Cost Control: The Importance of Health Insurance All-Payer Systems

One of the many big problems with the current crop of health care reform proposals is that they do not do enough to address cost control. If we are serious about addressing cost, one of the important tools available is a centralized provider reimbursement negotiator. It is an agency which negotiates or sets provider reimbursement for all the health insurance entities. This creates what is often called an all-payer system.

Most of the industrialized nations that don't have a government-run single payer system use an all-payer system with non-profit insurance entities. The centralized rate negotiator is often the government--like in France, Japan, and Belgium--but it can be a regulated cabal of all providers and insurers like in Switzerland. A similar all-payer-like system is currently being used in successfully in Maryland (Igor Volsky has more information about it at ThinkProgress). It is the lack of this all-payer function which I believe is a major reason why our health care costs are almost double most of countries.

Unfortunately, not only is an all-payer system not part of the health care bill, but the Senate bill takes active steps to prevent one from being created. For example the bill creates a "private purchasing council" for all the new co-ops expected to be created, but explicitly forbids the council from setting payment rates. From HR 3590 (PDF):

COUNCIL MAY NOT SET PAYMENT RATES- The private purchasing council established under paragraph (1) shall not set payment rates for health care facilities or providers participating in health insurance coverage provided by qualified nonprofit health insurance issuers.

An all-payer system is one important cost control idea. The other a standardized basic insurance package. A feature found in many other countries and Hawaii. I believe it is one of the main reasons Hawaii has basically the lowest health insurance premiums in the country.

When you combine an all-payer system with a standardized universal basic insurance package, you create a system that cuts out a huge amount of administrative waste. It is a set up where basically anyone who goes into a hospital can, with almost no work, know exactly what their insurance will cover and how much it will cost.

If congressional Democrats and President Obama are serious about cost control, they should use reconciliation to introduce real cost controlling changes to the Senate bill--including an centralized reimbursement rate negotiator, true standardized basic insurance plans, and a public option.