markers, the decisions we made, the missed opportunities. Then we wonder what led Trinity to say they were going to close the Burdett Birth Center.

John Baackes, Retired CEO L.A. Care Health Plan (00:39:37):
I know they’re a nonprofit, voluntary, faith-based organization, but they’re gigantic. They’re following the lead of the commercial plans who look at their entire portfolio. If there’s a non-performing piece, they make a decision economically: “Well, it’s not performing, close it.” There is no concern necessarily that it’s their responsibility to maintain a service because it’s critical or unique to the community. It’s strictly a business-driven decision. It doesn’t matter that it’s a not-for-profit or a for-profit because it’s a very cutthroat business. We have a system of competitors in the United States, and they’re acting as a competitor. The other factor affecting that is that over 50% of the visits at the Burdett Birth Center are Medicaid. If you have that much concentration of that payer in your payer mix, you’re going to be in trouble. We have this system, and it’s a non-system, as I’ve said.

John Baackes, Retired CEO L.A. Care Health Plan (00:40:46):
The big thing I would say is that we ration healthcare in the United States today by the plastic card in your wallet. The folks with the Medicaid card get the worst deal. COVID comes along—you all lived through it, you know how difficult it was. What happened during COVID for particularly the hospitals was that they had to shut down elective admissions because they were going to get ready for this wave of COVID patients that would come in. Those elective admissions they canceled were probably mostly commercial insurance. The people that came in that had COVID, got infected, hospitalized, and ultimately died were predominantly Medicaid. They were getting a lower level of reimbursement for the services they were providing. At the same time, physicians and nurses were getting burned out and saying, “We can’t take it. We’re leaving.” The traveling nurse industry thrived because those were people willing to do it because they could get more money.

John Baackes, Retired CEO L.A. Care Health Plan (00:41:52):
We wound up with a situation where hospitals’ costs were going up and the revenue was going down. If you happen to be a safety-net hospital in South L.A. or someplace like that, you were hurting. We now are in the post-pandemic period, and the hospitals—those safety-net hospitals—are on the brink because the revenue has not recovered to the pre-pandemic level. There are so many more Medicaid patients in their payer mix that many of them are on the brink of closing. That brings us to the unfortunate situation we are in today, where we have a federal government that has passed a bill the other day at the House that says we’re going to cut Medicaid by—I think the number was—$880 billion over 10 years. That equates to about 10% every year for the next 10 years. I don’t think the system will be able to stand that, and we will lose safety-net providers. There’ll be more Burdett Birth Center closings as a result.

John Baackes, Retired CEO L.A. Care Health Plan (00:43:00):
So what do we do about all that? I have a thought. [Laughs] We were faced with a smaller problem like this in California in 2022. When I quizzed our Medicaid director, I said, “You know, our safety-net hospitals—if they can find a nurse, they can’t afford to pay them. Are we going to do anything to raise the rates?” She said, “No, because the way Medicaid rates are done, you look back three years and then you trend forward. No, we’re not going to do that.” I was really angry about that. By the end of that month, which was June of ’22, I had called all the hospitals in Los Angeles County, the Medical Society, my competitor health plan, labor unions, nursing homes, and federally qualified health centers. We formed the Los Angeles County Safety Net Coalition.

John Baackes, Retired CEO L.A. Care Health Plan (00:43:58):
By the end of that year, it had become a statewide coalition, and other people more knowledgeable than I were involved. Rather than complain and get pitchforks and torches and march up to Sacramento, we said, “We have to have an idea.” Our idea was to reenact a managed care organization tax on the health plans, which could create a bolus of money, which would then be eligible for a federal match. If we raised a dollar in taxes, we’d get another dollar back from the federal government. We’d get our money back, plus another dollar. When the state of California had previously had this tax, all the money went to the general fund. In 2022, when we had a $100 billion surplus, Governor Newsom let the tax lapse. We went to the state and said, “We want to redo it.”

John Baackes, Retired CEO L.A. Care Health Plan (00:44:50):
“Here’s the model.” We did all the actuarial work and everything, and the governor said no. So we went out and organized a ballot proposition. It became known as Prop 35. We had all the providers on board. We were in a coalition that was solid, and we said, “Look, we’re an ecosystem taking care of one-third of the population of this state. We don’t have the resources that Medicare has or commercial insurance has, and we wonder why we have bad outcomes for this population.” We gathered 800,000 signatures. We raised $55 million to get the campaign. When the votes came in last November 5th, we had 67% of the vote of California supporting this proposition. Kamala Harris only got 57% of the vote. Why I mention that is that the public understood that Medicaid is a big deal in their communities.

John Baackes, Retired CEO L.A. Care Health Plan (00:45:58):
Many people have been on Medicaid at some point in their lives, and they know what difference it made and what difference it’s making in their communities. My suggestion, as we face this challenge we’re getting, is that we need to form another coalition, and we have to have an idea—not just be opposed to whatever the administration is proposing. I’ll give you my thoughts on what that should be. Number one, we should amend the Affordable Care Act and put the public option back in. Number two, we should make sure that Medicare and Medicaid are at parity in reimbursement to providers. Number three, we should make sure that managed care plans are providing personal managed care services to their most vulnerable—not relying on apps and artificial intelligence to do it, but human beings.

John Baackes, Retired CEO L.A. Care Health Plan (00:47:07):
We should also have the ability for those plans to give back to the community—invest in your community, either in scholarships for nurses and medical students, particularly those of color, to get into the business. One of the problems in Medicaid is that the population is a rainbow—lots of people of color—but the provider sector taking care of them is mostly white. We all know that the statistics are that if you see a provider of the same race, ethnicity, or language, you’re going to get a better health outcome because there’s a trust level implicit there that is otherwise absent. I think we need to figure out a coalition. We should have an idea based on at least those four principles, and we should get organized. I consider myself a healthcare professional, even though I’m not a doctor.

John Baackes, Retired CEO L.A. Care Health Plan (00:48:56):
If there were doctors and hospital CEOs—and I know there are a couple here—I believe our first responsibility is to serve as a trusted agent and advisor for our patients and for the health plans. We need to be advocates for our patients and our providers. Providers should be adequately compensated for their time and effort. The investor-owned hospital corporations, health plans, and medical groups are businesses, and they tend to think of healthcare as a business. It’s also true that many of the voluntary nonprofit hospitals, medical groups, and health plans are becoming more businesslike in their orientation toward sales, marketing, and cost controls. But does that mean that our healthcare system really is fundamentally the same as any other business? Or should we encourage it to become so? For me, the answer is no. I think we can do better.

John Baackes, Retired CEO L.A. Care Health Plan (00:49:25):
I think we need to get organized and go out there and make some good trouble and some good change. I’d be happy to do a Q&A with you, and I’d be particularly interested if there was such a coalition—what were the ideas you’d put in it? We cannot just say, “No, we don’t like what you’re doing.” We have to have our own plan. Thank you very much. I’d love to hear from many of you.

Event Assistant (00:49:46):
Thanks, John. I don’t have a question, but I’m supposed to be running the mic, so I can run the mic to anyone that has a question.

Audience Member #1 (00:50:04):
Can we increase the incentive for preventive medicine?

John Baackes, Retired CEO L.A. Care Health Plan (00:50:14):
Yes, I think we can. One of the hallmarks of managed care was you had to have a primary care doctor to make it work. One of the problems that has emerged, particularly in Medicaid, is that we’ve piled onto the primary care doctor by putting so many requirements on them that they have to do. In California, doctors have to go through 47 screening questions. We’ve said to the agency, “You’ve got to be kidding. They don’t have time in 15 minutes to do those 47 questions.” The response is, “Well, the staff can do it.” Well, baloney. I think if we have incentives, particularly around improving the quality outcomes—that we have a payment back to the providers, a bonus or a pay-for-performance—if you do a good job, if you can move the needle on immunizations for the kids or whatever it is, you will get an additional payment. I think we can do an incentive that way. Some of the health plans have been doing that for years, and I think it works.

Audience Member #2 (00:51:26):
On Prop 35 in California, it wasn’t clear. What is the tax that brings the fund to increase the Medicare business?

John Baackes, Retired CEO L.A. Care Health Plan (00:51:36):
The tax was on the health insurance plans, and it was a head tax. It varied whether you were Medicaid or commercial. It was heaviest on the Medicaid plans because they would get it back. It was the least on the commercial plans because they would never get it back. To get the commercial plans to support the tax and to donate to the campaign, they paid about a dollar per head. The managed care plans were paying about $65 per head. What we were able to do with that proposition is generate about $9 billion a year in new money that would come into the state. That was going to be pumped into the Medicaid program to reimburse the providers. Everyone went along with it. Most of the money was going to go to primary care and specialty physicians because that’s where we have the biggest problem getting them to participate.

John Baackes, Retired CEO L.A. Care Health Plan (00:52:36):
The hospitals agreed with that because they knew that if there were not enough primary care and specialty physicians in Medicaid in the community, the people would wind up in their emergency rooms, and their emergency rooms were overrun. The safety-net hospitals were very much in favor of that. We had a plan how we were going to distribute it. The money started distribution this year, 2025, and it will run through 2027. If the new administration says these kinds of taxes they will not support anymore, then it’s dead. That is one of the proposals in Project 2025—to eliminate these taxes that generate a match from the federal government. It’s in jeopardy, but that’s how we did it. The commercial plans, to get them to go along, were taxed lightly because they wouldn’t get the money back. The Medicaid managed care plans were taxed heavily because they’d get the money back plus whatever they paid.

Audience Member #3 (00:53:39):
John, you described the efficacy of a public health plan. I’ve got to say that your talk tonight was just wonderful in the thoroughness of the history and the implications. Is there a spread strategy to generate things like L.A. Care in other states or other environments, and is that an effective way of providing some justice?

John Baackes, Retired CEO L.A. Care Health Plan (00:54:07):
I’m not aware of any other state doing it now. Colorado and Washington State did a public option, but it’s nothing like the way it has worked in California because they prescribed what the doctors would get paid, and there was a lot of prescription. In the California model, we got no special favors. We had to apply to become a qualified health plan in the exchange like the commercial plans. We had to go out and voluntarily get doctors to agree to accept reimbursement from us. We got no special favors whatsoever. It worked, and I think it can work again. The secret that’s in there, that probably was not thought of by the House in 2010, was that the public plan was also a Medicaid plan. We already had a ready set of providers who were familiar with us. We went to them and said, “Look, we’re going to do a new product. It’s commercial, and we’ll pay you more.” They all signed up. I think it could be done. My biggest concern about it is what you do in rural areas where there would not be multiple choices—there would be only one plan, which has been a problem for the individual marketplaces across the country where they only have one option. But the idea that the public option does not have shareholders—we operate on a 2% margin—is what makes our ability to do what we did successful.

Audience Member #3 (00:55:43):
Thank you.

Anthony Gaddy, President/CEO Upstate Black Chamber (00:55:55):
Good evening. Thank you, sir, for a very informative conversation. Even though you did all the talking, I took lots of notes. [Laughs] My name is Anthony Gaddy. I represent the U.S. Black Chambers. We’re here in Upstate New York, but our national headquarters is in Washington, D.C. First of all, thank you for mentioning good trouble because that’s kind of what we do. [Laughs] You mentioned the need to organize and mobilize. I think we all know that will take a certain amount of resources beyond the mobilization of people. What do you think something like that would take? We know we’re going to be going up against money on the other side, so there’ll need to be a strategy of organization, mobilization, and resources as well. What does that look like?

John Baackes, Retired CEO L.A. Care Health Plan (00:56:46):
That’s an excellent question. I have two daughters here tonight—both do fundraising for nonprofits. I should ask them to answer that question. [Laughs] But what we did, if I could use the California model, is that we showed people what they were going to get if we were successful. I think we have to have not just, “Hey, we’re going to do something,” but “Here’s what we want to do about it, and if you participate and contribute, here’s what you’ll get in the end if we’re successful.” That is, to me, the most significant thing we would have to do to raise the necessary funds. I can’t fathom what a national campaign would cost, but it would be in the hundreds of millions, I’m sure. We’ll knock on your door if you’re interested.

Audience Member #4 (00:57:38):
Hi, John, from a long time ago. Just wondered about Medicare.

John Baackes, Retired CEO L.A. Care Health Plan (00:57:51):
Hi, Geri. My vision is still pretty good.

Audience Member #4 (00:57:56):
It’s better than mine. I only knew it was you because I knew it was you. [Laughs] John, you know Bernie Sanders, one of my favorite people, is always touting Medicare for All. He’s not the only one. This is what I’d like to see. It seems like it would be simpler to have this than to have this whole array of different things that you need to have a degree to choose from. What do you think are the chances that that might ever happen, and do you see pros and cons with that?

John Baackes, Retired CEO L.A. Care Health Plan (00:58:34):
I don’t see it happening in my lifetime or Bernie’s—and I am younger than he is. If we were starting from scratch, Geri, I would say a publicly funded health program was what we need, but we’re too far down the road. We have too many entrenched interests that I think it would be like tilting at windmills to try to get a single-payer system or Medicare for All. That’s why I think the public option is our best way to incrementally start moving in that direction because it stays within the insurance system, but it introduces public and private competing with each other. I think that has a more realistic chance of happening in our lifetimes, particularly if we can sell the idea that the public option is also a Medicaid plan. People now finally get that Medicaid is an important program, and it shouldn’t be treated as just a program for poor people. It should be treated as a program for people who have a certain income level and get the welfare aspect of it out of the question.

Pamela Bentien (Audience) (01:00:00):
I’ve got sort of a complicated first question and then a more simply phrased second question. I’m puzzled why it is considered cost-effective and efficient to have so many layers of organization, if you can call it that. I belong to a local small primary care provider that is part of a slightly larger local care provider that is under the umbrella of a larger regional—I guess HMO or something like that. Then we get into the employer insurance or the Medicare, which I’ve graduated to. I’m curious about all that because I’m also wondering how on earth some religious so-called nonprofit organization can come in, buy up every care facility in the area, and then dictate to people what kind of care they can receive. If you can give me an idea about that, I’ll save my second question for a moment.

John Baackes, Retired CEO L.A. Care Health Plan (01:01:09):
I didn’t really talk about your question because I agree with you. Early on, I said we have gotten specialization and fragmentation in our current system. The fragmentation is exactly what you’re talking about, and it’s even worse in California. There are so many layers of middlemen now in the process, adding no value other than to take out a profit, that we really need to slim it down. I would be all in favor of us eliminating these middle organizations. In California, the medical groups formed independent practice associations, which bargained with the health plans to take on more of the insurance function. They couldn’t do it, so they went and hired another company to do it. We have all these layers, each taking one out. The health plan could do all those services that are on the administrative side and leave to the providers—just do the medical care part of it, whether you’re a hospital or doctor.

John Baackes, Retired CEO L.A. Care Health Plan (01:02:14):
What has happened is that people have seen there’s money in there—that if they take on some of the administrative work, they can get more revenue for it. That’s what’s complicated it. I think as part of this coalition work, we need to say that managed care has to be streamlined, and delegated entities should not be part of the equation. That’s what you’re talking about—we’re delegating work to smaller and smaller units, each one that takes out. Don’t get me started on pharmacy benefit managers because that’s another example of layers of unnecessary administration taking money out of the system.

Pamela Bentien (Audience) (01:02:59):
How can that religious insurance company dictate to an entire region what kind of care they can receive?

John Baackes, Retired CEO L.A. Care Health Plan (01:03:07):
That’s where I think you need to have some sort of local control. My friend Joe Doula was in the audience, and he would know much more about this than I do, but back in the 1960s, they started health planning organizations by region. The most effective one was in Rochester, New York, where they had all the stakeholders around the table. They said, “Well, we need a new X-ray machine because there’s not enough.” They would talk among themselves and decide who would get it and who would get the revenue so that they didn’t set up unnecessarily competing X-ray operations. Those have died off—they’re around in name only, but they don’t have the guts of it. The Rochester one was really effective because it included the big employers because they were writing the checks.

John Baackes, Retired CEO L.A. Care Health Plan (01:04:01):
They got in and had a much more efficient operation for a while. I think it’s gone the way of the rest of the country now. We need to have that sort of local control so that a decision-maker somewhere in Michigan is not deciding how your healthcare is delivered. This could be part of this coalition effort to reform—to have local planning organizations that represent the stakeholders and the community, prioritizing what the needs are and deciding how the resources should be allocated. I think that would begin to get to your question about how they can dictate to us—there’s no local input, and we need to build that into the structure.

Pamela Bentien (Audience) (01:04:49):
Yet this religiously based organization has bought up every hospital in this area.

John Baackes, Retired CEO L.A. Care Health Plan (01:04:55):
I’m aware of it, yeah.

Pamela Bentien (Audience) (01:04:57):
So my final question is very short. Are we just rearranging the chairs on the deck of the Titanic here? Or is there any chance of getting any of this through if the hackers who are going through all of our records right now and stealing our information and destroying the government don’t succeed?

John Baackes, Retired CEO L.A. Care Health Plan (01:05:21):
Wow. [Laughs] It’s pretty doomsday the way you described it. I remain hopeful, and I will base it on the experience I had last year with Prop 35. When I started that coalition in June of 2022, people said, “Oh, this’ll never happen.” But we came together quickly over a plan. That’s what I’m saying—if we want to get any of this done, we have to have a plan all the stakeholders support because all the stakeholders can see what benefit they will get from it if we succeed. We’ve got to educate the public and educate the voters. If they start cutting Medicaid and people start losing benefits or their providers close up shop because they can’t live on what the reimbursement is, I think those people will join the coalition, and then it would have a chance. I’m not doing surveys—that’s just my observation. Thank you for the question.

Audience Member #6 (01:06:31):
John, brilliant as usual. [Laughs] My question was similar to Geri’s about Medicare for All, but I like your sense of incrementalism—building up from the public option that Medicare and Medicaid would reach parity of structure. Once that happens, it will be pretty obvious we don’t really need two doing the same thing. I think that really is a good one. How do you address a couple of examples that you’ve used—moving the thinking of health providers from a simple fee-for-service, “If I determine that’s the service you need, that’s what I get paid for, so I’ll just keep doing that,” to outcomes and outcome-based? I know that’s what you said earlier about managed care really demanding outcomes. I remember having conversations with you about, “Well, what about a person that doesn’t have a roof over their head? How are we going to have healthcare outcomes no matter what we do? We could stand on our head, and it won’t help the person.” How those kinds of things, which you initiated, can be highlighted and rewarded—because I think that’s what’s necessary to change minds.

John Baackes, Retired CEO L.A. Care Health Plan (01:08:08):
On the latter part of your question about how we take care of the unhoused, I’ll go back to California. At L.A. Care, we had 2.6 million members—2,350,000 of them were on Medicaid. The rest were in the exchange and so forth. We probably, at any given moment, had 50,000 of our members who were unhoused. What we did—and other plans across the state did—is we invested in street medicine. We got the state to adjust the regulations so that a primary care physician did not have to be in a brick-and-mortar facility. That was getting the regulators to catch up to reality. We probably have 10 street medicine vendors in Los Angeles County now. Some are run by federally qualified health centers. The University of Southern California has one, UCLA has one, and they’re doing that.

John Baackes, Retired CEO L.A. Care Health Plan (01:08:51):
They’re going out and finding the members, and we signed them up to be primary care doctors in the health plan. If they get Joe, the homeless guy, to come to them, then they’ll get a capitation payment from us for taking care of him. They all have various ways that they track Joe, so that if he moves from under a bridge to Skid Row, they know where he’s gone. I think that’s how we have to change the definition of what primary care is to suit the people where they are. I think that’s a good example.

Audience Member #7 (01:10:15):
Good evening. My question is, has the L.A. Care Health Plan written this up in such a way that other people could read it and get ideas?

John Baackes, Retired CEO L.A. Care Health Plan (01:10:26):
Which plan?

Audience Member #7 (01:10:27):
This plan that you’re involved with—the healthcare.

John Baackes, Retired CEO L.A. Care Health Plan (01:10:28):
Well, I’ll have to go back and start writing. I did retire January 5th, and I didn’t know what I was going to do. Somebody said, “You ought to write a book.” [Laughs] Frankly, you’re my guinea pigs. Do I have anything that anybody would buy? Alright, thank you. [Laughs]

Audience Member #8 (01:11:10):
Enjoyed your talk, John. Thank you very much. I’m not in healthcare, but I have a lot of family who have been in healthcare. I look at it more from a business perspective. When I think about our situation in this country, it seems like the best argument for socialized medicine is capitalism. We’ve got basically every employer in this country, to some degree, has to be involved in healthcare. Employees have to be involved. The labor market is restricted because if you want to work for a small company and you’ve got a family, you better hope you have a spouse that works for a big company that offers healthcare. It’s very limiting for the small businesses—they can’t hire a lot of people that they want for that very reason. What can we do to energize both employees and employers to think about it from a perspective and really energize the argument for socialized medicine?

John Baackes, Retired CEO L.A. Care Health Plan (01:12:08):
That’s a good question. As I said, we missed an opportunity back in the fifties when the IRS cemented this rule. I think the best way is to show people that you’re already paying taxes that would go into a socialized system. New York, before the Affordable Care Act, when 15% of the population was uninsured—they were getting care, but they were getting it through hospital emergency rooms. The hospitals were writing it off as uncompensated care, but the state had two taxes you didn’t know about. One was a head tax on insurance—so every insurance policy in the state had a tax built into it that generated revenue that went to the state. There was a bed tax—so anytime a patient was in a bed and they had commercial insurance, a portion of that cost was a tax that went to the state. This is back in the nineties, but the amount they were collecting was $3 billion a year.

John Baackes, Retired CEO L.A. Care Health Plan (01:13:44):
That money was then divvied up and sent to the hospitals to reimburse them for their uncompensated care. The people who were already insured were paying a tax that went to support the people who were not insured. We need to educate the public that you’re already doing this, and we just need a more equitable way to distribute it. You’re an educator, I think.

Audience Member #8 (01:13:44):
No, I work in finance.

John Baackes, Retired CEO L.A. Care Health Plan (01:13:45):
Oh, alright. Too bad. Anyway [Laughs], I think the main thing is for us to figure out how to get that message out: you’re paying for it one way or the other. Let’s pay for it in a way that is more equitable and addresses the disparities that we have as our outcomes under the current system. Did you know about those two taxes?

Audience Member #8 (01:13:44):
No, I didn’t.

John Baackes, Retired CEO L.A. Care Health Plan (01:13:45):
Well, now you do. I don’t want to keep anybody here longer than necessary.

Audience Member #9 (01:14:18):
Hi, Sarah. How are you?

John Baackes, Retired CEO L.A. Care Health Plan (01:14:23):
Hi, Sarah. I’m thinking about benefits, and I’m thinking about when we were back at CHP. We had under one roof behavioral health, and we had all the physical care—all the health was there. Now we have a bifurcated system where you’ve got behavioral health—God forbid we shouldn’t be talking to anybody who’s doing it. When you look at the benefits that are covered under Medicaid and those that are covered under Medicare, they’re completely different. How do we put those benefits together in such a way—when you say pay them the same, should we have a standard for the benefits? Shouldn’t Medicare be paying more for behavioral health, and shouldn’t we have an integrated system again?

John Baackes, Retired CEO L.A. Care Health Plan (01:15:10):
Yes, we should have an integrated system again. One of the things I’ve discussed with providers is why can’t we recognize that primary care doctors do provide the front end of behavioral health and credit them for that and compensate them for that? Do the compensation in a way that says, if you have a connection to behavioral health for more serious issues, and you have that built into your referral system, then your compensation will be adjusted to show that. That might be a first step. It would be great if we could recreate staff-model HMOs. Everybody thought Kaiser’s the greatest—I was inside Kaiser for two years. It’s not as pretty as it looks from the outside. [Laughs]

John Baackes, Retired CEO L.A. Care Health Plan (01:16:07):
But I do think they have the integration in one place, and they have a common medical record. All of those things are extremely beneficial. It’s stupid in this day and age that we can’t send a medical record from one doctor’s office to the other doctor’s office across the street electronically because they all have different electronic systems that don’t talk to each other. Now the big word is interoperability—that means more money because you have to have systems that can talk to each other, so you’re building another layer in. If we could go to more standardization, I think that would be a big help in that area. To integrate the physical health and the mental health, we have to recognize the role the primary care doctors can play in facilitating that and recognize that in their compensation.

John Baackes, Retired CEO L.A. Care Health Plan (01:17:02):
In Los Angeles County, Los Angeles County has one of the largest publicly operated health delivery systems. They’ve got four public hospitals, 24 primary care clinics, hundreds of employed physicians. They took care of about 300,000 of our members who had a primary care doctor there. They also operated 14 mental health centers—they weren’t even in the same building. We’ve got to talk to the professionals to get them to begin to work together on that, because that was idiocy and a measure of how bad the problem is. There’s a lot of work to do. We can do it with incentives, but we’ve got to get the professionals to talk to each other and not compete so much.

NYS Assemblyman John McDonald (01:17:57):
John McDonald, a pharmacist for the last 40 years. I’m also the assembly member here in the Capital Region. I don’t need a clap. I’ve been following your career because you started CHP when I was in pharmacy college in Albany, and I’ve run an independent pharmacy for the last 40 years. On the PBMs—which most people don’t know what they are, but that’s why we have a lot of problems in the pharmaceutical arena—I appreciate your comments. I want to take a moment for personal privilege to explain to everybody that the MCO tax that you talked about in California—New York, not being a great pioneer, actually has pirated that idea. [Laughs] We are including that MCO tax—it’s active in this year’s budget. It’s bringing two to $3 billion.

NYS Assemblyman John McDonald (01:18:47):
We didn’t have to go through Proposition 35. We didn’t have to build a coalition because, for better or worse, the way Albany works, all the health systems and all the labor unions that are in healthcare saw money and got on the same page. The health plans realized they’re not going to get screwed, so they kept their mouths shut. Now we have an extra $3 billion or $4 billion that we’re starting to include in our budget. As I said to everybody, buyer beware—we’re good for three or four years. We’re hopeful that this current administration doesn’t turn on it. The truth of the matter is New York followed, but guess who followed us after that? Louisiana—they’re not exactly a blue state by any stretch of the imagination. There’s hope that—we call it a gimmick, to be honest with you—but it actually works.

John Baackes, Retired CEO L.A. Care Health Plan (01:19:43):
No, it is a gimmick.

NYS Assemblyman John McDonald (01:19:44):
It is a gimmick in that aspect. [Laughs] What I wanted to focus on a little bit is—there was a mention upfront about shouldn’t health plans get away from fee-for-service and pay for more comprehensive care. I can tell you in my 40 years in healthcare, it boils down to: is it a for-profit insurance plan or a not-for-profit insurance plan? Here in the Capital Region, Highmark, MVP, CDPHP—they look for that type of innovation. They don’t need to hit that higher margin that they’re required to do. I can tell, as one who gets a lot of requests to get involved with getting prior approvals done, they’re a lot easier to work with—not being disrespectful to the others. Aetna, Cigna, UnitedHealth—they are literally $100-billion-a-year corporations.

NYS Assemblyman John McDonald (01:20:40):
The government has allowed that to happen at the federal level because of vertical integration. Whereas you’re talking about integration at the local level with the primary care provider for behavioral health and physical health—that’s perfectly fine. Your thoughts about—is there going to be a day when these behemoths that have grown—I could honestly say they’re at the point that they’re too big to fail to a certain degree—but do we need to start peeling that layer back? When you’re looking at challenges getting authorizations through, it’s these entities that are the insurer, the payer, and the provider. At the same token, it seems like transparency gets to be a little bit opaque.

John Baackes, Retired CEO L.A. Care Health Plan (01:21:28):
We could be here for a long time. [Laughs] UnitedHealthcare is the perfect example of that. They have a huge health plan. They also have a huge health services company, Optum, that is selling services to other health insurance plans. We had Optum at L.A. Care, and I escorted them through the door because it just was not working. They didn’t provide good value, and I wasn’t going to make that behemoth any bigger than it already was. I do agree we have to have some peeling back. I don’t have a particular solution on this, but I think bringing it back to the state levels and having more state control would be a way to do it—so that a decision-maker in Indianapolis or Minneapolis is not deciding what’s going on in your town. I don’t know exactly how to do it, but I agree with you.

John Baackes, Retired CEO L.A. Care Health Plan (01:23:05):
Our competitor at L.A. Care was Centene, operating under the brand name Health Net. They had lobbied the state to get preferential treatment on rates. Over a period from 2011 until 2023 in California, they made $4.6 billion on Medicaid and sent $3.6 billion to shareholders as dividends. I think that’s obscene.

Becky (Audience) (01:23:14):
As you know, my background is in public health. How did you put public health in your plan? For instance, you’re talking about educating the public—that’s all part of public health. How did you do that?

John Baackes, Retired CEO L.A. Care Health Plan (01:23:32):
Public health is run through the county in Los Angeles, like it is in many places. The Department of Public Health—we worked with them on a number of programs where, operating on a 2% margin, we invested—for this century, we’ve invested $500 million in projects in Los Angeles County to do various things like working with public health. One of the things we did is that doulas became a profession eligible for reimbursement, but the doulas didn’t know how to bill—what do we do? We created a doula hub, and the county came to us, and we financed it because we wanted the doulas to know, “It’s great, somebody wants to see you, but how do we submit a bill? How do we get paid?” We worked with the county on that.

John Baackes, Retired CEO L.A. Care Health Plan (01:24:33):
We also worked with the county on gun violence because that’s a huge public health issue, as you know. It was partnering with them. I said to people, “L.A. Care was a big organization—$11 billion in a year of revenue—but we can’t accomplish things alone. We have to do them in partnership, and we have to build relationships.” I don’t think we accomplished anything that was any good without getting some other entity in the community to work with us on it. We used our 2% margin to grease the wheels.

Noreen McKee, JCRC Board Member (01:25:16):
Well, thank you so much, John. This was wonderful. I’m sure the audience appreciates it.

John Baackes, Retired CEO L.A. Care Health Plan (01:25:23):
Thank you very much.

Noreen McKee, JCRC Board Member (01:25:33):
After you write that book, please come back.

John Baackes, Retired CEO L.A. Care Health Plan (01:25:32):
[Laughs] I will.

Noreen McKee, JCRC Board Member (01:25:33):
Thank you, everyone. This was a wonderful event for the Justice Center and for Rensselaer County, and we appreciate everyone coming out tonight. Thank you.