Commentary: A Modest Proposal for Controlling Healthcare Costs

Jim Koepke, for HealthLeaders Media, May 13, 2011

Americans are concerned about how the federal government can keep paying the crushing cost of healthcare for people who cannot afford medical insurance. While the government has long taken on the burden of paying medical providers for providing healthcare to the uninsured, it is now accepted that the country cannot continue down the path of funding healthcare entitlements unless major changes are made in the system.

Those of us who have worked on both sides of the aisle -- for private industry and also for government -- tend to agree that the former is more efficient and cost conscious. Why not then, remove the government, as much as possible, from the healthcare process and use free market principles to control costs?

The government should put the entire healthcare entitlement system out to bid so that private firms with a record of competence and success can take over the system and manage it.

The Request for Bid, simply put, would be: The United States has "X" dollars budgeted for healthcare costs in 2012. Private companies that can provide administration of the healthcare system to the uninsured for "X" dollars are asked to bid.

The administrative costs incurred by the private firm as well as the payments to providers come out of the "X" dollars. This means the bidders will need to be creative, efficient, and well-managed in order to pay healthcare expenses as well as their own costs. Here is their real incentive: if the private firms fulfill the obligations for less than "X" dollars, they get to keep the difference. If costs exceed the bid amount, the private firm is responsible for paying the difference. This is not much different than the risk a private insurer takes when agreeing to insure a large company.


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