Amazing explanation, thank you! No, really, thank you!
I wish I had more time to work on this question, but I’ll have to ask it now and run the risk of sounding stupid:
What would happen if a government agency mediated all dealings between the insurers, the insured and the hospitals? No one would be allowed to deal directly with no one else, only with the agency, and no information about any party would flow to the other parties.
The agency would turn to the insurers and say “I have here 100 million people who need insurance; they are all exactly the same”. Then it would turn to the hospitals and say “I can give you 10 million patients a year, there’s no way to predict what ailment they’ll have; let’s negotiate service costs — and don’t forget I know exactly how much profit you make”. And, finally, it would turn to the people and say “I can offer everyone exactly the same cost for health insurance and everyone gets full coverage; if you can’t afford that cost then we, as a society, will decide whether you get any breaks.” (This last bit means that, depending on how many people are in the system, participation may not be mandatory).
My thinking is to make everyone work with the average: there’s only one risk, the average risk; there’s only one patient cost, the average cost; there’s only one premium cost, the average premium.
Would that make sense or will it fall apart if I sneeze? Like I said, I haven’t thought this through at all…