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This is similar to the proposal Ted Cruz has been floating. Not so much the “fixing” part but the separation. The problem is that it’s unworkable. It might sound good but when you think it through or talk to experts, it’s actually a return to the pre-ACA status quo, and possibly much worse cost-wise. It allows “pre-existing condition” discrimination and badly distorts insurance company incentives.Insurance companies will be able to discriminate and reject people from the cheaper plans (or use other methods to drive certain people away from those plans). Instead of competing on the quality of their service, they’ll go back to competing on their ability to select the lowest risk customers.It’ll create a separate “high risk pool” but with completely inadequate funding. Insurance is cheapest overall if more people are in the same pool, not segregated by healthy right now and not healthy right now (and has never been sick). The very healthiest people might pay a little less, so long as they stay perfectly healthy in every respect and never do anything to scare insurance companies, like survive cancer, but if they get older, get into an accident, get sick in any way, that second pool will be much more expensive than it would’ve been, because it’s like the insurance company reject bin. Diabetes? High risk pool. Cancer survivor? High risk pool. Back pain? Risk. Allergies? Depression? Woman of child bearing age? Who knows what they’ll discriminate against but the cost to be in the sick pool will be much higher than anything we’ve seen. What’s the point of a health insurance system that’s only affordable when you’re healthy?Suppose you’re one of the lucky ones who does actually have the choice, and doesn’t have the insurance company choose for you. What happens when someone could choose a cheaper plan but instead takes the one with all the bells & whistles that other people avoid? It tells the insurance company that person expects to be a heavy user of healthcare. When most years you go for the cheaper plan that doesn’t cover much but this year you know you’re going to need maternity care so you opt for one that covers that, insurance companies are wise to that. This makes maternity care plans more expensive, because the odds are much higher that the people choosing that plan are choosing it because they expect to need maternity care. That’s what makes insurance more expensive, when nearly the only people in the insurance pool are people who are going to need it, the ones who will make the expensive claims. It’s like knowingly selling fire insurance to only arsonists—how would you price that plan? It would be much cheaper if more people were covered, even the people who didn’t expect to need maternity care, which drastically lowers the overall cost.The same is true for all sorts of medical coverage. Having lots of different risk pools instead of one big one makes them all less affordable. The feared “death spiral” where plans get more and more prohibitively expensive forcing all but the sickest to skip them, is exactly what would happen when there’s one insurance plan for sick people and others for everyone else, particularly when there’s inadequate subsidies for those incredibly costly plans and when insurance companies get to choose who gets pushed into that plan. There’s no panacea that’s going to make healthcare dirt cheap for the young and healthy and not ruinous for the sick. There’s also very few human beings who won’t ever find themselves in need of actual healthcare at some point in life.A person’s health is also a lot more complex than the binary sick or not sick question, so it’s dangerous thinking to presume that if you don’t currently have a serious medical problem, you and your family are better off in a system like this. Who is to say which of your current and future ailments will force you out of the cheaper plans? (Hint: Not you) Who is to say you won’t take a bad step or get rear-ended tomorrow and require multiple surgeries or physical therapy for the rest of your life? This idea is not about choice but pitting the healthy against the sick (or merely less healthy, or old) and in actuality taking away many choices. It is not truly meant to solve the problem, but to clandestinely return to the previous status-quo.UPDATEThe Cruz proposal was added to the GOP proposal and insurance companies are coming out against it: “It is simply unworkable in any form and would undermine protections for those with pre-existing medical conditions, increase premiums and lead to widespread terminations of coverage for people currently enrolled in the individual market.” That statement was made by Blue Cross Blue Shield and America’s Health Insurance Plans (the group that represents the major insurance companies) in a rare joint letter to Senate leaders.

I agree to a degree with the premise of this question. However there is more involved then just an attempt to overcharge. The complexity of medical billing is a construct of the health insurance industry not hospitals or medical practices. I have had few problems over many years of dealing with a chronic illness with over billing from individual or group medical practices.Where you can find that medical practices have run into legal problems are in a federal lawsuit against Blue Cross Blue Shield of Virginia and several other states' BlueCross plans. The essence of the lawsuit was that BCBS forced doctors to sign contracts with them that caused the doctors to become a party to fraud. The contracts that doctors must sign in order to be accepted by health insurance companies under the plans require doctors to accept the payments deemed suitable for every covered medical service under the companies' insurance policies.What BCBS did was require doctors to tell patients that the amount they normally charge was a higher amount then it actually was. Say an office visit would have normally been billed by that doctor at $150 and BCBS pays 50% of that cost under the insurance policy. What BCBS did was force the doctor to say his bill was $300 per visit, BCBS would pay 50%, the doctor would bill the patient the remaining 50%. BCBS paid the doctor 50% of $150. Then BCBS would then require the doctor to rebate back to BCBS the $75 extra that the patient paid the doctor. In the final outcome the actual amount paid to the doctor is $75 from BCBS and $150 from the patient, but the doctor also returned $75 as a rebate back to BCBS. So it cost the insurance company $0 to cover the office visit the doctor, made an extra $75, and the patient got screwed. These numbers are simplified to make the scam easier to understand. In many cases the reality of the situation saw the insurance company make a profit on the transaction, the doctor not do as well as in this example, and the patient as always got screwed.The end result of this lawsuit was the issuance of a $400 million dollar fine and the bankruptcy of several Blue Cross Blue Shield plans.Now onto how hospitals game the system. One of the most common billing practices that get hospitals in trouble is billing for the difference between what the insurer agrees to pay and the hospitals charge amount that the uninsured pay even though there contract with the insurance company that expressly prohibits them from charging the patient any more then they agreed upon price. They do this by making the bill very complex coming in multiple parts with the statement exempting the patient from additional charges on one form sent weeks before the form with the extra charge on it. They count on inpatients not asking about bills before paying them and knowing most patients have great difficulty associating the hospital bills to the statements of payment issued by the insurance company. I make a practice to let all hospital bills and insurance payment statements to accumulate for at least 6 months to a year before attempting to reconcile them. It is amazing to watch the amount that the hospital claims I owe slowly decline as each month passes finally ending up with a zero balance. If I notice that "a payment is overdue" comes in I call and force them to fully explain what they claim is owed then call my insurance carrier to see what they say before ever considering making a payment.The other scams used are billing for services never rendered and the hospital claiming that, say, the surgeon was an out-of plan doctor thus I owe more because the insurance pays less for out of plan doctors. If the hospital pre approved the treatment via your insurance carrier something I highly recommend you always insist on they can not later claim part of there services were not covered by that approval. There are more but this gives you a good run down of what I know about this question.

Before the 1973 change which allowed for-profit health insurance, paying for medical treatment was much simpler.When I was young in the 1950s and 1960s, we would go to the doctor’s office. There were the doctor and his nurse/receptionist. My mother would pay by check. I understand that he had an accountant come in a couple of hours each week to do the books.I believe that we had Blue Cross to cover hospital visits when I was very young, but everything else was cash. Later, my father’s company was acquired, and he received a Blue Shield coverage. The doctor visits stayed the same. The doctor did not accept insurance. But now my father would gather up the receipts to get reimbursed. The plans were administered through the company he worked for.Before For-profitsBlue Cross and Blue Shield were both nonprofit companies at the time. Blue Cross started in the 1920s to help cover the cost of “major medical.” It was true insurance and spread the risk of a catastrophic injury or illness over the entire insured base. The premiums for employer-provided coverage and individual coverage was the same. During WWII, Blue Cross grew a lot. Many companies used it to attract workers in the booming economy with a limited workforce.After WWII, there was widespread support for medical coverage for those who had been affected by the war. The war research had found many treatments to prolong life, but these had higher costs than seen previously. In the US, this resulted in the GI bill and an expansion of the national health care system for veterans. However, there was no equivalent coverage for non-veterans. In Europe, the same sentiment resulted in national plans, but they covered both soldiers and civilians. It’s likely this is because so many civilians suffered in the war and had medical needs just like the soldiers. Also, there was a stronger distrust of the private sector because, during the period between the wars, much of the growth in the Nazi and Fascist movements had been supported by the oligarchs of the time. The Europeans implemented various forms of healthcare for all, either through national healthcare or single-payer insurance.In the US, the rising costs caused some pressure to help the rest of the population. Tax incentives were provided to employers to provide coverage. This is still one of the largest taxpayers funded subsidies. Blue Shield started in 1948 to cover basic medical, including doctor visits and tests. It was more like a subscription plan than the Blue Cross insurance model used previously. However, it was still non-profit and open to anyone who appliedBlue Shield grew during the 1950s and 1960s, a time when new technology was being developed for medical procedures that could improve medical care dramatically. However, these procedures were expensive and required increasing more sophisticated equipment to perform.As a teenager, I started to see an osteopath for an injury. He had nice X-Ray machines and special tables. He also cost more than my old primary case. It made Blue Shield nice to have. While my primary doctor still did not accept payments from insurers, many specialized doctors started to accept the coverage directly.In the 1960s, it became clear the US plan had a major hole. Healthy, employable people got coverage from their employers. Veterans got coverage from the VA. Small business owners could still get coverage from the Blues. However, there was no coverage for people who were disabled or retired. To fill the gap, Medicare and Medicaid were started in 1965The advent of for-profitA major change in the industry came in 1973, near the end of the Nixon administration. For the first time, for-profit companies were allowed to offer medical insurance.By the end of the 1970s, I was working at a small insurance company. By this time, several large insurers had moved into the health insurance marketplace. They were aggressively courting large companies to move their employers to their plans. I vividly remember a discussion with one of the VP’s at the company I worked for. He said that he really could not understand why the companies were going after the market so aggressively. Insurance, after all, is a relatively low margin industry. And health insurance was something that really did not fit the classic insurance model. He did not see how they could do well.It turns out that he was partially right. The big insurance companies could not make a lot processing medical claims. However, it turns out that they were going after a very different model. The model had two parts: reducing administrative cost, and premiums based on the covered employees rather than the general pool. That change is the start of what we have now.