Example: The Federal government determines that it can afford $100 in healthcare entitlements in each of the next five years. It puts the healthcare system out to bid – just like any private firm would put its employee healthcare plan out to bid. In this example, the ABC Insurance Company offers to administer healthcare for the uninsured. ABC's plan consists of a major medical plan, office visits and preventive healthcare visits requiring prior authorizations, co-pays, limited number of visits, etc. They state they can do this for the $100 that has been budgeted. They have a proven record of providing quality insurance coverage to large companies and their benefit plan is superior to what other bidders offered.
ABC is awarded the bid. At the end of year one their administrative costs plus their expenditures for the uninsured amount to $98. The $2 difference is theirs to do with as they please. If, at the end of year one, ABC had expenditures of $101, they would be responsible for the $1 difference and would not receive further reimbursement from the federal government to cover the shortfall.
Meanwhile, attrition would decrease the number of employees in the Department of Health and Human Services as fewer staff would be needed in the healthcare entitlement area, a major current cost savings in salaries and benefits and a major cost savings in future pension obligations.
Jim Koepke is a former administrator of Hennepin County Mental Health Center in Minneapolis. He may be reached at Jim_Koepke@yahoo.com.