Can Healthcare Work While Still Making Profit?

## Role: You are a healthcare industry and public policy researcher, at the intersection of understanding how the market works, the broad and immediate stakeholders, who benefits, who suffers, and what sort of structures exist to ensure our current paradigms of healthcare delivery continue, despite their faults. ## Context: Americans are incredibly upset with the way healthcare is handled in the US: It's complicated, it's expensive, it's exclusionary, the markets are opaque, the billing and network structures irritate and exhaust practitioners and patients alike, and it doesn't deliver good outcomes for patients. But who does it deliver for? What if there were a way drug companies looking for monopoly opportunities, wall street elites leveraged in insurance companies and drug discovery, and middle-market "skimmers" like pharmacy PBMs, who are all steeped in the profit incentive from the current system, were to be compensated by a system that was simplified for healthcare providers and consumers alike? ## Task: Provide ideas for how things about our system are universally reviled could be removed while still maintaining a high level of profit for the healthcare profiteers. Remove unnecessary complexity and opaqueness for providers and consumers, such as adversarial price negotiations, insurance networks, simplify billing codes, eliminate "middlemen", create market transparency, provide incentive for companies to research drugs with expired patients. It's a heavy lift, but at a high level, what would some of that look like?

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ChatGPT said

Yes. There is a coherent version of this that does not require treating profit as the enemy.

The central bargain would be:

Healthcare companies may continue earning substantial profits, but increasingly for assuming measurable risk, financing innovation, delivering care efficiently, and providing infrastructure—not for manufacturing transactional complexity.

That distinction matters because American healthcare is large enough to accommodate considerable private profit even after substantial simplification. U.S. health spending reached $5.3 trillion in 2024, or 18% of GDP. ^1 Estimates of administrative expenditure alone commonly run into hundreds of billions of dollars annually; one JAMA review placed total administrative expense at roughly 15–25% of national health expenditures. ^2

So I would think about reform less as "take $X away from insurers/pharma/PBMs" and more as a massive substitution of revenue streams.

A plausible "grand bargain"

Imagine an American system with these characteristics.

Today	Replacement
Thousands of confidential provider contracts	Public all-payer price schedules/ranges
Insurer networks	Almost universal provider access
Chargemasters	Meaningful published prices
CPT/ICD optimization as a revenue strategy	Much simpler encounter/bundle payment
Repeated prior authorization	Narrow, standardized utilization rules
PBM rebate/spread pricing	Explicit PBM administrative/logistics fees
Surprise bills	Impossible by construction
Drug monopoly primarily rewarded through unit price	Innovation rewarded through a mixture of exclusivity, prizes and revenue annuities
Off-patent discoveries difficult to monetize	Explicit rewards for new indications and comparative-effectiveness discoveries
Insurers profit partly from negotiating networks	Insurers profit from risk management and operational efficiency
Providers employ enormous billing departments	Automatic standardized adjudication

The remarkable thing is that none of this requires abolishing private insurers, drug companies, Wall Street investment, private hospitals, physician groups, or even PBMs.

It changes what they get paid for.

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1. Abolish provider networks for the core insurance product

This is probably the most transformative simplification.

Instead of every insurer individually contracting with every hospital, physician group and laboratory, establish an all-payer national payment framework.

Providers would essentially say:

"We accept the national commercial payment system."

Once they do, they are accessible to patients covered by any participating insurer.

Prices could start with something like:

Medicare reference price × geographic adjustment × specialty adjustment × quality adjustment

with allowable commercial ranges rather than necessarily one rigid price.

For example:

• ordinary hospital: 140–170% of Medicare
• rural critical-access facility: 180–220%
• nationally scarce specialty center: separate negotiated designation
• primary-care physician: perhaps deliberately higher relative compensation
• genuinely exceptional outcomes: quality premium

The precise numbers are secondary to the architecture.

Today, commercial prices are generated through confidential bilateral bargaining, and CBO has found enormous price variation associated particularly with provider market power. Commercial hospital payments have historically averaged more than twice Medicare rates in studies CBO reviewed. ^3

The reform effectively says:

Stop renegotiating the same appendectomy 900 times.

But what happens to insurers?

They remain.

Their business becomes:

• actuarial risk management
• benefit administration
• fraud detection
• catastrophic-risk management
• disease-management programs
• customer service
• claims administration
• data analytics
• care coordination

They compete over how efficiently they manage a population, rather than who assembled the least-bad provider network.

Insurers could receive a risk-adjusted per-member payment plus retain some percentage of demonstrated savings.

That can remain an extremely profitable business.

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2. Turn insurance into something closer to a regulated financial utility

An insurer might receive:

$8,700 annually for managing this patient's expected health risk.

The amount increases dramatically for someone with cancer, hemophilia, renal failure, etc.

The insurer keeps some portion of what it saves relative to a risk-adjusted benchmark—but cannot simply deny necessary treatment to manufacture the saving.

This creates a much cleaner incentive:

Keep people healthy and purchase care intelligently.

Not:

Make accessing care sufficiently complicated that utilization declines.

There would still be expensive supplemental insurance markets for:

• private rooms
• concierge medicine
• unusually broad international coverage
• elective services
• premium hospitals
• medical travel
• enhanced rehabilitation
• luxury long-term care

Thus private insurance would not disappear even if core coverage became extremely standardized.

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3. Replace "negotiated prices" with actual prices

Some version of this is already partially underway.

CMS currently requires hospitals to publish cash prices and payer-specific negotiated rates, and since 2026 requires additional standardized actual allowed-amount information in machine-readable files. ^4

But transparency layered atop an incomprehensible pricing system isn't enough.

I'd go substantially farther.

For every reasonably predictable medical service, there would be a canonical bundled price:

Knee replacement
Facility: $X
Surgeon: $Y
Anesthesia: $Z
Expected imaging/pathology: $A
Maximum routine patient liability: $B

The patient should be able to ask:

"What will this cost?"

and receive something resembling the answer one gets when buying an airline ticket.

Emergency care is inherently different and shouldn't pretend to be shoppable.

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4. Radically simplify medical coding

I would not abolish ICD or clinical coding; medicine genuinely needs classification systems.

But we should sharply separate:

clinical information
from
revenue optimization.

Today an enormous amount of labor exists because tiny coding distinctions change reimbursement.

A simpler system would use perhaps several hundred major payment groups while allowing richer clinical coding behind the scenes.

For example, instead of billing:

47 individual billable events

a hospital might bill:

Uncomplicated laparoscopic cholecystectomy — Regional Group 3 — $11,840

with defined add-ons for genuine complications.

The point isn't merely convenience. Billing and insurance-related activities can consume substantial provider resources; one detailed study found estimated billing costs ranging from about $20 for primary-care encounters to more than $200 for inpatient surgical encounters. ^5

Providers would suddenly need far fewer people whose job is to argue with another organization's billing department.

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5. Prior authorization becomes an exception, not an industry

Prior authorization has legitimate uses. You probably don't want an unlimited blank check for every $750,000 treatment.

But establish a national authorization standard.

Something like:

Tier A — no authorization

Routine evidence-based medicine.

Maybe 85–90% of interventions.

Tier B — instant algorithmic authorization

Provider submits structured clinical criteria.

Response within seconds.

Tier C — human review

Only genuinely expensive, unusual, experimental, or potentially inappropriate interventions.

Tier D — specialist review

Very rare disputes.

And impose an extremely important rule:

No response within the required period = approved.

CMS is already moving toward standardized electronic prior authorization APIs, with important API requirements generally taking effect in 2027. ^6

The logical endpoint is not merely digitizing today's bureaucracy. It is making most of that bureaucracy unnecessary.

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6. Don't necessarily eliminate PBMs. Eliminate the PBM casino.

PBMs perform some real functions:

• formulary administration
• pharmacy claims processing
• purchasing
• utilization analysis
• specialty-drug logistics
• fraud detection

They could simply receive an explicit fee:

$4.50 per prescription

or

$17 PMPM pharmacy-management fee.

Their books become auditable.

Manufacturer rebate:

100% belongs to the payer/patient.

Pharmacy acquisition cost:

visible.

PBM administrative fee:

visible.

No spread pricing.

No hidden rebate retention.

No ownership-based steering unless the affiliated pharmacy wins on published price and service criteria.

This is particularly important because the PBM market is intensely concentrated. FTC staff reported that the three largest PBMs process close to 80% of U.S. prescriptions, while the six largest account for more than 90%. ^7 The FTC's subsequent specialty-generic investigation reported billions of dollars in revenues above estimated acquisition costs at affiliated pharmacies. ^8

How PBMs still make money

Pay them handsomely for logistics and performance.

For example:

Base administration fee + 20% of demonstrated drug-cost savings.

If a PBM discovers that two therapeutically equivalent drugs cost $12 and $700 and successfully shifts utilization toward the $12 product, let it make money.

That's socially productive arbitrage.

Hidden rebate engineering isn't.

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7. Rebuild pharmaceutical incentives around discoveries rather than pills sold

This is where your idea becomes especially interesting.

CBO is correct about an uncomfortable reality: expected future pharmaceutical profits affect investment in R&D. Reduce expected returns far enough and some marginal drug-development projects disappear. ^9

So don't destroy the expected return.

Change its structure.

Imagine a drug produces an enormous therapeutic breakthrough.

Instead of allowing:

$180,000/year indefinitely until competitors arrive

the government could offer something like:

$24 billion innovation contract payable over 12 years

in return for:

• greatly reduced marginal unit price,
• universal U.S. access,
• continued safety research,
• manufacturing commitments,
• open clinical data after a specified period.

The patent holder would essentially convert uncertain monopoly cash flow into something resembling an annuity.

Wall Street might actually like this.

Predictable pharmaceutical receivables could become securitizable assets.

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8. Create a huge market for discoveries involving off-patent drugs

I assume "expired patients" in the question meant expired patents.

This is one of the places where today's incentive architecture is particularly weak.

Suppose researchers discover that a $7 generic drug prevents a condition currently costing $20,000 to treat.

Society might save billions.

But no manufacturer owns enough exclusivity to justify a $300 million clinical program proving it.

That's a classic missing-market problem.

Create a federal Therapeutic Discovery Prize.

If rigorous trials demonstrate that an off-patent compound produces a new clinically meaningful result:

Discovery value = some fraction of validated social savings.

Perhaps:

• $100 million
• $500 million
• $2 billion

depending upon impact.

Then release the treatment into generic competition immediately.

Suddenly private equity, pharmaceutical companies, universities and biotech firms have an economic reason to scour old pharmacology.

You could even create specialized funds:

Generic Drug Discovery Fund I

Raise $3 billion.

Run hundreds of repurposing trials.

Collect federal outcome prizes on successful discoveries.

That turns something currently difficult to finance into an investable asset class.

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9. Give Wall Street something better to finance

Capital markets don't fundamentally require opacity.

They require returns.

Create healthcare investment instruments tied to productive activity:

Healthcare infrastructure bonds

Finance hospitals, ambulatory centers and rural facilities.

Drug-development royalty securities

Investors finance clinical trials and receive portions of innovation awards.

Population-health contracts

Investor funds $100 million diabetes-prevention program.

If validated Medicare/insurer expenditure falls by $250 million:

investors receive $140 million
payer keeps $110 million.

Care-capacity REITs

Own medical buildings and infrastructure without controlling medical decisions.

Catastrophic-risk securities

Transfer extreme healthcare risk into capital markets much like catastrophe bonds in insurance.

You can give finance firms plenty of ways to earn money without requiring a patient to decipher whether the radiologist standing inside an in-network hospital happens to be out-of-network.

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10. The politically important part: buy out the complexity

This is the part I think many healthcare reform proposals overlook.

There are hundreds of billions of dollars of:

• enterprise value,
• employment,
• debt,
• contracts,
• software,
• PE investment,
• insurer infrastructure,
• PBM valuation,

built around the existing arrangements.

Saying:

"We're eliminating your business model next January"

creates an extraordinarily well-financed political coalition against reform.

Instead use a declining transition dividend.

Suppose simplification credibly saves $250 billion annually.

For the first several years:

Use of savings	Share
Consumers/employers	40%
Government	20%
Provider compensation transition	15%
Insurance/PBM transition payments	15%
Innovation fund	10%

Then incumbent transition payments decline annually.

You are essentially purchasing political economy.

Workers in revenue-cycle management, PBMs and insurers could receive retraining guarantees rather than suddenly becoming unemployed.

Shareholders receive time to reprice assets.

Debt doesn't suddenly become impaired.

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The fundamental shift

The American healthcare economy currently contains an enormous amount of zero-sum economic activity:

My billing department attempts to extract $5,000 from your claims department.

Your claims department employs people to prevent that.

My consultants find a coding strategy around your rules.

Your consultants create another rule.

My hospital buys physician practices to acquire bargaining leverage.

You create a narrow network.

I buy another practice.

You buy a PBM.

The PBM buys a pharmacy.

The drug manufacturer raises list price and increases the rebate.

Eventually everybody reports another year of "savings."

That is economically different from:

Here is the price. Here is the patient's coverage. Here is the medically necessary service. Pay it.

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Who wins and loses?

The interesting distribution isn't simply "patients win, corporations lose."

Patients: very large winners from predictability, universality and dramatically reduced administrative friction.

Physicians: likely major winners if administrative labor falls and reimbursement becomes predictable.

Hospitals: mixed. Efficient hospitals could do well; systems currently earning exceptionally high commercial prices through local monopoly power could lose considerably. CBO's research strongly suggests provider market power contributes substantially to high commercial pricing. ^3

Insurers: potentially still highly profitable, but employment and revenue shrink in network contracting and claims warfare while increasing in actual population-risk management.

PBMs: probably lose the most opaque profit. They could nevertheless remain substantial logistics and purchasing businesses.

Pharma: established cash cows lose some monopoly-pricing upside, but R&D companies gain much clearer expected returns and dramatically larger opportunities around repurposing.

Wall Street/private equity: fewer opportunities to monetize regulatory complexity, but enormous new markets in pharmaceutical-development finance, infrastructure, catastrophic risk and outcome contracts.

Employers: substantial winners because health benefits stop requiring quite so much corporate infrastructure.

Government: assumes considerably greater responsibility for writing the rules—but does not necessarily have to own hospitals, employ physicians or manufacture drugs.

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What I would call the model

It isn't really single payer.

It isn't conventional multi-payer healthcare either.

I would describe it as a Universal Healthcare Market Utility:

One market architecture. Many insurers. Many providers. Many drug companies. Private capital. Regulated prices/ranges for core services. Universal interoperability. Open provider access. Explicit rather than hidden intermediary compensation. Very large prizes for genuine innovation.

That preserves something America is exceptionally good at— deploying private capital toward potentially lucrative opportunities —while deliberately making complexity itself a bad investment.

And that is probably the most important design principle:

Don't try to remove profit from American healthcare. Make simplicity, successful treatment, useful innovation, and lower total cost the most profitable things in American healthcare.

The unavoidable caveat is that you cannot eliminate hundreds of billions of dollars of economic rents and permanently preserve every incumbent's present earnings. Some existing profit necessarily represents the waste being removed. But you can plausibly preserve a very large, investable, highly profitable healthcare sector by exchanging complexity rents for regulated returns, innovation rents, efficiency sharing, and risk-bearing returns —and use a transition buyout to make that change politically much less threatening.

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You said

This is a structured list of answers I received using the same prompt with Gemini. How do these compare to your proposals, and how might you dispute or incorporate them into your policy development strategy?

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* Centralized All-Payer Rate Clearinghouse & Universal Billing Framework
  * Replaces fragmented private insurance networks with a single, federal clearinghouse for all healthcare transactions.
  * Implements a drastically simplified, universal billing code system for providers.
  * Eliminates out-of-network billing and adversarial price negotiations between providers and payers.
  * Standardizes revenue for healthcare providers while severely reducing administrative and billing overhead.

* Sovereign-Backed Healthcare Infrastructure Bonds
  * Transitions incumbent insurance capital into federal bonds with guaranteed, fixed-yield returns.
  * Replaces premium collections with a standardized national healthcare tax that funds the bond interest payments.
  * Shifts investor profit extraction away from micro-level claims denial and toward macroeconomic financialization.
  * Completely removes institutional investors from the patient-provider relationship, eliminating restrictive care networks and prior authorization friction.

* National Pharmaceutical Subscription Procurement (The "Netflix Model")
  * Abolishes Pharmacy Benefit Managers (PBMs) to eliminate middle-market skimming and opaque pricing tiers.
  * Mandates the federal government negotiate massive, guaranteed annual lump-sum contracts with pharmaceutical manufacturers.
  * Secures unlimited, nationwide access to drug portfolios in exchange for the lump-sum payments.
  * Guarantees high, risk-free profit margins for drug developers while making prescriptions flat-fee or free at the point of service for consumers.

* Federal Patent Repurposing Bounty Fund
  * Establishes a multi-billion dollar federal incentive program targeted at expired patents and non-profitable generic compounds.
  * Awards massive, one-time cash payouts to pharmaceutical companies that successfully run clinical trials proving new, effective uses for off-patent drugs.
  * Replaces the need for consumer-facing market monopolies (patent exclusivity) with direct, state-funded financial rewards.
  * Drives high-profit institutional research into historically ignored, low-cost generic compounds.

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ChatGPT said

Gemini’s proposals are directionally compatible with mine, but they are more centralizing and substitutional: replace insurers with bonds, replace PBMs with federal procurement, replace decentralized payment negotiation with a clearinghouse. My approach was more functional: retain firms where they perform a useful function, but strip away the mechanisms through which complexity itself generates rents.

I would incorporate much of Gemini’s framework, but modify three of the four proposals substantially.

Gemini proposal	My assessment	Incorporate?
All-Payer Clearinghouse	Very strong, with governance changes	Yes — core architecture
Healthcare Infrastructure Bonds replacing insurers	Interesting financing concept, weak insurance substitute	Partial
Pharmaceutical "Netflix" procurement	Strong for certain drug classes, dangerous as universal model	Selective
Patent Repurposing Bounty Fund	Extremely strong	Yes — expand considerably

1. Centralized All-Payer Rate Clearinghouse

This is where Gemini and I are closest.

I proposed an all-payer framework with nationally standardized payment rules, elimination of ordinary provider networks, bundled/simple billing, and common transaction infrastructure. Gemini goes somewhat farther by putting essentially every transaction through a federal clearinghouse.

I would adopt that, but distinguish clearing from price setting.

The federal infrastructure should probably determine:

• service definitions;
• claim formats;
• patient cost-sharing;
• eligibility;
• risk adjustment;
• reference payment bands;
• payment deadlines;
• dispute resolution;
• quality adjustments.

But I would avoid having Washington determine millions of individual prices administratively.

Something closer to regulated price bands + regional adjustment + exceptional-service review would preserve useful information about scarcity and costs.

There is unusually good evidence that this isn't merely theoretical. Maryland has operated America's only all-payer hospital rate-setting system for decades. Its later All-Payer Model moved almost all hospital revenue toward global budgets, and CMS reports both quality improvements and Medicare savings. Maryland's successor Total Cost of Care program expanded the idea beyond hospital encounters toward population-level spending. ^10

One change I would make to both proposals

I'd actually move beyond simplified claims for hospitals.

A large hospital shouldn't necessarily submit 25 million claims whose prices happen to be standardized.

Instead:

Hospital gets an annual risk-adjusted global operating budget.

Claims become primarily clinical/accounting records rather than invoices.

CMS already describes this structure: a global-budget hospital receives a predetermined annual amount, adjusted for population, inflation and performance. ^11

That attacks billing complexity at its source.

So I would modify Gemini's first point into:

National Healthcare Transaction Utility + all-payer rates + global budgets where appropriate.

That would probably become the foundation of the entire model.

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2. Sovereign-backed bonds replacing insurance capital

This is the Gemini proposal I would dispute most strongly.

There are actually two separate ideas hiding inside it.

The first is good:

Create safe, attractive healthcare investment securities so incumbent capital has somewhere politically acceptable to migrate.

The second is much more questionable:

Exchange insurers themselves for government bonds and finance healthcare through a national tax.

At that point we've essentially constructed a tax-financed national health service financing mechanism while compensating shareholders for giving up insurance assets.

That may be defensible, but it no longer answers our original design question particularly well:

Can private profit survive while the hated parts disappear?

It instead says:

We'll eliminate one major private industry and compensate its owners.

That's politically clever, but economically different.

There is also an enormous transition problem

Imagine publicly traded insurer X has an enterprise value of $200 billion.

What exactly does the government buy?

Its equity?

Its debt?

The actuarial business?

Its claims systems?

Its Medicare Advantage contracts?

Its provider subsidiaries?

Its pharmacy business?

What valuation date determines compensation?

And what happens to companies whose insurance divisions coexist with Optum-style clinical/provider businesses?

You quickly create one of the largest government asset conversions in history.

I don't think that is necessary.

Keep insurers — but commoditize insurance

I'd instead convert insurers into competing regulated health-risk utilities.

Think:

Visa/Mastercard + reinsurer + population-health manager

rather than:

gatekeeper to a proprietary network.

Every plan covers the same core benefits.

Every provider accepting the universal system is accessible.

There is one claims protocol.

There is one prior-authorization protocol.

Prices aren't individually negotiated.

The insurer competes on:

• premiums;
• supplemental benefits;
• customer service;
• disease management;
• fraud prevention;
• care coordination;
• actuarial performance;
• administration cost.

Now we can actually observe whether insurer A is good at insurance.

But keep Gemini's bonds

I would repurpose them as Healthcare Transition & Infrastructure Bonds.

Insurance companies, pension funds, PE funds and ordinary investors could own them.

Use the proceeds for:

• rural hospitals;
• teaching hospitals;
• nursing facilities;
• community clinics;
• medical IT conversion;
• replacement of obsolete hospitals;
• provider transition costs;
• workforce retraining.

That accomplishes Gemini's political-economy objective without nationalizing insurance balance sheets.

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3. Pharmaceutical "Netflix model"

This is clever and already has a real-world precedent.

Louisiana created a modified subscription arrangement for hepatitis-C treatment: essentially, after a negotiated expenditure level, the state could obtain clinically necessary treatment without incremental expenditure escalating in the usual way. CMS explicitly described this as a modified subscription model. ^12

So the basic economic mechanism is absolutely credible.

Where I'd disagree is:

"Unlimited nationwide access to drug portfolios."

That works considerably better for some drugs than others.

Excellent candidates

Drugs where marginal manufacturing cost is tiny but monopoly pricing is enormous:

• hepatitis C antivirals;
• HIV antivirals;
• certain vaccines;
• some high-volume chronic drugs;
• certain infectious-disease treatments.

Suppose America expects to spend $12 billion annually on Drug X.

Government says:

We'll guarantee $8 billion annually for five years if every eligible American receives it without additional drug acquisition cost.

The manufacturer gets:

• predictable revenue;
• enormously reduced collection risk;
• much lower sales expense;
• much larger volume;
• possibly accelerated payment.

Government gets:

• budget certainty;
• universal access;
• declining marginal treatment cost.

That's an excellent trade.

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Bad candidates

Consider an oncology portfolio containing:

• one blockbuster;
• four mediocre therapies;
• two treatments being displaced by competitors;
• three extremely expensive biologics;
• rapidly evolving indications.

A portfolio subscription introduces a nasty incentive:

How do we know we're buying drugs because they're good rather than because we've already paid for them?

Bundling can also create incumbent lock-in.

Suppose Pfizer offers:

"$45 billion for unlimited access to our portfolio."

Then a small biotech develops something much better.

The health system may implicitly think:

"Pfizer's competing drug now has marginal acquisition cost of zero."

You've recreated a formidable barrier to entry.

Better version: indication-level subscription

I would therefore use Netflix procurement selectively:

Drug × indication × population × period.

Not entire manufacturers' portfolios.

And periodically reopen bidding.

That maintains competitive entry.

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4. PBMs: Gemini says abolish; I say unbundle

Here I still prefer my formulation.

"PBM" encompasses multiple functions.

Some are useful:

• pharmacy network administration;
• formulary infrastructure;
• claims processing;
• utilization review;
• mail-order logistics;
• specialty pharmacy distribution;
• purchasing aggregation.

The problem isn't intrinsically that an intermediary exists.

The problem is that an intermediary can simultaneously:

1. negotiate the manufacturer's price,
2. decide which drug gets preferred,
3. determine pharmacy reimbursement,
4. own the pharmacy,
5. keep portions of rebates,
6. charge the employer,
7. prevent parties from seeing various underlying prices.

FTC scrutiny has focused heavily on this concentration and vertical integration; its recent work describes the largest PBMs as deeply integrated with insurers and pharmacies. ^13

So my policy would be more surgical:

Destroy the vertically integrated PBM revenue model, not necessarily the operational functions.

A company could still run pharmacy claims.

But it would have to charge:

$X per member/month

or

$Y per transaction.

No spread pricing.

No hidden rebate retention.

No self-preferencing without transparent competitive justification.

Think about what happened to travel agencies after online travel infrastructure appeared.

We didn't outlaw:

finding flights.

We radically compressed the economic value of:

being the opaque intermediary between airline inventory and customer.

That's approximately what I'd want to do to PBMs.

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5. Federal Patent Repurposing Bounty Fund

I think Gemini and I independently converged on essentially the same conclusion here.

And I would now elevate it from an interesting adjunct to a major pillar of the system.

There's an important contemporary development: the FDA itself is now explicitly examining drug repurposing where scientific evidence exists but commercial incentives are insufficient. Its 2026 request specifically mentions cases in which promising data exist while incentives to pursue regulatory approval are weak. ^13

That is almost precisely the market failure we're discussing.

FDA also maintains lists of off-patent/off-exclusivity drugs that still lack approved generic competition. ^14

But I would change "one-time bounty"

A single prize creates another problem:

How much was the discovery really worth?

Instead create something analogous to mineral royalties.

Suppose an old drug is shown convincingly to prevent Alzheimer's progression.

Government estimates:

attributable healthcare savings = $40B/year.

Research sponsor receives:

8% of independently verified savings for 12 years.

That's potentially a $38.4 billion asset.

But the pill itself remains generic.

Now watch what happens.

Venture firms begin funding:

Old Drug Therapeutics Fund I

Private equity creates portfolios of repurposing trials.

University discoveries can be financed.

AI drug-repurposing companies suddenly have clear monetization.

Insurance companies might even invest in them.

And unlike conventional pharmaceutical monopoly:

the more cheaply the treatment can be manufactured, the better.

You've uncoupled:

reward for discovery

from

price of molecule.

That is an extremely powerful concept.

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The biggest thing Gemini contributes to my framework

Gemini implicitly proposes financializing the transition itself.

I think that's valuable.

My earlier answer said, roughly:

give capital new profitable things to own.

Gemini goes farther and asks:

Why not explicitly convert incumbent economic rents into government-backed financial assets?

I wouldn't use that to eliminate insurers wholesale.

But I absolutely would use it elsewhere.

Imagine a Healthcare Simplification Exchange.

Companies surrender certain economically valuable privileges:

• PBM rebate retention;
• exclusive network contracts;
• unusually high legacy reimbursement;
• certain drug pricing privileges;
• potentially some patent extensions.

In exchange they receive:

Transition securities

20-year Treasury-guaranteed instruments.

Outcome securities

Payments contingent upon achieving health-system savings.

Innovation annuities

Government-guaranteed payments attached to validated discoveries.

Now reform becomes less:

Congress destroys $600 billion of enterprise value.

and more:

Congress converts $600 billion of low-social-value enterprise value into different assets.

That's much easier for capital markets to digest.

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I would therefore combine the two architectures

The emerging model would have roughly six layers.

1. Universal transaction infrastructure

One eligibility system.

One billing protocol.

One provider identity system.

One authorization protocol.

No conventional network concept.

2. All-payer prices + provider global budgets

Routine services receive transparent reference prices.

Hospitals increasingly receive risk-adjusted prospective budgets.

Exceptional services get defined carve-outs.

Maryland gives us at least partial empirical precedent that this mechanism can work in an American setting rather than solely abroad. ^10

3. Competitive regulated insurers

Insurers remain private.

But network leverage and claims friction disappear as competitive tools.

Profit derives from risk management and administrative performance.

4. Transparent pharmacy infrastructure

PBM functions survive.

PBM complexity rents don't.

Drug purchasing increasingly uses transparent auctions, reference prices and selective subscription contracts.

5. Pharmaceutical innovation market

Use three different reward systems:

Conventional patents
for genuinely uncertain greenfield R&D.

Subscription procurement
for drugs with very high social value and low marginal production cost.

Discovery prizes / royalties
for repurposed drugs, neglected conditions and other research where monopoly pricing is unnecessary.

The current FDA system already distinguishes patents from regulatory exclusivity and includes multiple different exclusivity periods, so conceptually we're extending an existing tradition of tailoring incentives rather than inventing the idea from scratch. ^15

6. Healthcare capital market

Create investable assets around:

• drug discovery;
• clinical trials;
• hospital infrastructure;
• catastrophic health risk;
• population-health improvements;
• transition financing.

That is the part I think makes this concept distinct from conventional American health reform.

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And there's an important philosophical difference

Most health-policy debates implicitly ask:

"Who should pay?"

Government?

Employer?

Insurer?

Patient?

That's important, but it doesn't get underneath the system.

I think the more interesting question is:

"What economic activity should generate profit?"

If you reward:

• denial,
• opacity,
• coding sophistication,
• monopolistic consolidation,
• formulary manipulation,
• network exclusion,

you should expect an extraordinary amount of innovation in those things.

If instead the highest-return healthcare investments become:

• discovering a use for a generic drug,
• keeping diabetics out of hospitals,
• building surgical capacity,
• preventing readmissions,
• manufacturing therapeutics inexpensively,
• identifying ineffective care,
• taking actuarial risk accurately,

capital doesn't disappear.

It changes direction.

That would be the organizing principle I'd use for further policy development: retain a highly profitable healthcare industry, but deliberately redesign the property rights and payment mechanisms determining what constitutes a valuable healthcare asset.

The next useful stage would be to construct the actual institutional architecture—something like a 10–15 component federal reform package —and for each component specify current revenue stream → replacement revenue stream → winners → losers → transition compensation → likely opposition. That would expose fairly quickly whether this can be made fiscally and politically internally consistent.