Protocol | Policy

Big Tech contracts powered California's COVID response. At what cost?

Gov. Gavin Newsom turned to big technology and health care firms that have backed his political career.

California Gov. Gavin Newsom has leaned on the private sector in the state's coronavirus response.​

California Gov. Gavin Newsom has leaned on the private sector in the state's coronavirus response.

Photo: Jeff Gritchen/Getty Images

Angela Hart is the California Healthline Correspondent for Kaiser Health News.

California Gov. Gavin Newsom has embraced Silicon Valley tech companies and health care industry titans in response to the COVID-19 pandemic like no other governor in America, routinely outsourcing life-or-death public health duties to his allies in the private sector.

At least 30 tech and health care companies have received lucrative, no-bid government contracts, or helped fund and carry out critical public health activities during the state's battle against the coronavirus, a Kaiser Health News analysis has found. The vast majority are Newsom supporters and donors who have contributed more than $113 million to his political campaigns and charitable causes, or to fund his policy initiatives, since his first run for statewide office in 2010.

For instance, the San Francisco-based software company Salesforce — whose CEO, Marc Benioff, is a repeat donor and is so close with the governor that Newsom named him the godfather of his first child — helped create My Turn, California's centralized vaccine clearinghouse, which has been unpopular among Californians seeking shots and has so far cost the state $93 million.

Verily Life Sciences, a sister company of Google, another deep-pocketed Newsom donor, received a no-bid contract in March 2020 to expand COVID testing — a $72 million venture that the state later retreated on. And after Newsom handed another no-bid testing contract now valued at $600 million to OptumServe, its parent company, national insurance giant UnitedHealth Group dropped $100,000 into a campaign account he can tap to fight the recall effort against him.

Public health on the line

Newsom's unprecedented reliance on private companies has come at the expense of California's overtaxed and underfunded public health system. Current and former public health officials say Newsom has entrusted the essential work of government to private-sector health and tech allies, hurting the ability of the state and local health departments to respond to the coronavirus pandemic and prepare for future threats.

"This outsourcing is weakening us. The lack of investment in our public health system is weakening us," said Flojaune Cofer, a former state Department of Public Health epidemiologist and senior director of policy for Public Health Advocates, which has lobbied unsuccessfully for years for more state public-health dollars.

"These are companies that are profit-driven, with shareholders. They're not accountable to the public," Cofer said. "We can't rely on them helicoptering in. What if next time it's not in the interest of the business or it's not profitable?"

Kathleen Kelly Janus, Newsom's senior adviser on social innovation, said the governor is "very proud of our innovative public-private partnerships," which have provided "critical support for Californians in need during this pandemic."

California Health and Human Services Secretary Dr. Mark Ghaly echoed the praise, saying private-sector companies have filled "important" roles during an unprecedented public health crisis.

The state's contract with OptumServe has helped dramatically lower COVID test turnaround times after a troubled start. Another subsidiary of UnitedHealth Group, OptumInsight, received $41 million to help California rescue its outdated infectious disease reporting and monitoring system last year after it crashed.

"Not only are we much better equipped on all of these things than we were at the beginning, but we are also seeing some success," Ghaly said, "whether it's on the vaccination front, which has really picked up and put us in a place of success, or just being able to do testing at a broad scale. So, I feel like we're in a reasonable position to continue to deal with COVID."

The federal government finances most public health activities in California and significantly boosted funding during the pandemic, but local health departments also rely on state and local money to keep their communities safe.

In his first year as governor, the year before the pandemic, Newsom denied a budget request from California's 61 local public health departments to provide $50 million in state money per year to help rebuild core public health infrastructure — which had been decimated from decades of budget cuts — despite warnings from his own public health agency that the state wasn't prepared for what was coming.

After the pandemic struck, Newsom and state lawmakers turned away another budget request to support the local health departments driving California's pandemic response, this time for $150 million in additional annual infrastructure funding. Facing deficits at the time, the state couldn't afford it, Newsom said, and federal help was on the way.

Yet COVID cases continued to mount, and resources dwindled. Bare-bones staffing levels meant that some local health departments had to abandon fundamental public health functions, such as contact tracing, communicable disease testing and enforcing public health orders.

"As the pandemic rages on and without additional resources, some pandemic activities previously funded with federal CARES Act resources simply cannot be sustained," warned a coalition of public health officials in a December letter to Newsom and legislative leaders.

Calling on Silicon Valley

Newsom has long promoted tech and private companies as a way to improve government, and has leaned on the private sector throughout his political career, dating to his time as San Francisco mayor from 2004 to 2011, when he called on corporations to contribute to his homelessness initiatives.

And since becoming governor in January 2019, he has regularly held private meetings with health and tech executives, his calendars show, including Facebook CEO Mark Zuckerberg, Google CEO Sundar Pichai and Apple CEO Tim Cook.

"We're right next door to Silicon Valley, of course, so technology is our friend," Newsom wrote in his 2013 book, "Citizenville," arguing that "government needs to adapt to this new technological age."

With California's core public health infrastructure already gutted, Newsom funneled taxpayer money to private-sector tech and health companies during the pandemic or allowed them to help design and fund certain public health activities.

Other industries have jumped into COVID response, including telecommunications and entertainment, but not to the degree of the health and technology sectors.

"It's not the ideal situation," said Daniel Zingale, who has steered consequential health policy decisions under three California governors, including Newsom. "What is best for Google is not necessarily best for the people of California."

Among the corporate titans that have received government contracts to conduct core public health functions is Google's sister company Verily.

Google and its executives have given more than $10 million to Newsom's gubernatorial campaigns and special causes since 2010, according to state records. It has infiltrated the state's pandemic response: The company, along with Apple, helped build a smartphone alert system called CA Notify to assist state and local health officials with contact tracing, a venture Newsom hailed as an innovative, "data-driven" approach to reducing community spread. Google, Apple and Facebook are sharing tracking data with the state to help chart the spread of COVID. Google — as well as Facebook, Snapchat, TikTok, Twitter and other digital media operations — also contributed millions of dollars in free advertising to California, in Newsom's name, for public health messaging.

Other companies that have received lucrative contracts to help carry out the state's COVID plans include health insurance company Blue Shield of California, which received a $15 million no-bid contract to oversee vaccine allocation and distribution, and the private consulting firm McKinsey & Company, which has received $48 million in government contracts to boost vaccinations and testing and work on genomic sequencing to help track and monitor COVID variants. Together, they have given Newsom more than $20 million in campaign and charitable donations since 2010.

Private companies have also helped finance government programs and core public health functions during the pandemic — at times bypassing local public health departments — under the guise of making charitable or governmental contributions, known as "behested payments," in Newsom's name. They have helped fund vaccination clinics, hosted public service announcements on their platforms and paid for hotel rooms to safely shelter and quarantine homeless people.

Facebook and the Chan Zuckerberg Initiative, the philanthropic organization started by Facebook founder Mark Zuckerberg and his wife Priscilla Chan, have been among the most generous, and have given $36.5 million to Newsom, either directly or to causes and policy initiatives on his behalf. Much of that money was spent on pandemic response efforts championed by Newsom, such as hotel rooms and child care for front-line health care workers; computers and internet access for kids learning at home; and social services for incarcerated people leaving prison due to COVID outbreaks.

Facebook said it is also partnering with the state to deploy pop-up vaccination clinics in hard-hit areas like the Central Valley, Inland Empire and South Los Angeles.

In prepared statements, Google and Facebook said they threw themselves into the pandemic response because they wanted to help struggling workers and businesses in their home state, and to respond to the needs of vulnerable communities.

Venture capitalist Dr. Bob Kocher, a Newsom ally who was one of the governor's earliest pandemic advisers, said private-sector involvement helped California tremendously.

"We're doing really well. We got almost 20 million people vaccinated and our test positivity rate is at an all-time low," Kocher said. "Our public health system was set up to handle small-scale outbreaks like E. coli or hepatitis. Things work better when you build coalitions that go beyond government."

Public health leaders acknowledge that private-sector participation during an emergency can help the state respond quickly and on a large scale. But by outsourcing so much work to the private sector, they say, California has also undercut its already struggling public health system — and missed an opportunity to invest in it.

Take Verily. Newsom tapped the company to help expand testing to underserved populations, but the state chose to end its relationship with the company in January after county health departments rejected the partnership, in part because testing was not adequately reaching Black and Latino neighborhoods. In addition to requiring that residents have a car and Gmail account, Verily was seen by many local health officials as an outsider that didn't understand the communities.

It takes years of shoe-leather public health work to build trusted relationships within communities, said Dr. Noha Aboelata, founder and CEO of the Roots Community Health Center in the predominantly Black and Latino neighborhood of East Oakland.

"I think what's not fine is when these corporations are claiming to be the center of equity, when in fact it can manifest as the opposite," she said. "We're in a neighborhood where people walk to our clinic, which is why when Verily testing first started and they were drive-up and you needed a Gmail account, most of our community wasn't able to take advantage of it."

To fill the gap, the clinic worked with Alameda County to offer walk-up appointments. "We're very focused on disparities, and we're definitely seeing the folks who are most at risk," Aboelata said.

The state took a similar approach to vaccination. Instead of giving local health departments the funding and power to manage their own vaccination programs with community partners, it looked to the private sector again. Among the companies that received a vaccination contract is Color Health, awarded $10 million to run 10 vaccine clinics across the state, among other COVID-related work. Since partnering with California, Color has seen its valuation soar to $1.5 billion.

A private-public tech gap

As the state's Silicon Valley partners rake in money, staffing at local health departments has suffered, in part because they don't have enough funding to hire or replace workers. "It is our biggest commodity and it's our No. 1 need," said Kat DeBurgh, executive director of the Health Officers Association of California.

With inadequate staffing to address the pandemic, the state is falling further behind on other basic public health duties, such as updating data systems and technology. Many county health departments still rely on fax machines to report lab results. They're also combating record-setting levels of sexually-transmitted diseases, such as syphilis.

"We've put so many resources into law enforcement and private tech companies instead of public health," said Kiran Savage-Sangwan, executive director of the California Pan-Ethnic Health Network. "This is having a devastating impact."

Dr. Karen Smith, former director of the state Department of Public Health, left the state in July 2019 and now is a consultant with Google Health.

She believes Silicon Valley can improve the state's crumbling public health infrastructure, especially when it comes to collecting and sharing data, but it can't be done without substantial investment from the state. "Who the heck still uses fax? Public health doesn't have the kind of money that tech companies have," said Smith, who said she wasn't speaking on behalf of Google.

Without adequate funding to rebuild its infrastructure and hire permanent workers, Smith and others fear California isn't prepared to ride out the remainder of this pandemic — let alone manage the next public health crisis.

Statewide public health advocacy groups have formed a coalition called "California Can't Wait" to pressure state lawmakers and Newsom to put more money into the state budget for local public health departments. They're asking for $200 million annually. Newsom will unveil his latest state budget proposal by mid-May.

"We're in one of those change-or-die moments," Zingale said. "Newsom has been at the vanguard of the nation in marshaling the help of our robust technological private sector, and we're thankful for their contributions, but change is better than charity. I don't want to show ingratitude, but we should keep our eyes on building a better system."

KHN data editor Elizabeth Lucas and California politics correspondent Samantha Young contributed to this report.

This story was produced by Kaiser Health News, a national newsroom that provides in-depth coverage of health issues and that is one of the three major operating programs at the Kaiser Family Foundation. KHN is the publisher of California Healthline, an editorially independent service of the California Health Care Foundation.

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