John Goodman of the National Center for Policy Analysis writes:
[B]efore the current era, the most common form of health insurance — other than Blue Cross plans — was indemnity insurance with a fee schedule. A typical benefit consisted of so many dollars a day for each day in the hospital. Since the benefit was independent of what hospitals actually charged, this type of health insurance did not interfere with the ordinary workings of the hospital marketplace.
Can we replicate that idea in a way that meets the financial and health needs in the modern era? I think we can.
In thinking about how to design a radically different type of insurance we have to come to grips with two principles that seem to invariably clash:
Principle One: Efficient, high quality health care requires that providers compete for patients on the basis of price and quality and that will not happen unless patients can unilaterally decide how their health dollars are spent.
Principle Two: Since all third-party insurance involves a pooling of resources, the more discretion individuals have to unilaterally draw from the pool, the more wasteful and costly the insurance will be. …
So how do we get around these seemingly irreconcilable principles?
Find out by reading the whole article: A Radically Different Approach to Health Insurance.