During the health reform debate, there was controversy and disappointment over the failure to include a public option in the Affordable Care Act. Not only did the public option idea not die, it is alive and well in California.

In northern California last week, Kaiser Health News correspondent Sarah Varney interviewed the CEO of the Alameda Alliance for Health, Ingrid Lamirault, about their intention to participate in the California Health Benefit Exchange when it goes live in 2014. The Alameda Alliance is a non-profit insurer (governed locally) that competes with private for-profit plans in the county to deliver health services to Medicaid beneficiaries (called "Medi-Cal") and public employees.

California does not have a monolithic or centralized Medicaid program. There are a variety of innovative programs that deliver cost-effective high quality care to Medi-Cal beneficiaries. Alameda Alliance is one of fourteen "two plan" counties that serve 3 million beneficiaries. Alameda has to market to Medi-Cal members in competition with a commercial plan. These public plans have been competing with the private sector for over a decade, and despite initial concern from both the left and the right, Medi-Cal beneficiaries and providers are pretty satisfied with the program, which has been able to live within its budgetary limits. Members can walk into the local office of Alameda Alliance and talk to a real person; they can get a home visit from a doctor or pharmacist; they get to choose their provider. Because of their success, some of these "public option" programs are now considering expanding their services to a broader population through the Exchange.

The other main model of Medicaid managed care in California is a six county program called County Organized Health Systems or COHS. These programs have the "franchise" to treat Medi-Cal beneficiaries within their county boundaries without having to compete with any other plan. Because they don't have to spend money on marketing, the COHS plans are able to save money on administrative overhead and return some of those savings to the providers in the form of bonuses for delivering quality of care as well as providing additional services to their members. Some of the larger COHS plans may decide to participate in the Exchange, and people who live in those counties can only "hope" they get a chance to choose these plans when 2014 rolls around.

Why is this important and is it "news"? It's important because many of us felt all along that public options could still spring up at the state level, despite lack of support from Washington. The fact that the Alameda Alliance wants to participate in the Exchange as a public option is validation of that hope. It's news because, although many of California's managed care Medi-Cal programs have been working successfully for over a decade (and I have written about them here), this is the first time that we have heard publicly that one of these programs will expand its services to the broader public because of health reform. Even though it's a small step, and only a few counties may participate at first, it should give encouragement to those who have been so strongly supportive of a public option and single payer program in health reform.