Longtime Head of L.A. Care To Retire After Navigating Major Medi-Cal Changes

LOS ANGELES — For nearly a decade, John Baackes has led L.A. Care Health Plan, a publicly run insurer primarily serving low-income Los Angeles County residents on Medi-Cal. It is by far the largest Medi-Cal plan in the state.

Baackes, 78, who will retire after the end of the year, helped transform L.A. Care into a major market player following its expansion under the Affordable Care Act. He implemented a new administrative structure and promoted a new internal culture. The insurer generated $11.3 billion in revenue last year, with membership close to 2.6 million people — nearly 900,000 more than when Baackes took the reins in March 2015.

“I recognized when I got here that L.A. Care was a big frog in a big pond,” he said in an interview with KFF Health News on the 10th floor of L.A. Care’s downtown headquarters. But the organization still had a small-plan mentality, he said, until he convinced his staff “that we had an opportunity to really be leaders.”

Baackes moved to Los Angeles from Philadelphia, where he had headed the Medicare Advantage business of AmeriHealth Caritas VIP Care. He started at L.A. Care 15 months after the implementation of the ACA, which expanded Medicaid eligibility and created insurance exchanges where uninsured people could buy federally subsidized coverage.

L.A. Care’s Medi-Cal rolls swelled, and it offered a new health plan sold on the state’s ACA exchange, Covered California, as well as one for medically vulnerable seniors who are eligible both for Medi-Cal and Medicare.

But Baackes saw that L.A. Care didn’t have the right structure to manage the bigger organization it had become. So, he hired directors to oversee each of the health plans and revamped the chain of command.

The changes required a long period of reorientation, Baackes recalled. Then, “one of the officers came up to me one day and said, ‘Well, before I had to talk to everybody, but now I know who to talk to.’ I thought, ‘OK, phew, now we’re making progress.’”

Baackes has sometimes butted heads with state regulators, including when L.A. Care was fined $55 million in 2022 for “deep-rooted, systemic failures that threaten the health and safety of its members.” Baackes thought the fine was not justified. L.A. Care contested it and still has not paid it.

Baackes, who will retain his position as chair of Charles R. Drew University of Medicine and Science, a medical school that trains health professionals to work in underserved areas, expounded on the shortcomings and successes of the U.S. health system and Medi-Cal, which covers well over a third of California’s population.

Like many of his colleagues, he believes Medi-Cal’s principal flaw is low payments to providers, which is exacerbated by a shortage of labor in health care. That discourages doctors and other providers from taking Medi-Cal patients, limiting their choices and extending their wait times for care. He supports Proposition 35, a measure on the ballot this November that would secure a permanent revenue stream to increase Medi-Cal payments.

L.A. Care tackled the labor shortage by creating a $205 million fund to pay for medical school scholarships, help clinics hire doctors, and offer educational debt relief to doctors who work in safety-net settings. Jennifer Kent, former director of the California Department of Health Care Services, which oversees the Medi-Cal program, said she was impressed when Baackes used money from a rate settlement with her agency to help fund those initiatives.

“John very clearly has an appreciation and a passion for the program and what it represents in terms of the power to change people’s lives,” Kent said.

This interview with Baackes has been edited for length and clarity:

Q: Voters will decide, with their vote on Proposition 35, whether money from an industry tax will be locked into Medi-Cal permanently, curbing Gov. Gavin Newsom’s plan to tap the revenue for the state’s budget shortfall. Where do you stand on this?

I understand they’ve got a budget deficit, and they’ve got to do something about it. But we have to have security of the funding, and if it’s going to be decided in every budget, there’s going to be politics and other priorities. This is the same way education runs. They went to a ballot initiative to lock in their portion of the budget, and I think the health of over one-third of the population is as important as education.

Q: Medi-Cal has embarked on an ambitious expansion, including full coverage for all immigrants, a push to increase the amount of primary care provided, the elimination of an asset test, and continuous coverage for children up to age 5, among other things. Does the provider shortage in Medi-Cal dampen the prospects of these efforts?

Absolutely. If we are giving people expansion in access, then we have to have the resources for them to take advantage of it — unless we’re going to say, “Yeah, you have access, but figure it out on your own.” If we look at Los Angeles County, we’ve got plenty of doctors bumping into each other in places like Beverly Hills and Santa Monica. But if you go to South L.A., the Antelope Valley, it’s a different story.

John Baackes, CEO of L.A. Care, stands in front of a placard on his desk, hand-carved by his daughter, which designates him as “The Big Cheese.” Baackes, who will retire in January, worries that low Medi-Cal payment rates that suppress the participation of doctors and other providers will hamper a major state push to improve the program.(Bernard Wolfson/KFF Health News)

Q: What do you think of the Office of Health Care Affordability’s goal of limiting annual health care spending increases to 3.5% at first, and ultimately to 3%?

Well-intended, but I do not see how it can be effective without causing a lot of damage along the way. You can restrict the amount of money that can be spent, but it doesn’t fix the underlying drivers of why it costs so much.

Q: So it could ultimately reduce care for patients?

Yeah. I think so. Because if doctors and nurses demand higher salaries and can command them because there aren’t enough people, then having an administrative hammer that you can’t spend more isn’t going to work.

Q: A lot of people would say the whole U.S. health care system, not just Medicaid, is failing patients. Access to care, and the cost of it, is difficult for a lot of people. How do we fix the system?

We need to simplify the regulatory environment. Regardless of whether it’s commercial insurance, Medicare, or Medicaid, the regulations are piling up and they cost money. The second thing: I think particularly the safety-net providers might have to say there can be no for-profit or private equity investors in that area. I’m not against capitalism. I just think if you’re going to make that money on a system that’s underfunded in the first place, something is being lost.

Q: What are your thoughts about the California Advancing and Innovating Medi-Cal program (CalAIM), especially the community supports such as meals designed for specific medical conditions, home modifications, and help finding housing?

CalAIM is a wonderful program in the sense that it begins to recognize that social determinants do influence your health. So we’re finally saying, “OK, we’ll put some money toward paying for those.” But the trade-off is that they want to reduce the medical costs by making these investments. The problem is we are trying to save dollars that are already deeply discounted. Of the 14 community supports they have, the one that is in my mind a slam dunk is the medically tailored meals.

Q: How has your thinking about health care evolved?

What I’ve learned and experienced is that health care is part of social justice, and we have to think of it that way. Any other way of thinking of it is going to create winners and losers.

This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

Bernard J. Wolfson:
bwolfson@kff.org,
@bjwolfson