California: The ultimate health reform litmus test?

(Kevork Djansezian - Getty Images)

If you want to know what the future of health reform will look like, keep an eye on California. The state has pushed aggressively to set up the Affordable Care Act, only to run full speed into daunting obstacles that could derail its efforts.

Perhaps no one knows this as well as Bruce Bodaken, CEO of Blue Shield of California. Unlike other health insurers, his company has been a consistent and vigorous supporter of the Affordable Care Act. But at the same time, Bodaken is cognizant of the big challenges that could undercut the law in his state. “We’re going to have to work doubly as hard as everyone else to make this successful,” Bodaken told me in an interview on Capitol Hill yesterday.

In so many ways, California has all the makings of a health reform trailblazer. Under the leadership of Gov. Arnold Schwarzenegger, the state attempted to do sweeping health reform in 2007, similar to the then recently passed law in Massachusetts. The bill ultimately failed, but it left California with a bevy of health policy experts who have aggressively implemented the Affordable Care Act. “We’ve seen an exchange go out of business in California,” says Bodaken. “We have a great group of exchange board members who know the pitfalls of the past. We’ll see how well capitalized the exchange is, what states and foundations do to support it.”

California was the first state to pass legislation authorizing a health exchange under the new law; many of those involved in the Schwarzenegger reform push now sit on that board. It is one of just four that has opted to expand its Medicaid program up to 133 percent of the Federal Poverty Line; the rest are waiting until that’s required in 2014.

But, in so many other ways, California could easily fail at health reform. It is not Massachusetts, and not just because its earlier health reform effort failed. California’s uninsured population of 7 million is the largest in the country; the state has more uninsured people than the entire population of the Bay State (6.5 million). It’s population is also lower income, one that may chose to pay the smaller penalty for not carrying coverage rather than buy a plan. “Both the carrots and the sticks need to be bigger,” says Bodaken of getting Californians enrolled in insurance.

And at the same time that California’s Medicaid program is also expanding, it’s getting slashed. Noam Levey at the Los Angeles Times wrote an excellent story last week looking at how California’s reimbursement rates for Medicaid doctors — the lowest in the country — could undercut health reform implementation. Some worry the budget crisis could also undermine the exchange, as other programs are given higher priority.

California faces extreme versions of just about everything that can help or hinder a state in implementing the Affordable Care Act. The state is, more so than any other, poised to give us a sneak peak at whether political will to set up health reform can conquer very big economic obstacles.