Health care’s administrative costs consume an estimated 15% to 30% of every dollar spent, with most of the burden falling on practice staff rather than patient care. A 30-year veteran of government health programs believes a cash-based model could eliminate much of that overhead—if the system is open to reconsidering insurance’s purpose.
Insurance was not designed to cover routine visits
Joanne Frederick, CEO of Government Market Strategies, spent more than 30 years working within Medicare, Medicaid, Tricare, and VA health programs. Insurance was designed to catch the thing that goes wrong, not to pay for a routine office visit. Somewhere along the way it moved into the middle of the exam room, and estimates put the administrative layer built around it at 15% to 30% of every health care dollar.
Frederick highlights Tricare, the military’s health program, as an example. It covers roughly 9.4 million service members, families, and retirees, and pays at a discount off Medicare rates. Physicians already say Medicare does not cover their costs, and Tricare reimburses at an even steeper discount. The program covers what the rest of health care could borrow from the military health system, including whether prior authorization still earns its cost.
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How a cash-based system would work
In this model, insurance would cover only major expenses, not routine care. Administrative costs run an estimated 15% to 30% of health care spending. Removing that layer could free up staff and reduce costs.
Prior authorization is often defended as a way to control costs, but its effectiveness is debated. When requests cycle back and forth multiple times before approval, the value is unclear.
Artificial intelligence is already improving efficiency beyond note-taking. Navigation tools could help patients and providers bypass red tape, though nothing replaces the physician-patient relationship. Frederick, a direct primary care member herself, notes that physicians may not have the panel time to serve as health coaches. An annual health improvement plan could provide structure without adding more paperwork.
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Frederick has worked in public sector health programs since the late 1980s. The system was not designed for today’s level of administrative demand, when insurance serves as the default payment method for every visit.
The challenge lies in whether the industry can reverse course or if the bureaucracy has become too deeply embedded.
