The merits of health care provider duopolies?

Greenbeard · Jul 18, 2018

One of the great questions today is what does competition actually look like in the health care world?

You could imagine a world in which insurers compete aggressively with each other to offer the lowest premiums (i.e., if most of the population was buying through exchanges like those created by the ACA) and thus benefit greatly for using their bargaining power to keep health care provider prices down, as well as using cost-sharing and smart product designs to steer their customers toward the most cost-effective care providers.

Or instead of activist insurers you could imagine a world of passive insurers in which every insurer pays the same prices to the same health care provider (all-payer rates) and exposes their customers to as much of those relative prices as they can. Instead of a world of insurers competing aggressively and perhaps getting lower provider prices as a byproduct, this would be a world of providers aggressively competing with each other and patient-consumers voting with their feet and wallets when they choose a doctor or hospital.

A third option would be a world in which you don't quite have aggressive insurer competition or aggressive provider competition per se, but one in which providers eat the insurers, forming super-systems that combine the two. A given market might have just two such super-systems competing against each other. Then you buy the insurance product owned by the provider system you want access to and that's their incentive to keep your premium and their total expenses down.

Eastern Massachusetts is right now grappling with the question of whether that third option is a good idea. The region already has a dominant provider system that owns its own health insurer, and now a would-be rival is waiting in the wings if a pending super-merger is approved. The problem is that super-systems don't eat all the insurers and so they have the incentive and means to negotiate much higher prices with those health insurers they don't directly own.

Beth Israel-Lahey merger could raise healthcare spending

Massachusetts healthcare spending would increase by up to $251 million per year if regulators approve the planned merger between Beth Israel Deaconess Medical Center, Lahey Health and several other hospital systems to create the second-largest healthcare network in the state, according to a preliminary report from the Massachusetts Health Policy Commission.

The combination would put the new system behind Partners HealthCare and its nearly $14 billion in total revenue in 2017. The combined entity would have a network of 10 hospitals, the largest in the state. It would also have three affiliate hospitals in Cambridge Health Alliance, Lawrence General Hospital and Metrowest Medical Center and more than 4,000 physicians.

The Beth Israel-Lahey merger would increase its bargaining leverage with commercial payers and potentially allow it to boost prices around 5% to 10%, increasing spending by an estimated $138.3 million to $191.3 million annually for inpatient, outpatient and adult primary care services. Specialty physician services spending could increase by an additional $29.8 million to $59.7 million. These conservative price hike estimates modeled after insurers' willingness to pay higher prices would still result in lower prices than Partners, the commission found.

The discussion illustrates the power struggle between Partners HealthCare, the largest health system in the state, and other providers in Massachusetts trying to capture more market share. On one hand, the Beth Israel and Lahey combination could lower Partners' prices if it broadens the payer network that Partners is in. A more competitive network could ultimately lower spending.

But even if Beth Israel and Lahey are able to save money by shifting care from high-cost providers, expanding its patient base, better coordinating patient data and sharing best practices, and combining purchasing and administrative services, among other purported efficiencies, that would not offset the projected higher prices it could garner from more market share, the commission said.

This conversation is taking place throughout the country as providers grow.

The best case scenario if the merger were to go through is that these newly merged hospitals retain their lower cost structure and lower prices and steal customers away from the higher-priced existing market leader, perhaps even prompting the latter to lower its prices. The worst case scenario is that it mirrors the actions of its adversary and uses its new market clout to drive up its heretofore lower prices. Quite the gamble the regulators are facing.

Greenbeard · Jul 18, 2018

I should add that obviously this situation isn't unique to Eastern Mass. Pittsburgh, for example, is already there:

Two visions for the future of health care are at war in Pittsburgh

Two health-care juggernauts are locked in a battle for patients in western Pennsylvania that could foretell the future of American health care.

On one side is UPMC, a health system that built its brand on cutting-edge research and university-affiliated hospitals. On the other is Highmark Health, best known as one of the country’s biggest health insurers.

They could be mirror images of each other, flipped upside down. UPMC started out in the hospital business, then created its own health insurance plan and built a $20 billion-a-year enterprise. Highmark, which reported $18.2 billion in revenue last year, announced in 2011 that it would branch from insurance into hospitals.

The competitive clash has turned Pittsburgh into a testing ground for forces that are transforming health care nationally, as waves of consolidation blur traditional boundaries in the $3.3 trillion health-care system.

Like other mergers rippling through health care, the integration of health insurance and hospitals is supposed to cut out waste, align incentives and contain costs. But industries that were formerly enemies do not always mix well: Hospitals typically want to keep their beds full, while insurers want to cut costs.

“We don’t have effective competition in this market; we have these two huge entities, circling each other looking for some kind of opening,” said Martin Gaynor, a former director of the Bureau of Economics at the Federal Trade Commission and a professor at Carnegie Mellon University.

The experiment is far from over, but it is unclear whether the combinations have delivered their promised results.

Many patients have yet to be convinced.

Kerr, recuperating from a hysterectomy, is not sure where she will land. She is looking for a primary-care doctor at Allegheny Health Network. She is considering switching to UPMC’s health plan next year. But she’s unhappy — she doesn’t feel that either system is on her side.

“I suspect what we have is two Goliaths,” Kerr said.

Xelor · Jul 18, 2018

One of the great questions today is what does competition actually look like in the health care world?

That most certainly is not a question for which we don't already have the answer. Health care has existed as a monopolistically competitive industry for as long as there's been health care for which recipients of it must pay.

Greenbeard · Jul 18, 2018

Xelor said:
That most certainly is not a question for which we don't already have the answer. Health care has existed as a monopolistically competitive industry for as long as there's been health care for which recipients of it must pay.

In a world of managed care competition, growing patient cost-sharing, and the formation of mega-systems featuring provider-sponsored insurance plans--all existing in the same space!--it's not just an open question, it's the dominant question of our time.

jaeger19 · Jul 25, 2018

Greenbeard said:
One of the great questions today is what does competition actually look like in the health care world?

A third option would be a world in which you don't quite have aggressive insurer competition or aggressive provider competition per se, but one in which providers eat the insurers, forming super-systems that combine the two. A given market might have just two such super-systems competing against each other. Then you buy the insurance product owned by the provider system you want access to and that's their incentive to keep your premium and their total expenses down.

Eastern Massachusetts is right now grappling with the question of whether that third option is a good idea. The region already has a dominant provider system that owns its own health insurer, and now a would-be rival is waiting in the wings if a pending super-merger is approved. The problem is that super-systems don't eat all the insurers and so they have the incentive and means to negotiate much higher prices with those health insurers they don't directly own.

Beth Israel-Lahey merger could raise healthcare spending

The best case scenario if the merger were to go through is that these newly merged hospitals retain their lower cost structure and lower prices and steal customers away from the higher-priced existing market leader, perhaps even prompting the latter to lower its prices. The worst case scenario is that it mirrors the actions of its adversary and uses its new market clout to drive up its heretofore lower prices. Quite the gamble the regulators are facing.

Thanks for the link.. .but just to point out.. this does not appear to be a merger or acquisition between a provider EATING or absorbing insurance companies. This appears to be a provider expanding in order to deal with lower reimbursements from insurance companies.

jaeger19 · Jul 25, 2018

Greenbeard said:
In a world of managed care competition, growing patient cost-sharing, and the formation of mega-systems featuring provider-sponsored insurance plans--all existing in the same space!--it's not just an open question, it's the dominant question of our time.

In your article I did not see anything featuring a provider sponsored insurance plan in Mass. but I might have missed it.

Greenbeard · Jul 25, 2018

jaeger19 said:
In your article I did not see anything featuring a provider sponsored insurance plan in Mass. but I might have missed it.

The dominant system bought a payer six years ago ("Partners HealthCare's Acquisition of Neighborhood Health Plan Receives State Approval") and has recently been in talks to merge with the second largest payer in the state as well ("Partners HealthCare, Harvard Pilgrim discussing possible merger").

It's unclear what the pending would-be competitor is going to do but there's speculation, given the geographic footprint of the numerous providers that would be in that new mega-system, that a provider-sponsored plan is one of the endgames. But for now that's TBD.

jaeger19 · Jul 26, 2018

Greenbeard said:
The dominant system bought a payer six years ago ("Partners HealthCare's Acquisition of Neighborhood Health Plan Receives State Approval") and has recently been in talks to merge with the second largest payer in the state as well ("Partners HealthCare, Harvard Pilgrim discussing possible merger").

It's unclear what the pending would-be competitor is going to do but there's speculation, given the geographic footprint of the numerous providers that would be in that new mega-system, that a provider-sponsored plan is one of the endgames. But for now that's TBD.

Well.. it makes sense. If you can't beat em.. join em.

The failure to address the insurance industry is why we are where we are.

HonestJoe · Jul 26, 2018

Greenbeard said:
One of the great questions today is what does competition actually look like in the health care world?

What I find disturbing about this is that there is no real consideration of quality of care and not a single reference to patients as anything other than commodities. In my experience, healthcare decisions tend to be worse the more steps the decision makers are away from the actual patients in the clinics, wards and theatres.

jaeger19 · Jul 26, 2018

HonestJoe said:
What I find disturbing about this is that there is no real consideration of quality of care and not a single reference to patients as anything other than commodities. In my experience, healthcare decisions tend to be worse the more steps the decision makers are away from the actual patients in the clinics, wards and theatres.

healthcare is a business. The problem is that the consideration tends to only be on quality of care and patients... and little consideration is done on the financials of healthcare. Its so much easier to blame that greedy doctor, hospital, etc.

Greenbeard · Nov 30, 2018

Update: the duopoly is on.

The new system will have price increases capped for seven years and had to commit to Medicaid participation and investments in community health centers. But the merger will proceed, giving the Boston market a competitor more or less at parity with the current dominant system.

State, federal regulators sign off on Beth Israel-Lahey merger

Nearly two years after proposing the deal, Beth Israel Deaconess Medical Center and Lahey Health received final clearance to merge, striking a compromise with regulators who worried that the new health care giant would raise prices and impede access to care for low-income patients.

In a settlement announced Thursday, Attorney General Maura Healey signed off on the merger while imposing constraints designed to prevent the combined hospital system from wielding too much power in the health care market.

The agreement with Healey’s office requires Beth Israel Lahey Health to cap price increases on medical services for seven years and comply with other requirements. These are the strictest limits ever placed on a hospital merger in the state, even though some critics said the terms would not stop the heath care market from evolving into an anticompetitive duopoly.

Neomalthusian · Nov 30, 2018

Greenbeard said:
One of the great questions today is what does competition actually look like in the health care world?

You could imagine a world in which insurers compete aggressively with each other to offer the lowest premiums (i.e., if most of the population was buying through exchanges like those created by the ACA) and thus benefit greatly for using their bargaining power to keep health care provider prices down, as well as using cost-sharing and smart product designs to steer their customers toward the most cost-effective care providers.

This seems to me to be the partially missed opportunity of the ACA. I am currently in the process of discontinuing my Cadillac government health insurance with its $1,000 deductible and moving to an HDHP/HSA type plan that is structured very similarly to what we'd get on the exchange. My wife has remarked how crappy our new coverage is, but I remind her that our Alaska-based coverage had premiums over $33,000 per year, and it was just that we didn't directly pay those premiums. The new coverage is not crappy, she's just not used to low premiums and high deductibles. I tell her it only seems crappy, but really, I think everyone in the country should have this type of coverage. But it's not happening, at least not very quickly, at all. The Cadillac tax has been delayed and people seem very attached to their employer-sponsored coverage and low deductibles.

Or instead of activist insurers you could imagine a world of passive insurers in which every insurer pays the same prices to the same health care provider (all-payer rates) and exposes their customers to as much of those relative prices as they can. Instead of a world of insurers competing aggressively and perhaps getting lower provider prices as a byproduct, this would be a world of providers aggressively competing with each other and patient-consumers voting with their feet and wallets when they choose a doctor or hospital.

I feel skeptical of this working, because wouldn't the provider competition depend on them being willing to lower their prices below that which the insurers are willing to pay? Couldn't providers already do this if they wanted? I don't see much evidence of providers trying to attract patients by offering lower prices.

A third option would be a world in which you don't quite have aggressive insurer competition or aggressive provider competition per se, but one in which providers eat the insurers, forming super-systems that combine the two. A given market might have just two such super-systems competing against each other. Then you buy the insurance product owned by the provider system you want access to and that's their incentive to keep your premium and their total expenses down.

Eastern Massachusetts is right now grappling with the question of whether that third option is a good idea. The region already has a dominant provider system that owns its own health insurer, and now a would-be rival is waiting in the wings if a pending super-merger is approved. The problem is that super-systems don't eat all the insurers and so they have the incentive and means to negotiate much higher prices with those health insurers they don't directly own.

Beth Israel-Lahey merger could raise healthcare spending

The best case scenario if the merger were to go through is that these newly merged hospitals retain their lower cost structure and lower prices and steal customers away from the higher-priced existing market leader, perhaps even prompting the latter to lower its prices. The worst case scenario is that it mirrors the actions of its adversary and uses its new market clout to drive up its heretofore lower prices. Quite the gamble the regulators are facing.

Very interesting, and it's always the question with a duopoly. They can either inch their prices up as if by quiet collusion, or they can end up in a price war. No matter what, it would seem patients need a lot more price transparency in their care, including in advance, than there currently is to expect them to price shop. And if they don't price shop, the expectation that the duopoly will lower prices seems too optimistic to me.

Greenbeard · Nov 30, 2018

Neomalthusian said:
I feel skeptical of this working, because wouldn't the provider competition depend on them being willing to lower their prices below that which the insurers are willing to pay? Couldn't providers already do this if they wanted? I don't see much evidence of providers trying to attract patients by offering lower prices.

The underlying assumption behind this approach is that insurers are willing--or at least compelled in some markets--to pay more than consumers would. Under a system in which prices are determined by insurers', not consumers', willingness to pay, providers don't need to lower prices to attract patients.

The argument for this one is perhaps best presented as critiques of the first approach I mentioned, in which insurers compete with each other to negotiate the best secret/proprietary deals with health care providers in order to sell the most attractive insurance products (managed care competition).

One might look at the managed care competition approach and say it's flawed because consumers are not voting with their feet the way they must if a market is to work. If most people are in employer-based insurance and key decisions about which insurance to buy are being made for them by an employer, that dampens the incentive for the insurer to negotiate aggressively or make the hard tradeoffs that are necessary to offer more financially attractive products. When insurers and employers briefly got serious about cost containment in the mid-1990s, they were punished for it. In order for managed care competition to really work, more people need to be in ACA-style exchanges where tradeoffs are priced for them and they vote with their wallets accordingly (e.g., I may decide I only need 20 hospitals in my network, not 80, if it saves me 15% on my premium; but if my employer were to make that decision for me and I didn't perceive any financial gain from that decision, I might revolt).

Further, one might argue that by locking the key pricing decisions away from the consumer (instead placing it in the hands of a few negotiators from a provider system and a health insurer who meet behind closed doors), that enables providers with market clout to impose prices on the market that they wouldn't get if consumers were actually exposed to those higher prices. There have been looks at provider price variation in markets around the country (e.g., Massachusetts, New York, California, or even national datasets) and they often conclude that the negotiating clout to twist insurer arms is why some powerful provider systems have the high prices they do. If you're not asking consumers if they're willing to pay higher prices to get services in that provider system, you're on track for a market failure.

In that vein, the influence of dominant systems can go beyond just arm-twisting over prices to more expansive efforts to quash cost containment strategies. See this thread :

If you believe all of those factors prevent managed care competition from working the way it's supposed to, you may conclude that the only way to defeat these large, consolidating provider systems and bring real price competition to the provider space is to move away from these big oligopolies making secret deals at conference tables. Instead, you move toward what makes other markets work: distributed decision-making where individual people, not a handful of powerbrokers, vote with their wallets and signal what they do and do not value and which tradeoffs they're willing to make to save themselves money.

Now there are lots of limiting factors that put a ceiling on how effective that sort of approach can really be; the economics of health care are unique. But it's not hard to see why it would have a certain appeal when one considers the failures of the alternative, insurer-centric approach to injecting competition into the health care system.

Neomalthusian · Dec 2, 2018

Greenbeard said:
The underlying assumption behind this approach is that insurers are willing--or at least compelled in some markets--to pay more than consumers would. Under a system in which prices are determined by insurers', not consumers', willingness to pay, providers don't need to lower prices to attract patients.

The argument for this one is perhaps best presented as critiques of the first approach I mentioned, in which insurers compete with each other to negotiate the best secret/proprietary deals with health care providers in order to sell the most attractive insurance products (managed care competition).

I guess I'm still confused as to the middle example, i.e. the passive insurers paying the same and providers competing with each other for price-sensitive consumers. I don't see how that happens without not only passing direct costs to them, e.g. via co-insurance and higher deductibles, but price transparency in advance for patients.

Anecdotally, having higher-deductible insurance has strained our relationships with our providers, because we are increasingly our own cost-controllers, and they over-provide, won't tell us what stuff costs, twist our arm for agreement to things that are questionably medically necessary, and will argue with us as to what's best when we object because of cost relative to its benefit.

One might look at the managed care competition approach and say it's flawed because consumers are not voting with their feet the way they must if a market is to work. If most people are in employer-based insurance and key decisions about which insurance to buy are being made for them by an employer, that dampens the incentive for the insurer to negotiate aggressively or make the hard tradeoffs that are necessary to offer more financially attractive products. When insurers and employers briefly got serious about cost containment in the mid-1990s, they were punished for it. In order for managed care competition to really work, more people need to be in ACA-style exchanges where tradeoffs are priced for them and they vote with their wallets accordingly (e.g., I may decide I only need 20 hospitals in my network, not 80, if it saves me 15% on my premium; but if my employer were to make that decision for me and I didn't perceive any financial gain from that decision, I might revolt).

So when you were talking about customers voting with their wallets in their choice of providers/hospitals, you meant in how they choose which of those will be in their insurance network? That might have been why I didn't understand the scenario.

Neomalthusian · Dec 2, 2018

...continued...

Further, one might argue that by locking the key pricing decisions away from the consumer (instead placing it in the hands of a few negotiators from a provider system and a health insurer who meet behind closed doors), that enables providers with market clout to impose prices on the market that they wouldn't get if consumers were actually exposed to those higher prices.

There have been looks at provider price variation in markets around the country... and they often conclude that the negotiating clout to twist insurer arms is why some powerful provider systems have the high prices they do. If you're not asking consumers if they're willing to pay higher prices to get services in that provider system, you're on track for a market failure.

I fully connect with this and think it goes back to price transparency and higher deductibles and/or coinsurance being key. It's why, after we switched from Cadillac plan government employee insurance to ACA-style coverage, and my wife remarked repeatedly how crappy the new insurance is, I pushed back and said in a way it's better, and it's what everyone in the country should have, and, if we'd had this kind of coverage for the last 10 years, plus just a little bit of extra wages, we'd be better off financially right now today than we are, because a huge proportion of my compensation package got sucked up by platinum-benefits Cadillac style government health insurance premiums that were necessary to pay for every single health care cost for employees. To this day public employees often regard insurance as "good" or "bad" based exclusively on benefits, without any regard for premiums. I see the public sector as the main culprit in maintaining these types of plans. It's hard for people to detach from the feeling that health insurance is supposed to pay for everything.

In that vein, the influence of dominant systems can go beyond just arm-twisting over prices to more expansive efforts to quash cost containment strategies. See this thread :

If you believe all of those factors prevent managed care competition from working the way it's supposed to, you may conclude that the only way to defeat these large, consolidating provider systems and bring real price competition to the provider space is to move away from these big oligopolies making secret deals at conference tables. Instead, you move toward what makes other markets work: distributed decision-making where individual people, not a handful of powerbrokers, vote with their wallets and signal what they do and do not value and which tradeoffs they're willing to make to save themselves money.

Now there are lots of limiting factors that put a ceiling on how effective that sort of approach can really be; the economics of health care are unique. But it's not hard to see why it would have a certain appeal when one considers the failures of the alternative, insurer-centric approach to injecting competition into the health care system.

Very interesting. I realize these issues are complex but I wish more lay people cared to understand them more. I appreciate your contributions to this topic.

Greenbeard · Dec 3, 2018

Neomalthusian said:
I guess I'm still confused as to the middle example, i.e. the passive insurers paying the same and providers competing with each other for price-sensitive consumers. I don't see how that happens without not only passing direct costs to them, e.g. via co-insurance and higher deductibles, but price transparency in advance for patients.

Anecdotally, having higher-deductible insurance has strained our relationships with our providers, because we are increasingly our own cost-controllers, and they over-provide, won't tell us what stuff costs, twist our arm for agreement to things that are questionably medically necessary, and will argue with us as to what's best when we object because of cost relative to its benefit.

So when you were talking about customers voting with their wallets in their choice of providers/hospitals, you meant in how they choose which of those will be in their insurance network? That might have been why I didn't understand the scenario.

Again, these are just my thoughts on what competition in health care can look like. In broad strokes, the three scenarios I'm thinking of look like this:

Scenario 1: Insurers take a variety of 'activist' approaches: they negotiate aggressively with providers on price, they design different networks and benefit designs at different price points, they try out different payment strategies to influence providers' business models and care delivery, they facilitate care coordination and provide care management and utilization management to try and improve the health of their enrollees and be good stewards of resources. They bundle all this up with a nice bow, display what each plan offers along different dimensions of choice and sum it up in a single monthly premium, and bring it directly to consumers in the market. Consumers vote with their feet at the point of purchase of insurance and consequently insurers have the most interest in holding down cost growth.

Scenario 2: Provider pricing moves back to the providers. In Scenario 1, there's no such thing as prices, not really. Every insurer negotiates different ones so not only are the prices secret and proprietary, a given service at a hospital could have dozens of different prices depending on who's asking. Networks in Scenario 2 are open, since the point of an insurer developing different restricted networks is to negotiate its own (presumably favorable) prices with the providers it contracts with. Providers, like sellers in most markets, put a transparent price on their product and consumers decide whether they want to pay it. Those consumers can go to anyone they want, but the catch is that their insurer has to figure out ways to expose them to those relative prices, directly where possible and indirectly where not.

Other than that, the insurers are hands off, relying on patients to make their own decisions when choosing providers and to manage their own care (in conjunction with their providers as they wish). Consumers vote with their feet at the point of purchase of care and consequently providers have the most interest in holding down cost growth. This is the one you're talking about above and I think you're correct about some of the downsides.

And in Scenario 3 consumers more-or-less buy their way directly into entire provider systems (generally in advance of needing care)--not disjointed networks cobbled together haphazardly by insurers, but rather clinically and financially integrated systems deliberately formed by the participating providers themselves. It's concierge care writ large, in that the monthly premium you pay is directly to the provider system since it owns your insurer and directly sponsors your insurance plan. Insurers effectively disappear and large provider systems (doctors, hospitals, post-acute, the works) do battle directly. Consumers vote with their feet at the point of choosing a care provider, which is also effectively the moment they choose their insurer. This is, perhaps, what Mass is now facing.

There are certainly upsides and downsides to each one (and things that make each more or less realistic).

Greenbeard · Dec 3, 2018

If I were trying to succinctly sum it up:

	Scenario 1	Scenario 2	Scenario 3
Who we rely on to save us	Insurers	Consumers	Providers
Provider prices	Negotiated; vary by insurer and consumer	Set by providers; consistent across insurers and consumers	Set by providers; may vary between 'subscribers' and consumers referred from outside
Networks	Restricted; network breadth reflected in product premium	Open	Restricted; premium paid primarily for access to specific provider system
Cost-sharing	Strategic; decision aids to guide consumer choice between providers and procedures based on relative value	Maximum; price exposure to the max extent feasible, with relative value determinations left to the consumer	Limited; mainly intended to keep consumers inside the provider system
Prerequisites	Most consumers in transparent insurance marketplaces with multiple payers, prompting aggressive competition on premium	Homo economicus; large volume of shoppable health insurance; mechanisms to realistically expose consumers to price and relative price	Multiple competing integrated delivery systems willing and able to take on insurance risk

I have a favorite here but I vacillate sometimes depending on my mood.

Neomalthusian · Dec 7, 2018

Greenbeard said:
I have a favorite here but I vacillate sometimes depending on my mood.

If I had to pick a favorite it'd be scenario 2, or something fairly close to it.

Full disclosure about what informs my perspective. I spent the last 10 years in Alaska, in a place where an overwhelmingly large amount of health providers' revenue came from Medicaid, IHS, Medicare, and a much smaller amount came from employer-insured people with very small deductibles. As a young healthy family that basically never met its deductible and watched employers send $30,000 per year per family in premiums to the insurance companies, it was easy to start to see some of the ways the heath care system became built up around patients who don't care at all what their health care costs, because they were virtually never paying any of it directly.

As a result, I feel a lot of large providers' businesses are not at all designed, prepared, or willing to discuss medical decisions with their patients based on relative value/price, and consumers are not at all prepared or willing to expose themselves to potential health costs to save money in premiums. The concepts seems to remain foreign to most of our health systems and their customers.

But as a high-deductible patient trying to navigate the providers' systems in an environment like this, you're basically treated like a problem-patient, a rabble-rouser that asks disruptive questions the executives have declared shall not be acknowledged or answered in the provision of care. Doctors squirm when questioned and seem to resent having to defend the financial aspect of their recommendations. It leaves you feeling like you don't belong in this system, because it makes most of its money from people who pay for none of their own health care.

It leads me to think private insurance is not meant to be forced to cover people who can't afford to share in any costs, nor was it meant to cover extremely high cost customers indefinitely and limitlessly. Car insurance won't buy new cars for someone who totals theirs once a year on average. Requiring them to do so significantly decreases privately purchased insurance's relative value to the healthy and promotes adverse selection, so you have to mandate participation, which foments resentment. I've come to think health insurance companies get way too much criticism regarding the cost of health care than deserved and that providers who tend to over-bill (e.g., because their patients never care what it costs) get way too little criticism.

I see the chronically ill high billers as fundamentally different from the young and healthy who very likely will not become chronically ill for another 30 years, and that the former, because they can't remotely afford to significantly share in their health costs, require tax-funded coverage and bureaucratic care management, and the latter need maximum cost sharing and lower premiums. To expect these different patients to be well-served by the same co-mingled insurance and provider groups is probably unrealistic, and it will result in one of those groups getting really pretty poor service, in all likelihood. Business models built up around providing government-covered care for the chronically ill and chronically poor are going to have entirely different incentives and priorities than those built to serve cost-conscious consumers.

At this particular point in time I don't believe very strongly in insurer competition on premiums, because too many shoppers still don't understand what they want or should want. Preferences still seem heavily tilted toward low deductible plans, with anything else dismissed as "junk," and still seem to want to viciously attack insurance companies for anything that could possibly be done to achieve those lower premiums, whether it's narrower networks, excluded services, higher OOP maximums, or anything else. If consumers were financially rational and ran all their numbers objectively, then maybe, but what I've seen is a far cry from that.

Not sure if all that fits into your scenarios, but I still think Scenario 2 comes closest. For the not-particularly-sick, I'd like to see as much more cost-sharing as possible, a lot less employer-sponsored health insurance, strong disincentives to continue providing Lamborghini health coverage to public employees, and a few other changes. Those who can't share in much or any of the cost of their care, whether because they're super poor or because their health needs are enormous, need to be dealt with separately, perhaps by an expanded single-payer-esque system, with a bureaucracy of managed care assisting government in keeping costs down as much as possible without affecting quality too detrimentally. And I really think all would be better served if providers catered to one population or the other. Because currently I think they do a bad job of adequately serving both simultaneously.