There is a solution for U.S. national healthcare which would allow for no claims to be denied, all claims to be paid in full to both the healthcare providers and the insured patient, and over time, the overall cost of the healthcare system would be reduced, patient outcomes would improve, and the drain on the federal budget and taxpayers would be eliminated. The key this solution is setting up a new government agency similar to the FDIC. This new agency would provide re-insurance to the insurance companies who provide healthcare insurance for all U.S. and legal residents. This new agency would be required by law and incentives to run a balanced budget and would be funded by premiums from the insurance companies and new fully marketable, federally guaranteed debt securities similar to Treasury securities. This is how it would work.
Insurance companies must sell health insurance to all citizens and for all conditions. They can deny no citizen or legal resident. Government-funded insurance for federal and all other government employees is eliminated and these employees are covered by the same program described here.
The cost of procedures, drugs and services is established on a free market basis. The entire concept of reimbursement rates is eliminated. Neither the insurance companies nor the government determine how much will be paid on any medical or dental bill. Your insurance card will pay the entire bill. Hospitals, doctors, drug companies and all providers compete freely based on the services they provide and they set their own prices.
The citizen has an smart insurance card which they use for any medical or dental procedure much like paying with a credit card. Insurance is required to be portable across all state lines. An employer is free to but not required to subsidize employee insurance, but the policy holder is the individual citizen.
The cost of an individual’s insurance policy is based on a national actuarial table. All insurance companies must use the national rates. Mortality and costs for any pre-existing condition and the anonymized family medical history of the insured versus the national average family history determines the cost of a citizen’s insurance. This puts in place a natural financial incentive to improve quality of lifestyle. The national actuarial table is based on an electronic medical records system that is a blinded statistical database of family medical histories. Generations of blinded medical histories are tracked. As a result, over years, your personal healthcare insurance price will be determined by your genetic makeup, your environment and your lifestyle, but no one is individually tracked and the capability to identify or track a person does not exist in the database. Only meta-information on groups and clusters exists in the database.
If you choose a more expensive hospital or doctor or a proprietary drug instead of a generic, then the monthly cost of your insurance will slowly rise to the national actuarial average for that level of service. If you select your health care providers on a cost performance basis or rarely use/need health insurance, then your monthly cost for health insurance will slowly decline to the national actuarial level; if more people make careful cost effective solutions, then overtime the national actuarial cost for insurance will decline. In any event, your insurance card will cover all your healthcare expense by any healthcare provider just as if you were walking into a grocery store and buying groceries with a credit card.
The new federal government re-insurance entity is not involved in any way in determining which or whether healthcare procedures are approved. FDA continues to regulate diagnostic devices, pharmaceuticals and foods. There are major areas for improvement in the US healthcare system, but this healthcare insurance plan does not attempt to regulate or require any changes in the FDA. HIPAA and CLIA regulations also are not affected by this concept, but these regulations would continue to apply to healthcare providers and insurance companies as they do today.
Insurance companies would have re-insurance provided from the federal government by a new agency similar to the FDIC. Insurance companies must comply with the policies above. Their risk and therefore the price of that risk are eliminated by government agency re-insurance. All insurance companies use the same federally managed actuarial table to establish their rates. The price of monthly cost of an individual’s healthcare insurance will be identical from one company to another. Insurance companies compete based on the services they provide to healthcare providers, employers and individuals. Insurance companies who successfully guide their cardholders to the most cost effective healthcare providers will be preferentially selected by individuals because over time the monthly insurance cost will decrease. Insurance companies work with providers and employers to gather and communicate information to the market about the capabilities of the healthcare. The new government healthcare re-insurance agency documents and distributes market, quality and cost performance statistics including the actuarial tables to insurance companies and healthcare companies. Insurance companies and healthcare providers may work together to advertise and co-market.
The new federal government agency sells re-insurance to the insurance companies. All insurance companies selling healthcare insurance are required to buy re-insurance from the new federal re-insurance agency. The cost of the re-insurance varies inversely with the business performance of the insurance company compared to the national average. Thus, the price of the re-insurance policy declines when the insurance company is more efficient at promoting the highest quality and lowest cost healthcare providers. The price (or premium) for the re-insurance policy is collected quarterly from every insurance company; this is revenue to the new agency for funding the national re-insurance program and to pay interest on the new federally insured bills and bonds issued by the new federal re-insurance agency. The federal government securitizes the re-insurance debt into fully marketable bills and bonds which are denominated, managed and marketed in the same way as U.S. Treasury bills and bonds today. The interest rate/yield/coupons paid on the new securities is paid from a percentage of the re-insurance policy revenue collected from the insurance companies. The price of the bonds is determined by normal competitive market factors at regularly scheduled auctions. These new national re-insurance bills and bonds are supported by the full faith and credit of the U.S. government.
The federal re-insurance entity is managed to be a non-profit entity, with balanced revenue and expenses and no federal subsidy after its initial startup funding. Its managers and employees are evaluated on their ability to deliver on that basis. Management does not have the ability to increase the premium cost of the re-insurance, and also management does not control the interest rate/yield/coupon on its bills and bonds offered in the market. The cost of the re-insurance policy to the insurance company is determined by that company’s success in controlling and improving healthcare cost/performance in the market compared to the national actuarial table which averages the cost/performance of all insurance companies for all insured citizens. Because it is incented to maintain a balanced budget, and since neither it nor insurance companies control the price of health insurance policies sold to all citizens, management at the new federal agency is thus incented to work with each insurance company to stabilize or decrease the cost of its re-insurance policy. That can only be done by improving the national averages for cost and quality of care as measured by the national actuarial table for each medical condition. Thereby, the new agency, the insurance companies, healthcare providers, and citizen consumers of healthcare are all incented to improve reduce the cost and improve the quality of the healthcare system.
The new federal re-insurance securities are “risk free” in the same sense as U.S. Treasury securities. A market competitive dynamic is established between U.S. Treasury pricing and the new federal re-insurance bills and bonds.