This weekend tells us three things. One, American government is beyond broken. In this completely artificial debate, a minority opinion that after all represents a minority of the opinions of a party that only controls one third of the government dictates the terms of the deficit reduction compromise. A compromise that is pure fantasy anyway. Two, no one in DC gives a shit about the economy and particularly no one cares the lowest 30% of Americans who are un- or marginally employed or relying on support from society. We heard nary a peep even from any Democrats about them as we insanely cut spending in the middle of a recession. It’s 1937 all over again. Third, health care is for sure a government business, according to Wall Street, with the stocks of most major insurers and hospitals off 5-10% this morning on fears of cuts in Medicare.

Over at Managed Care Matters Joe Paduda makes the outrageous allegation that because the current Republican leadership all voted for the Medicare Modernization Act, (not to mention our adventure in the desert and the tax cuts last decade) they bear some responsibility for the current deficit. One wonders why the Democrats aren’t using this information and explaining it to the public instead of bending over and grabbing both ankles/adopting a position to the right of average Republicans! I’ve now figured it out. Joe must have obtained this information by phone hacking and because it was obtained illegally, Obama and co are honor bound not to use it!

The next few days will be all about exchanges, or more accurately the “American Health Benefit Exchanges for Individuals and Small Business Health Options Program.” Tim Jost has a long and excellent article at Health Affairs blog explaining them, and–Yikes!–it’s the first of three. There’s going to be different rules for individuals versus small businesses, and of course differences as to whether Medicaid plans (which will cover more poor individuals) will be part of the exchange. For states that decide not to implement the exchange themselves, it’ll be done by the Feds–assuming that the whole thing doesn’t get repealed (and it won’t). But I remain very concerned that the complexity of 50 different exchanges, not to mention the ability of HHS to really keep an eye on all of them, is a problem–one that would be much reduced with a single Federal Exchange looking something like FEBHP. As Jost says, The Senate version of the ACA which became law (in contrast to the House version which did not) creates the exchanges at the state rather than the federal level. For that we have Scotty Brown and the voters of Massachusetts to blame. And thus the weirdness of the American political system has given us a long series of headaches for years to come.

By Matthew Holt

We’ve been digging under the hood a little of Xerox since (much to my surprise) they started sponsoring THCB recently. The reason Xerox cares about health care is related to their purchase of ACS a couple of years back. ACS was best known for government (mostly Medicaid) claims processing but they also had a whole lot of other technologies and capabilities. One of those is actually running the Health Insurance Exchanges that are going to be in every state (or imposed on the states in 2013 if they’re not ready). Another ACS capability is working with incipient ACOs, or providers that backdoor into ACOs via Medicare Advantage or direct deals with private plans.

Last month I spoke with Michael Sandwith who runs Market Management at ACS. Why should a state or a provider use ACS to put the systems together to run health information exchanges or ACO information capture and management systems? Mike’s logic is simple–because they’ve done it before. They’re operating 7 state HIEs already and aren’t just bringing Powerpoint. And can ACOs work given the failure of PHOs in the 1990s? It all depends if we can independently manage the physicians within the system–i.e. don’t let the hospital management screw it up! Here’s the full video interview of someone who’s been there in two of the bigger health care IT challenges of the day.

HHS Secretary Kathleen Sebelius (who sat in front of me at a meeting last month–my brush with fame) is in the HuffPo writing about the benefits of the (coming) health insurance exchanges. I’m deeply disappointed that we ended up with state-based exchanges rather than the national exchange that was in the House version of the ACA, but I’ll spare you my diatribe on what States and the Senate are good for….Instead let’s focus on what the exchanges will need to do. Deliver accurate information about insurance choices to their users. That means real apples to apples comparisons of benefits, networks, out of pocket costs, etc, etc. This is all still buried on most private markets (e.g. HealthInsurance still doesn’t clearly explain max out of pocket costs–the most important number for most policies). The good news is that there won’t be any distinction between the polices sold to different business sizes and to sick and healthy people. The bad news is that when people see how little their subsidy will buy them, and that most plans will have high deductibles, the good news may get lost. But the exchanges are important advances–even if in some states they may get subverted.

For a long time Pittsburgh’s UPMC has been flexing its market power and there’s been precious little that dominant local insurer Highmark Blues could do about it. UPMC has long been accused of similar tactics to Partners in Boston and Sutter in Northern California–facing down local insurers, forcing them to pay higher prices than paid to other systems, and using aggressive tactics to crowd out competitors. Highmark has reacted by trying to keep competitors alive, and finally has gone the whole hog and bought West Penn Alleghany the only other viable hospital system in the area. It’s likely that UPMC will end its contract with Highmark when it expires next year, and we’ll see the first in a new round of battles for market share between systems. But it surely won’t be the last across the nation as more and more hospitals will fight to fill the capacity they’re building by acquiring market share. I suspect the end won’t be pretty.

AHIP is in town (as in San Francisco) and sadly that means I’m juggling the office and conference going. So altough I made the odd party I missed former Minnesota governor Tim Pawlenty (who apparently was paid $30K to speak). However, Politico’s Kate Nocera seems to think he got a bit of a tough reception from the insurer crowd which by and large is going to enjoy the ACA and has set its course on making hay from it. But whether or not repealing ACOs and the experiments with Medicare financing are really going to happen (and they’re not) I was though struck by the final quote about exchanges: ‘And Pawlenty dismissed the importance of the state exchanges the law will create to provide consumer choice. “We already have an exchange: It’s called the free market,” Pawlenty said.’ Pawlenty shows himself to be a complete idiot on the Mark Pauly scale here. (Pauly is the Wharton professor who thinks that the individual insurance market works fine because it’s more or less OK for 80% of the people in it). But doesn’t this remind you of another not-too-bright former Republican governor? Remember who said this in 2007?: “I mean, people have access to health care in America. After all, you just go to an emergency room.” Let’s hope for logic’s sake alone we don’t end up with Pawlenty in the White House, as it could be a repeat of 2001-8 all over again.

Michael Cannon from Cato doesn’t like the idea that we’re going to cover children by putting them into Medicaid. To tell the truth I don’t like it either. He points to a NEJM study that shows–in the no shit, Sherlock department–that Medicaid recipients wait longer for care. My guess is that Michael’s solution is to a) do nothing or b) give Medicaid recipients a fund to pay for their own care–a fund that real life shows us will be cut as soon as budgets get tight (and as has happened nation-wide under S-CHIP). My solution is to put those kids in the same system as everyone else. But the real politics of the US is that–for now–Medicaid expansion is the best we’re getting. As soon as it’s done we should be working to abolish Medicaid by integrating it into a rational single system so that children (and adults) do not get discriminated against in medical care simply because they chose their parents poorly.