Wall Street Journal California

SACRAMENTO — What could possibly have possessed Daniel Zingale to accept — no, not merely accept but actively lobby for — the job of running the state’s new Department of Managed Care?

In the coming months, Mr. Zingale’s task will be to assemble from scratch a start-up agency whose jurisdiction — managed health care — is one of the most contentious issues on the state’s political radar screen. (About two-thirds of all Californians are enrolled in managed-care plans today, and recent public-opinion surveys show health care among the top three concerns for California voters.)

That means the 39-year-old will need to get his department up and running while the “under construction” sign is still posted. But Mr. Zingale, a longtime activist who has spent the past three years in Washington, D.C., battling the federal government over AIDS policy, says he sought the job because he knew it would be “a big challenge. And I like that. This was a job that would be exciting for me to have. And I wanted it.” And now he’s got it.

Consider that one of his first duties probably will be to slap the state’s health-maintenance organizations with a special one-time, $11 million assessment to help pay for his new department. His unenviable list of tasks also includes making appointments — quickly — to two advisory panels and hiring 131 employees, many of them high-level, at a time when the private sector is offering fat salaries, lucrative stock options and other attractive benefits that state government just can’t match.

Then there’s the more than two dozen new managed-care laws, all passed last year, whose implementation he and his department must monitor, enforce and help explain to consumers.

“This guy has probably the most difficult job in the administration, because of all the expectations that his new department will be the panacea,” says Jamie Court, advocacy director for the nonprofit Foundation for Taxpayer and Consumer Rights in Santa Monica.

At the same time, Mr. Zingale can’t ignore this year’s legislative battles over managed care. While last year’s bills had a mostly consumer focus — they requireHMOs to cover a wide range of new services and treatments — the bulk of this year’s docket has a more corporate orientation. Different special interests are fighting among themselves over issues that are a step removed from the typical consumer’s needs and wants.

Among the battles raging this session: Doctors are fighting the health plans for certain collective-bargaining rights that would include an exemption from federal antitrust laws; the state’s pharmacists are fighting the health plans over lower-cost, mail-order prescriptions; the senior-citizen lobby is fighting pharmaceutical manufacturers over legislation designed to bring down prescription-drug prices; and the state’s trial lawyers and certain consumer advocates are fighting health plans to eliminate mandatory binding-arbitration clauses in health-plan contracts.

“We have a new regulator with virtually no staff at hand, faced with implementing about 25 new bills” from the previous session, says Walter Zelman, president and chief executive of the 36-member California Association of Health Plans. “Reason suggests a go-slow, `Let’s see how this has worked’ approach. And then to see a new host of managed-care reform bills? We were very disappointed.”

And there may be even more legislative changes in the works. Assemblyman Martin Gallegos (D., Montebello), who wrote the legislation creating the Department of Managed Care, says that while consumer interests were largely addressed last year, that doesn’t mean there isn’t more work for lawmakers. “The many issues still outstanding are critical to the fiscal integrity of the health-care system,” says Mr. Gallegos, a licensed chiropractor who is chairman of the Assembly Health Committee.

Among those outstanding financial issues, Mr. Gallegos adds, is Gov. Gray Davis‘s budget for the Office of Patient Advocate, which Mr. Gallegos has described as the “crown jewel” of the legislation that created the Department of Managed Care.

Gov. Davis has yet to appoint the first patient advocate, whose duties will include helping consumers with complaints; issuing an annual HMO quality-of-care “report card”; and recommending enforcement actions to the department against health plans. Mr. Gallegos and other lawmakers already are promising to boost what they see as a meager $881,000 budget for the office for the 2000-2001 fiscal year.

For comparison, lawmakers and consumer advocates point to the California Public Utilities Commission‘s Office of Ratepayer Advocate, which is operating this year on an $11.9 million budget.

Enter Mr. Zingale, who is lowering himself gingerly and yet deliberately into this bubbling cauldron of politics and policy.

In Mr. Zingale’s first interview since Gov. Davis appointed him in December to the $118,199-a-year post, the Sacramento native insists he is fully aware of the challenge ahead. “To some extent,” he says, “you have to build the plane while flying the plane. That’s a tricky act, but either way we’ll make it work.”

To be fair, Mr. Zingale, a onetime chief of staff to then-state Controller Gray Davis, doesn’t even have a Department of Managed Care to direct just yet. Under Mr. Gallegos’s bill, the department comes into existence either on July 1 or when Gov. Davis signs an executive order creating it, whichever comes first. That order is expected next month — or at least that’s when Mr. Zingale has asked lawmakers for permission to begin spending money.

Until then, HMOs will remain regulated by the Department of Corporations, as they have been since the 1980s. The department lost that role last year because of concerns by lawmakers, consumer advocates and others that it was ill-equipped, underfunded and, under previous administrations, lethargic in enforcing the law and fighting for consumers. (Mr. Zingale will inherit 190 workers from the corporations department.)

That said, Mr. Zingale declines to discuss any of the pending legislation this year, deferring to the still-in-power Department of Corporations. As for the spending levels Gov. Davis has proposed for the department and the Office of Patient Advocate, Mr. Zingale says, “I feel like the governor’s budget is right on.”

He describes as “fair and constructive” the criticism that the nonpartisan Legislative Analyst’s Office leveled last month at the governor’s budget for the Department of Managed Care. The analyst’s office recommended that lawmakers withhold the entire budget for the department for this year and next, until the Davis administration provides more specifics on how the money will be spent. Mr. Zingale says he intends to have much of that detail ready when he faces lawmakers April 10 at a budget-committee hearing. His presentation will include two innovative ideas:

— Consumer Resources Center: The center will be a “large department,” Mr. Zingale says, that will offer patients guidance in their problems with HMOs, including laying out consumer rights and responsibilities with their respective plans.

— Plan-Provider Relations Office: a unit to solicit and review “constructive ideas” from health plans and providers.

Both initiatives, he says, are aimed at helping Mr. Zingale and his new department tackle what he thinks is the most serious problem they’ll face. “Californians have lost faith in managed care,” he says, and one of his primary goals for the department is “restoring that faith, beginning the process of restoring that faith.”

In addition, Mr. Zingale wants to assert a new emphasis on preventive care — which, in the long run, he says, will result in healthier Californians and a financially stronger health-care system. And, in a nod to cooperation, he wants to instigate an approach he calls “preventive regulation.” Mr. Zingale says he’d like to avoid “getting into situations where we’re penalizing HMOs for their treatment of consumers. I’d rather, on the front end, find ways to improve the quality of preventive care and health care before we have to enforce the law.” This is where Mr. Zingale’s Plan-Provider Relations Office — which solicits ideas from health plans — comes into play.

Such talk brings smiles to the faces of industry leaders like Mr. Zelman. But it raises concerns for consumer advocates like Mr. Court. “If this department doesn’t confront the HMOs with a heavy hammer early on,” warns Mr. Court, “then it’s going to set the wrong tone. This industry has to hear alarm bells, not dinner chimes.”

Despite such concerns, Mr. Court — like most everyone else — came away from a recent introductory luncheon with Mr. Zingale “pleasantly surprised.”

“He seems to be very pure of heart and anxious to have an impact,” says Mr. Court. “He will either last about two hours, or he will make that impact and see his blood pressure rise considerably.”

Sandy Thurman, a federal health official who knows Mr. Zingale from his days in Washington, predicts that his advocacy background will be both a blessing and a curse. Advocates-turned-appointees have “a greater sense of urgency to get through the muck, and much less patience with getting bogged down in the bureaucracy,” says Ms. Thurman, who was herself a health-care advocate until her appointment in 1997 as director of the White House Office of National AIDS Policy.

At times, he’ll feel like “he’s on the inside of a Waring blender, on the puree speed,” says Ms. Thurman. “He’s got a great challenge ahead of him. But I’d bet on him anyway” to succeed — if he takes her advice. “Start to buy Advil in bottles of 500,” she says, and “develop an even thicker skin than he already has.”

Mr. Court and Sen. Jackie Speier (D., Daly City), chairwoman of the Senate Insurance Committee, also agree that the key to Mr. Zingale’s success will be his ability to surround himself with top-flight deputies. “He’s going to need the best and the brightest to make it work,” says Ms. Speier, “and I don’t know if government can afford the best and the brightest.”

The thriving economy notwithstanding, Mr. Zingale says he is having no trouble finding qualified candidates — many of whom he says are calling him first — for the high-level jobs that he’ll need to fill initially. At the same time, he adds, “No one is coming to work for the new Department of Managed Care with the delusion that this is going to be an easy task. The people who are approaching us … know that this is going to be a tough job.”

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MANAGED-CARE REDUX

Less than a year after Gov. Gray Davis signed more than two dozen bills affecting managed-care health coverage — many of them mandating coverage for more services — lawmakers are back again this year asking for more changes and mandates. Here are some of the key managed-care bills before the Legislature today:

Pharmacies and Drugs: SB1922would prohibit health plans from charging different copayments based on the pharmacy used, in effect precluding plans from charging a lower copay for mail-order drugs.

Binding Arbitration: AB1751, SB1934

AB1751 would prohibit mandatory binding arbitration clauses in health-plan contracts; plans and enrollees could agree to arbitrate after a dispute arises. SB1934 would ensure that individuals who go to binding arbitration can recover the same damages that would be otherwise available in court.

Physician Collective Bargaining: SB2007 would give groups of independent, competing physician coalitions an exemption from federal antitrust law so they could bargain collectively with health plans.

Infertility Coverage: SB1630 would require all health plans to offer treatment for infertility with no lifetime caps or other limits on the costs of that treatment.

Uninsured Children: SB2020 would require health-care service plans to offer either a comprehensive children’s health plan to families with incomes of greater than 250% of federal poverty level, or
pay a 1.12% annual tax on total revenues.

Social Anxiety Disorder: SB1456 would require health-care service plans to cover medically necessary treatment of social anxiety disorder.