Paying You to Live

A radical rethink of healthcare

Risk & Progress explores risk, human progress, and your potential. My mission is to educate, inspire, and invest in concepts that promote a better future for all. Subscriptions are free. Paid subscribers gain access to the full archive and Pathways of Progress.

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As global fertility rates plummet and our population ages, healthcare has become one of the defining and most daunting challenges of the 21st century. If we are serious about preparing humanity for a thriving 22nd century, we cannot afford to ignore it. In the 20th century, we discovered that healthcare embodies a cruel “impossible trinity”: high-quality care, universal access, and affordable cost. History shows we can reliably achieve only two of these three at any given time. In this essay, I examine some of the world’s most prominent healthcare systems, uncover what they get right and where they fall short, and then propose a bolder, more radical approach, one that may finally break this century-old trade-off and better serve humanity in the decades ahead.

Why Healthcare is Difficult

Policymakers have long struggled to deliver high-quality, affordable healthcare, largely due to structural imbalances in the market. Chief among them is the asymmetry of bargaining power between patients and providers. Unlike purchasing a television or smartphone, where consumers can compare options, assess value, and walk away, many critical medical services are “offers we cannot refuse.” In the midst of a heart attack, for instance, a patient cannot comparison-shop cardiologists or emergency rooms, nor negotiate prices. Most people also lack the specialized knowledge needed to determine which procedures are truly necessary, which are optimal, which may be superfluous, or whether they are being overcharged. As a result, patients must rely heavily on intermediaries, primarily insurance companies, to navigate the system on their behalf.

Insurers act as our agents by negotiating prices with medical providers and scrutinizing claims to prevent unnecessary treatments and diagnostics, thereby protecting both their bottom line and ours. You may be rolling your eyes at this point, thinking, “They’re just protecting their own profits, not mine.” That reaction is understandable, but it rests on a common misconception: that doctors are selfless healers driven solely by patient welfare, while insurers are motivated purely by greed. In reality, the opposite dynamic often plays out. It is not uncommon for providers to recommend superfluous tests, procedures, or to inflate billing in order to increase revenue. They can do so with relative impunity because the public tends to direct its anger at the insurer rather than the doctor. Without this insurer scrutiny, premiums would need to be substantially higher.

Denials can save lives, too. In the 1980s, autologous bone marrow transplants (ABMT) for advanced breast cancer became wildly popular. The expensive procedure involved harvesting a patient’s own stem cells, administering high-dose chemotherapy or radiation, and then reinfusing the cells. Heavily promoted by the media and doctors alike, the treatment was largely unproven. Insurers denied coverage because it was experimental and risky. Patients sued to force payment, with doctors publicly condemning the denials as “arbitrary and capricious.” Courts often sided with patients, ruling that insurers could not withhold coverage for doctor-recommended treatments while awaiting rigorous statistical proof.

In one instance, insurer Health Net was sued for denying coverage for AMBT and lost. The patient, unfortunately, passed away shortly after the insurer acquiesced. The family blamed her death on the insurer for delayed treatment and sued the insurer again, a case that was settled out of court for an undisclosed sum. Media attention escalated public pressure, and soon elected officials joined in, passing legislation forcing insurers to cover ABMT. By the late 1990s, tens of thousands of women had undergone the procedure. The insurers, however, were right all along. The evidence supporting AMBT was flimsy and anecdotal, at best. By the late 1990s, when quality research finally emerged, it was proven to be less effective than existing treatment methods and had a higher mortality risk.

Insurers also face an informational asymmetry, but this time with you, the policyholder. You know your own health risks far better than they do. Healthy people often skip insurance, convinced that cancer, heart disease, or serious illness “won’t happen to me.” Yet the moment they sense they might actually need coverage, they rush to buy it. This dynamic produces adverse selection. When insurance is voluntary, the risk pool quickly becomes dominated by higher-risk individuals who expect to use it. As claims rise, premiums increase, prompting healthier people to drop out. The pool grows sicker and more expensive, creating a death spiral that hurts everyone.

Comparing Approaches to Healthcare

Countries address these informational asymmetries in very different ways. The U.S. relies primarily on private insurers, supplemented by various government programs. This approach has delivered poor results on most fronts: it fails to achieve universal coverage, and costs remain extraordinarily high at about 18% of GDP. It combines the worst of both worlds: the government rarely imposes price controls on drugs, devices, or procedures, while employer-sponsored insurance blunts direct market feedback from patients. Despite massive spending, the U.S. continues to lag peer nations in life expectancy and many quality-of-care metrics. One clear upside, however, is strong innovation: high prices paid by American patients and insurers give drugmakers and device makers powerful incentives to develop new treatments.

Many in the U.S. recognize these shortcomings and advocate shifting to a single-payer system, in which the government serves as the sole national insurer, funded primarily through taxes. The British NHS is the most prominent example. This model offers clear advantages: it guarantees universal coverage and, through its monopoly purchasing power, drives down prices for drugs, devices, and services typically to around 10% of GDP. Yet these gains come with significant trade-offs. Suppressing price signals weakens incentives for innovation and can produce shortages, leading to long waiting times for non-emergency care. Still, single-payer countries often achieve better overall health outcomes, frequently surpassing the U.S. in life expectancy and healthy life expectancy.

A third approach, a “middle way” called “managed competition,” is exemplified by countries such as the Netherlands and Switzerland. These systems harness regulated competition among private insurers while pursuing broad social goals. The government defines a standard basic benefits package that every individual must purchase from a private insurer of their choice. Insurers must accept all applicants regardless of age or pre-existing conditions and may charge only community-rated premiums (the same price for everyone). The key mechanism is risk-adjusted capitation: the government provides subsidies to insurers for individuals expected to generate higher costs, thereby preventing adverse selection and keeping the market stable.

In the Netherlands, for example, the risk-adjustment system uses over 40 factors, including demographics, socioeconomic status, and prior claims history, to calculate subsidies for insurers. The goal is to neutralize adverse selection: individuals pay the same community-rated premium regardless of health status, but insurers receive risk-adjusted payments to offset expected higher costs and prevent “cream skimming” of healthy patients. Crucially, insurers can keep any unused portion of these subsidies as profit. This creates powerful incentives to deliver high-quality care at the lowest possible cost while preserving strong motives for innovation and efficiency. The results speak for themselves. At roughly 10% of GDP, the Dutch system achieves near-universal coverage, delivers among the world’s highest life expectancies, and consistently ranks near the top in global indices of healthcare innovation.

Finally, Singapore offers a compelling hybrid model that puts personal responsibility front and center. All citizens are required to contribute roughly 8–10% of their income into MediSave, a tax-advantaged health savings account used to cover coinsurance and deductibles for routine care. This individual mandate gives consumers genuine “skin in the game.” As Milton Friedman observed, “Nobody spends somebody else’s money as carefully as he spends his own.” When people spend their own money, they tend to make more prudent decisions than any government bureaucracy or insurer could. The government reinforces this by mandating transparent pricing and fostering competition among providers, which drives higher quality and lower costs. The results are striking: Singapore achieves excellent health outcomes at a fraction of the spending seen in other developed nations.

Layered on top is MediShield Life, a low-cost national catastrophic insurance plan that covers major hospitalizations, chronic illnesses, and acute injuries once individuals have met their deductibles and coinsurance through MediSave. At first glance, Singapore’s system appears to embody libertarian ideals of personal responsibility. In practice, however, the government plays a heavy role: it owns most hospitals, imposes strict price controls, and carefully regulates the mix of private and subsidized wards, heavily subsidizing the latter. Singapore thus blends forceful state intervention with strong individual accountability. The results are impressive: near-universal coverage, among the world’s highest life expectancies and lowest infant mortality rates, all achieved at roughly 7% of GDP.

21st Century Healthcare

There is much we can learn from international experience. At its core, insurance exists to manage genuine financial risk arising from a serious illness or injury. In the United States, however, health insurance has drifted far beyond this purpose. It now routinely covers everyday check-ups and minor, non-life-threatening conditions that do not require a safety net. Think of auto insurance: we use it for major collisions, not for oil changes or routine tire replacements. By reserving health insurance for chronic conditions and acute injuries, we can once again subject routine care to normal market forces. This shift would likely reduce costs and improve quality through greater consumer choice and provider competition.

This distinction matters. Between 1998 and 2001, while overall consumer prices rose 66%, the prices of insured medical services jumped 132%. In contrast, the 16 most popular cosmetic procedures, paid for directly by consumers, rose just 31% on average, with some even declining in real terms. LASIK eye surgery offers a striking example: its inflation-adjusted cost per eye fell from roughly $4,000 in the 1990s to about $1,000 by 2019. Singapore’s model shows the power of this approach. Mandatory health savings accounts paired with high-deductible catastrophic coverage give consumers real skin in the game. One study of Indiana residents on high-deductible plans found they were far less likely to rush to expensive emergency rooms (opting instead for urgent care), chose affordable generics over brand-name drugs, and spent about 35% less overall on healthcare than those with traditional plans.

High-deductible plans and health savings accounts are powerful tools, but they are no panacea if consumers cannot make informed decisions. In the U.S., prices for most medical services remain hidden in opaque “chargemasters” that are accessible mainly to insurers. These list prices are not true market prices; they serve as arbitrary anchors for insurer negotiations. Even when prices are disclosed, complex billing codes make meaningful comparison shopping nearly impossible. To empower patients, providers should be required to publicly post their cash prices in clear, bundled formats — much like prices in a supermarket or online retailer. This transparency is essential. It would enable consumers to shop effectively, restore genuine market discipline, and shift bargaining power back toward patients.

Layered on top of the health savings accounts would be a universal catastrophic insurance plan. One option is to fund it through a value-added tax (VAT) on goods and services, while adopting Singapore-style government monopoly purchasing power to negotiate lower prices. This would reduce costs for taxpayers but introduce the familiar trade-offs of dampened innovation and longer wait times. Given that most routine care would remain in competitive markets, many may view this as an acceptable compromise. Alternatively, policymakers could follow the Dutch model: use VAT revenue to fund risk-adjusted capitation payments to private insurers. Insurers offering the catastrophic coverage would be required to accept all applicants at community-rated premiums. In return, they would receive subsidies calibrated to each enrollee’s risk score. Properly designed, this neutralizes adverse selection, allows insurers to compete vigorously on cost and quality, and lets efficient plans retain any surplus as profit. They could also offer optional supplemental packages with enhanced benefits.

This approach carries one notable risk: insurers might skimp on care for the highest-cost patients, particularly those with chronic conditions. To guard against this, policymakers could establish an excess coverage layer that activates only for costs exceeding a high threshold, such as two standard deviations above the average enrollee’s expected cost. Funding for this reinsurance could come from Pigouvian taxes, for example on sugar-sweetened beverages and tobacco. These taxes would simultaneously discourage unhealthy behaviors (internalizing negative externalities) and generate revenue to protect the most vulnerable patients.

A Radical Rethink

Still, this policy design leaves me unsatisfied. “Healthcare” is actually something of a misnomer: insurers provide something more akin to “sickcare”; they don’t have much incentive to prevent illness or act in the long-term interests of their insureds, in part, because insurers are bound to one-year cycles and cannot count on enrollees re-subscribing year after year. Therefore, the benefits of expensive preventative efforts, such as encouraging weight loss, will likely be captured by another insurer. A recent essay from Nicholas Decker, however, offers a pathway to a fix: an elegant merger between health and life insurance.

Life insurers price policies using actuarial tables that forecast mortality based on age, lifestyle, and health. As long as the policyholder stays alive, the insurer collects monthly premiums and invests the “float” in long-duration assets such as bonds and mortgages. The longer the insured lives, the more profitable the policy becomes. This alignment of incentives opens intriguing possibilities. Research by Koijen and Van Nieuwerburgh shows that while traditional health insurers often balk at funding expensive treatments like immunotherapies, a life insurer would have far less resistance. If the policyholder could draw directly from their death benefit to pay for such care, the treatment could cost the insurer nothing, or even generate a net gain.

This alignment could drive better social outcomes. Imagine a breakthrough anti-aging treatment that extends average lifespan by 20 years but costs $10,000 annually. A traditional health insurer would likely refuse to cover it. A life insurer, however, would have every incentive to pay, because keeping the policyholder alive longer directly increases its profits. When incentives align, a virtuous cycle emerges: longer life expectancy lowers life-insurance premiums, boosts participation, and accelerates medical innovation. In this model, the life insurer effectively becomes the catastrophic “health” coverage, while health savings accounts handle routine care. The same logic could extend to disability insurance, allowing payments or loans against the death benefit following a disabling event.

Instead of requiring people to buy private health insurance, perhaps we would be better off requiring everyone to purchase life insurance instead. These policies would help pay for chronic illnesses and acute injuries by allowing subscribers to borrow from the death benefit, providing an all-important safety net above and beyond a mandatory health savings account. With some built-in premium flexibility, the life insurer would also be positioned to help its members stay healthy. For example, they might offer premium discounts to subscribers who maintain healthy KPIs, like BMI, BPM, blood pressure, and blood glucose. Indeed, keeping just 3-5 KPIs within a healthy range would prevent or delay 60-80 percent of modern illnesses like obesity, cancer, dementia, and heart disease. A small nudge here could lead to a much healthier, happier, more productive society while simultaneously reducing the social cost of healthcare.

I do not claim this proposal to be perfect; there will never be a panacea for the challenge of healthcare. But I do believe this approach would strike an ideal balance. Mandatory health savings accounts would enforce personal responsibility and expose most of the healthcare industry to direct competitive pressure. The same pressure that has successfully driven down the cost of other goods and services would unleash the innovative potential of medical providers to discover better and more affordable ways to treat routine illnesses and provide general care. Above this, a mandatory life insurance plan provides a safety net in the event of death or serious illness; for the first time, an insurance plan that pays you to live.

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