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Variations on an All-Payer System

For some time I have been toying with a single rate solution for some of our healthcare problems with the poor and the elderly. The disparity in prices paid for the same health care service between Medicaid, Medicare, insurance companies, and uninsured patients is the definition of insanity. It is hard to believe that we actually believe we can reform health care when we keep pricing the services the same stupid way over and over again. Pricing insanity equals lots of unintended consequences. After reading a blog post on The Incidental Economist I realize that this system is called an “all-payer rate setting”. So here are my ideas:

  • All-Payer Rate Setting for the Poor
  • All-Payer Rate Setting for the Elderly
  • All-Payer Rate Setting for the High Cost Patients

All of these groups suffer from price insanity. My inner MBA say that a mutually acceptable price for a health care service exists between the Medicaid, Medicare, and the insurance company prices. The all-payer rate setting for the poor would close the gap between Medicaid, the insurance companies, and the uninsured. Hopefully this would minimize the financial impact of coverage gaps caused by Medicaid churning. Likewise the all-payer rate setting for the elderly would close the gap between Medicare, the insurance companies, and the uninsured. In this case I am referring to the elderly as older than 55 and hopefully it would reduce the impact of community rating on individual insurance group market and take advantage of Medicare pricing power. The all-payer rate setting for the high cost patients is an attempt to control or cap costs. If we combine all-payer pricing with a discount schedule based on income and family size like they have at Trihealth, we probably have a pretty sane pricing solution for the groups who have the greatest financial risk from a health care disaster. The loser in all of these cases is the hospitals, doctors, and drug companies but these are the folks who benefited from the price insanity. This is what you should expect when the U.S. total health expenditure (PPP) per capita leads the rest of the world by a considerable margin.