OAKLAND — California’s vaccination rollout was sputtering this year when Gov. Gavin Newsom embraced a solution long favored by Republicans: outsourcing.
Barely a month after the first doses arrived, the Democrat — who wrote a book on government innovation and has bemoaned California’s outdated technology — inked a no-bid deal with insurance giant Blue Shield of California to manage vaccine distribution throughout the state.
Newsom, facing a recall threat and under immense pressure to get the doses out quickly, turned to Blue Shield soon after vaccination problems surfaced, suggesting he deemed the task of rapidly vaccinating tens of millions too complex for government to handle.
But the deal has raised an array of data privacy and equity questions, and the company’s sizable contributions to Newsom’s reelection and the governor’s causes have fueled speculation about how money may have influenced the decision. The rollout continues to face challenges with getting doses into people’s arms.
“There’s a need for rapid deployment to ensure the majority of populations are served and do have access to equitable and fair vaccine distribution," said Oscar Alleyne, chief program officer for the National Association of County and City Health Officials. "But I can’t begin to surmise why a decision was made this way and not to further amplify the local distribution approach."
Alleyne said he knew of no other state that has gone as far as California in privatizing its vaccine rollout. Other states such as Massachusetts and Florida have used private corporations to manage mass vaccination sites or portions of the supply, but not their overall state distribution.
California public health departments were underfunded before the pandemic, and they have endured a stress test like never before in the past 13 months. County health officials have been responsible for determining local restrictions, running Covid-19 testing, tracing cases, helping schools retrofit their campuses — and now rolling out vaccines.
In January, soon after California was singled out for trailing many other states in getting doses into arms, Newsom announced the state had tapped Blue Shield to help manage a new, centralized system beginning March 1.
The idea was to replace the California’s fragmented vaccination administration run by its 61 local health jurisdictions with a one-stop point for people seeking vaccinations, along with a streamlined way for the state to track every dose and know when and where it’s administered, using a system called My Turn.
Nearly 170 providers have contracted with the company to administer the vaccine at some 1,460 sites throughout the state, as of Friday. But many county officials remain skeptical about ceding critical public health functions to a private company, particularly to an insurer that is responsible for both paying claims on vaccines and determining how they are distributed. So far, just one of the state’s 58 counties has signed a direct contract with Blue Shield, while 11 others — including Los Angeles, San Diego and Riverside — have entered into agreements with the state, as of Monday.
Under the deal with the state, Blue Shield is running the My Turn appointment website and handling the logistics of distributing the vaccine to the counties and providers. Some counties had raised concerns about potential violations of the state’s conflict of interest law in signing with Blue Shield and felt more comfortable signing agreements with the state.
Darrel Ng, a spokesperson for the California Department of Public Health, declined to comment directly on whether the state would cut off allocations to counties that don’t sign agreements to allow Blue Shield to manage the distribution. The state is working on more arrangements that give local officials greater flexibility in working with the private insurer, including one Los Angeles County announced Monday.
Newsom, a wine entrepreneur who got his political start in San Francisco, has long been enthralled by the private sector’s ability to solve problems on the fly compared to the slow pace of government. In his 2013 book, "Citizenville," he said that government doesn’t have the money, programmers or engineering mindset to address problems in the technology age. But, he added, "we don’t have to. We simply have to make it possible for people outside government to help us fix them."
In the pandemic’s early days, Newsom announced he had enlisted the help of Tesla’s Elon Musk and Apple’s Tim Cook to supply needed ventilators and masks for the pandemic response. He appeared with Bloom Energy CEO KR Sridhar to tout the fuel cell company’s effort to refurbish old, broken-down ventilators sent by the federal government. His office called Bloom "among the many businesses partnering with the state to assist Californians as COVID-19 continues to spread."
The governor has leaned heavily on the private sector throughout the pandemic, steering nearly $225 million in donations since last March to an array of causes in his name from major foundations and companies such as Facebook, Google, and T-Mobile, state records show. Many of those funds have flowed to Covid-19 awareness campaigns, contact tracing and housing for the homeless.
Blue Shield contributed $300,000 to Newsom’s re-election and ballot committees in 2019-20, records show. The insurer has also donated heavily to the governor’s causes, spending $100,000 on his inauguration and $20 million to support his signature pandemic homelessness initiative, Project Homekey — a contribution it announced in mid-January, shortly before the no-bid contract became public.
The public is right to be concerned, regardless of the ultimate public health outcome, said Jonathan Mehta Stein, executive director of California Common Cause.
“As long as we have a political system awash in money, including big corporate money, every time a policy maker makes a choice like this, it’s going raise eyebrows, rightly or wrongly,” he said. “If we want the public to trust that public decisions are being made in public interest, we can’t have these conflicts of interest looming over everything because big money funds our elections.”
Under Blue Shield’s no-bid contract, the company cannot profit from the deal and the cost of the work cannot exceed $15 million. The state also contracted with Kaiser Permanente to assist Blue Shield in the effort, and is vaccinating Californians outside its membership system.
Blue Shield CEO Paul Markovich has acknowledged the resistance in parts of the state, saying some counties prefer to sign a memorandum of understanding with the state rather than a contract with the company to continue receiving vaccine doses.
“There was some concerns about the government entity signing a contract with a private company, any private company,” Markovich said in a call with reporters this month. “They’re much more comfortable with an agreement with the state, which is fine by us as long as there’s agreement that they will participate in the performance management system that allows us to deliver on the performance in our contract.”
Newsom’s office did not respond to a request to comment for the story, but Newsom has defended his position, saying in earlier news conferences that Blue Shield had the kind of scale and capacity that the state needs for the job. In early February he dismissed concerns about the potential of Blue Shield influence contributing to the agreement with the state as “nonsense.”
One nagging concern is how Blue Shield will use and retain the personal information it collects as part of the effort. Reports that Blue Shield sought patient data from the University of California, as reported by the Los Angeles Times, has raised concerns, but Markovich has stressed repeatedly that the company is contractually forbidden from using the information for its own business purposes.
“That stuff is gold,” said Andrew Noymer, a professor of population health and disease prevention at the University of California, Irvine, of personal health information, earlier this month. “Everybody wants to know about your health data.” He said the only personal health data Blue Shield should need is “how many arms have been stuck.”
Elaine Batchlor, the CEO of Martin Luther King Jr. Community Hospital in southern Los Angeles, said she signed the provider agreement with Blue Shield, but only because she didn’t want to lose access to vaccine; the state initially told providers they would need to sign on by month’s end to continue receiving their allotments.
“I felt like we needed to sign up to continue to have vaccine supplied to our community, but I wasn’t happy with some of the terms,” she said.
Most of the distribution problems, Batchlor said, have been caused by lack of a sufficient and predictable vaccine supply.
Brian Metzker, who tracks information technology projects for California’s nonpartisan Legislative Analyst’s Office, said the state’s contract with Blue Shield goes well beyond any other IT agreements he’s seen with the state because it gives Blue Shield power over vaccine distribution as well as the delivery process. It requires the company to work with the counties and providers to get them on board.
Metzker acknowledged the systems weren’t up to snuff, but said that the state, after the testing snafus, had worked swiftly to revamp its infectious disease reporting and vaccine management systems, setting up contracts to create and expand capacity within weeks.
“All these systems were there and had been used before, but not scaled to receive the amount the data and test results associated with Covid. And they certainly weren’t set up to receive the volume of data we are now receiving,” Metzker said.
Newsom’s move to privatize has won him rare praise from the other side of the aisle. Assemblymember Jim Patterson (R-Fresno) described ongoing negotiations between Blue Shield and local governments as "the way the private sector and government ought to act."
Patterson, an outspoken critic of the state’s IT problems, said the plan helps fill in some key weaknesses for the state — namely its technology and speed.
“California state government is notoriously inefficient. Its bureaucracy is slow and plodding, and its technology is disastrous,” he said, referring to longstanding issues at the Department of Motor Vehicles, and problems with the state’s unemployment benefit program.
Sean Walsh, a Republican strategist based in California, said the stakes are too high for Newsom not to take the risk. "I think he’s more willing to take an a—chewing from government proponents and labor unions than an a—kicking from having a failed distribution system," Walsh said.
Even some labor leaders that normally decry private outsourcing are willing to give Newsom a chance to see if this works. In the end, Newsom may only be judged by the success — or failure — of the vaccine rollout.
Sandra Lowe, a veteran California political strategist and union organizer, doesn’t think Newsom will suffer serious backlash from labor for turning to Blue Shield.
“Gov. Newsom is trying everything he can to get vaccines into the arms of Californians," Lowe said, "and he’s enlisting all of the resources at his disposal.”
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