HMO Exec Named Schwarzenegger’s Chief of Staff

After running as an outsider critical of special interests, Gov.-elect Arnold Schwarzenegger on Wednesday selected as his chief of staff a health-care industry executive who is practiced at all the insider moves.

In naming Patricia T. Clarey his chief of staff, Schwarzenegger is relying on someone who is a no-nonsense administrator but who also has been a representative of one of the most influential interests in Sacramento -- the health-care industry.

“I have been working with her for the last 10 weeks throughout the campaign and all that, and she’s very efficient, very powerful, strong, very experienced and totally trustworthy,” Schwarzenegger said in announcing Clarey’s appointment.

A chief of staff is a key appointee in any administration, overseeing day-to-day operations, involved in virtually all major appointments, and a sounding board on policy issues. Unlike career politicians, Schwarzenegger comes to Sacramento without a cadre of trusted aides to serve in such high-level posts. Several top campaign aides had pressed for Clarey to get the job.

“She is as good as it gets,” said Bob White, who managed Schwarzenegger’s campaign and for 30 years served as chief of staff to Pete Wilson.

Clarey, 50, is a veteran of Washington, D.C., and Sacramento. She worked in the Interior Department under the first President Bush, having lobbied for Chevron before that. She spent most of the 1990s working in the Wilson administration, first serving as deputy chief of staff under White.

Since March 2001, Clarey has overseen lobbying for Health Net, California’s third-largest health maintenance organization. She worked for a major life insurance company before that.

Health Net does large amounts of business with California, providing coverage to 557,000 senior citizens and poor and disabled people through the state Medi-Cal program. The California Public Employee Retirement System, seeking to slow health-care cost increases, dropped Health Net last year as a provider to retired state workers.

Still, the company, with annual revenue of more than $10 billion, provides health care to 5.3 million people in 15 states, including more than 2 million in California.

Although she is expected to disassociate herself from Health Net, some Democrats and critics of the health-care industry said they fear her appointment suggests health maintenance organizations will regain some influence they appeared to lose after Gov. Gray Davis signed legislation in 1999 increasing HMO regulation.

“I don’t want to predict a full-scale anti-consumer trend,” said Senate Health Committee Chairwoman Deborah Ortiz (D-Sacramento). But the “perspective could tilt more toward corporations, rather than consumers.”

Others were more direct.

“The idea of appointing somebody who went from the Pete Wilson administration ... to Health Net makes us very worried about whether HMO reform is going to survive,” said lobbyist Beth Capell of Health Access, a group that includes organized labor and consumer groups such as Consumers Union.

Like other HMOs, Health Net has an extensive lobbying operation. Since Clarey joined Health Net as vice president for governmental relations, the firm, based in Woodland Hills, has contributed $530,000 to legislators and other political figures, including $70,000 to Davis.

Separately, the company spent $342,000 on lobbying, employing a team that includes a former state Democratic state senator, Patrick Johnston, and Nielsen, Merksamer, a political law and lobbying firm that represented Wilson when he was governor.

As part of its lobbying, Health Net regularly buys legislators fancy dinners and gives them tickets to Sacramento Kings basketball games. In November, Health Net paid for Atty. Gen. Bill Lockyer to attend a Rolling Stones concert at the Oakland Coliseum, its publicly filed lobbyist statements show.

Like other such corporations, Health Net has run afoul of California regulators. California’s Department of Managed Health Care levied a $100,000 fine on Health Net in 2001 for failing to pay physicians on time, the second-largest penalty meted out to a health-care provider for such a breach. The actions took place before Clarey went to work for the firm.

Inside the Capitol, HMOs are rivals with trial attorneys who represent patients who want to sue them over mistreatment. Physicians groups also tangle with HMOs. For the most part, the battles are fought over arcane issues that rarely become public.

But health care became a major issue early in Davis’ tenure when he signed legislation that created a “patients’ bill of rights,” requiring that HMOs permit patients to see specialists and seek second opinions.

Davis also established the Department of Managed Health Care. Since its inception, the department has handled 400,000 patient complaints, often pressing the health-care corporations to provide care to consumers.

The department issues a “report card” rating health plans. Health Net, a for-profit company, ranks about in the middle. The most recent report ranks it as “fair” in providing preventive care, and “good” in other categories such as communicating with patients.

Lisa Haines, Health Net’s vice president for corporate communications, said Health Net supported the 1999 legislation and generally has been supportive of the Department of Managed Health Care. Haines called Clarey “incredibly talented, smart, levelheaded.” But her appointment does not suggest that Health Net will pursue new legislation.

“I don’t think necessarily there will be a benefit” for the HMO industry, Haines said.