Medisense Phase 1

Pillar 1: The Universal Transparency Mandate

Currently, our system is full of confusion. People have no idea what the cost of care is prior to receiving it, and out-of-network designations lead to surprise bills and administrative waste. The Price Transparency Mandate is state-level legislation that addresses this by requiring:

1. All providers to report their prices for all procedures and services, to be updated annually.
2. That these reported prices are strictly binding, and that all providers must accept Medisense members (eliminating out-of-network designations).
3. Active regulation against collusive or anti-competitive pricing practices (e.g., by large provider networks or associations).

What Does This Achieve?

This mandate brings immediate psychological security to members. First, because prices can be completely known in advance, the anxiety of receiving an unpredictable medical bill is eliminated. Of course, it is not enough for these prices to exist in a database, they must be made accessible to members. This is discussed in more detail later. Second, by stripping away the concept of out-of-network designations, it permanently ends the era of surprise bills while drastically reducing the administrative bloat associated with network negotiations. These open the door to true economic competition between providers on both cost and quality. When providers must openly compete for patients, the natural result is downward pressure on premiums and an upward push on health outcomes.

Pricing Freedom: Benefits and Concerns

By allowing providers the autonomy to set their own prices—rather than forcing them to accept fixed Medicare rates—Medisense reduces political resistance while fundamentally reshaping the market. Pricing freedom does more than empower providers – it increases the market incentives needed to improve quality over time. However, giving providers total pricing freedom raises the risk that those with significant market power might set excessively high prices. Medisense addresses these concerns of pricing freedom across three distinct categories: shoppable care, complex care, and noncompetitive care.

The Benefits of Autonomy: As a baseline, Medicare is already accepted by 99% of providers (Cotrill et al., 2025). Medisense offers these providers even more autonomy alongside much lower administrative costs, as they no longer have to negotiate fragmented rates with multiple private insurers (though they remain free to accept other plans). Small providers, in particular, benefit immensely. Large hospital systems can no longer leverage their massive size to negotiate better reimbursement rates. Instead, smaller, independent practices can fairly compete on price and quality, reducing the perverse financial incentives for monopolistic consolidation.

Shoppable Care: For shoppable care—such as elective procedures, routine lab tests, and basic outpatient visits—the risk of price gouging is naturally mitigated by competition. With time, transparent information, and multiple options to compare prices, members can shop around for providers with competitive prices.

Complex Care: Complex care presents a greater challenge, though it is not entirely uncompetitive. In today's status quo, it certainly would be impossible to shop around for complex care. However, with the reforms proposed, patients would still be able to create competitive forces on price among providers. Nevertheless, complex care is inherently less shoppable because patients have fewer options, face higher costs of switching providers, and often face barriers like urgency or the need to coordinate multiple specialists. Consequently, there is an argument for regulating prices in this space. However, setting price ceilings for complex care does create a tradeoff. It punishes high-quality providers by restricting their margins, stripping away their incentive to invest in quality improvements. This approach would also invite fierce political resistance from powerful hospital systems. On the other hand, while pricing freedom may lead to higher prices relative to Medicare, sufficient price transparency, a large member base, and properly informed members may lead to prices lower than traditional private insurance. Ultimately, policymakers have the flexibility to weigh these tradeoffs. One practical approach could be to start with pricing freedom solely on shoppable care while maintaining Medicare rate ceilings on complex care. Gradually, policymakers would expand pricing freedom to complex care as the market stabilizes and price effects can be evaluated.

Noncompetitive and Emergent Care: Finally, there are markets where competition simply cannot restrict prices. In these cases, the government must take a more active regulatory role. There are two primary markets:

• Monopoly Markets: In rural areas with few providers or towns dominated by a single monopoly hospital system, Medisense will set binding price ceilings defaulted to Medicare rates, adjusted for local market conditions. In a sense, these markets should be regulated as public utilities to bring prices down where competition cannot. In the longer term, Medisense will recommend proactive policies to organically encourage competition and new market entrants in these geographic areas.
• Emergent Care: For truly emergent situations, patients may have absolutely no ability to shop around. In these cases, Medisense will follow the framework of the No Surprises Act, setting strict price ceilings at the median rates for similar providers within the region.

Political Feasibility and Implementation

Politically, the winners of this system are everyday members and ordinary physicians and providers who are empowered with more autonomy and lower costs. Large, monopolistic hospital systems who can no longer use their market dominance to hide exorbitantly high prices, may face more losses than the gains from lower administrative costs. However, their losses are limited compared to a Medicare-for-All (M4A) model. Instead of facing mandated, across-the-board pay cuts with no recourse, if a hospital system truly offers superior quality for complex care under Medisense, they are free to charge for it. When considering short term implementation, Medisense will "nudge" providers by pre-filling price reporting templates with baseline Medicare rates to anchor expectations. Medisense will clearly emphasize that lower, competitive prices will organically attract high volumes of Medisense members. Because prices are locked in annually, setting a reasonable, competitive price immediately is vital to a provider's bottom line.

Pillar 2: Voucher-Based Cost Sharing

Even with absolute price transparency, this clarity will not translate into lower costs if patients lack the incentives to seek out cost-effective care. In the status quo, copays limit a provider's incentive to drop prices; coinsurance only weakly incentivizes members to shop around; and deductibles discourage members from seeking necessary preventative care, which paradoxically raises long-term costs. Medisense addresses the lack of patient incentives to seek cost-effective care through a voucher-based cost sharing system.

Vouchers unlock competitive forces, while protecting members

By replacing traditional cost-sharing with vouchers, Medisense protects members from unpredictable out-of-pocket costs while incentivizing them to shop around. When a member seeks care, Medisense subtracts the voucher value from the reported price of the provider. If the provider's price is greater than the voucher value, the member pays the difference out-of-pocket. If the provider's price is less than the voucher value, the member receives a portion of the savings directly into an HSA account that can be used for a variety of health-tangential purposes. In this way, vouchers give members a reason to search for cost-effective providers.

Medisense also ensures that members are protected from out-of-pocket costs for medically necessary care. Voucher values are set at a specific percentile (e.g., 40th, 50th, or 60th) of the reported prices for each service performed by all providers in the state. That is, each CPT code a provider offers comes with an associated voucher with a specific value tied to the overall distribution of prices. To ensure stability and fairness in this valuation, these percentiles are averaged over multiple periods to reduce volatility, and they are potentially adjusted for local markets. By design, members are fully protected from being forced to pay out-of-pocket because they can always find care at or below the voucher value (and prices are regulated in uncompetitive areas).

Vouchers also make the healthcare system more efficient, reducing administrative burden for both members and providers. Members bring an unlocked, digital voucher to a provider, receive care, and go home. Providers scan the voucher and bill Medisense their reported price, and Medisense follows up with the member afterwards for their portion of the cost (price net of voucher value). This increases time available to be spent on care and streamlines payment so that providers need not dedicate resources for payment fulfillment and collection.

Vouchers pay for comprehensive coverage

Like Medicare but unlike many private insurers, Medisense offers a single coverage plan, ensuring that everyone has access to the medical services they need. However, Medisense further empowers members by allowing them to choose to pay more or less to increase the percentile of their voucher value. Lower percentile tiers mean lower premiums but also vouchers worth less money when seeking out care. Additionally, vouchers for PCP visits and other regular, preventative care are always available to be used. Vouchers for more specialized care may require a referral to be unlocked. This ensures medically-necessary care is paid for through standard coverage policies, without encouraging medical over-utilization.

As part of a comprehensive coverage plan, vouchers function the exact same way for vision, dental, mental health, and similarly for prescription drugs. The primary difference for prescription drugs involves an initial stage where Medisense negotiates list prices with manufacturers (or partners with entities like Mark Cuban's Cost Plus Drug Company to avoid negotiations altogether). The voucher value is then set at the negotiated list price plus an average pharmacy dispensing fee. If a member chooses a pharmacy with lower dispensing fees, they keep a portion of the savings in their HSA; if they choose a more expensive pharmacy, they pay the difference.

Vouchers pay for complex care

While shoppable care is easily managed, complex care requires appropriately adjusted voucher values to ensure members remain financially protected when facing intensive procedures. Complex care involving multiple or intensive CPT codes automatically generates appropriately adjusted voucher values. This allows for greater payment to providers offering complex care for members. Despite this, complex care may frequently price above standard voucher values. Some of this disparity today may simply be another form of market power exercised by large providers (e.g., high facility fees).

Nevertheless, some portion of complex care may require pricing above even these adjusted voucher values. Medisense introduces three supplementary, optional tools to guarantee patient affordability:

• First, Medisense could establish a health fund that members can apply to for out-of-pocket reimbursements for complex care. By offering members a way to self-select into funding, this mechanism could direct funding to those who need it, while giving policymakers direct control over the budget for complex care adjustments. Moreover, funding this separately would mean that Medisense premiums would remain unaffected.
• Second, Medisense could allow members to opt-in to out-of-pocket maximums paired with an HMO-style configuration. Members who are receiving complex care that meet the out-of-pocket maximum can choose to continue paying with vouchers or opt-in to a select group of providers offering cost-effective care at no additional out-of-pocket expense.
• Third, Medisense could allow complex care facilities to issue separate facility fee CPT codes for reimbursement. These would function in a similar way to other CPT codes, though perhaps with regulated prices due to lack of competition.

It should be emphasized that the default architecture of Medisense likely preempts much of the concern around complex care. Therefore, a wait-and-see approach would be practical with simple supplementary tools available if complex care pricing becomes a concern.

Why Death Spirals Are Not a Concern

A common problem in health insurance design is the concept of adverse selection – the sickest individuals are the ones to sign up, which drives premiums up. Medisense avoids this because all voucher tiers offer the exact same medical benefits and Medicare-like coverage. A sick member has absolutely no incentive to segregate into the 60th percentile tier just to get life-saving care. Higher premiums in Medisense pay purely for choice, not health—they allow members to see higher-priced, premium providers without incurring out-of-pocket costs. If a sick member is willing to shop around, they can safely choose a lower tier and save money.

Pillar 3: Price and Quality Transparency Tools

To ensure that the price competition of Pillar 1 and the financial incentives of Pillar 2 achieve their intended effects, members must have seamless access to digestible price and quality information. Without access to clear data, members risk getting lost in the complexity of healthcare, which would reduce the virtuous competitive forces at play. Therefore, Medisense will provide an intuitive online platform—akin to Amazon or Kayak—to compare providers. This central hub translates the raw data of the Price Transparency Mandate into a user-friendly, everyday shopping experience.

The platform allows members to access and understand precise cost information in a simple format. The system offers intuitive search options for common conditions and specialties, alongside refined tools for users who want to dive deeper into CPT-level price data. Crucially, the platform incorporates the member's specific voucher tier to display the exact out-of-pocket cost they will pay at any given clinic (calculated simply as the provider's reported price minus the member's voucher value). Moreover, the interface actively highlights opportunities where members can earn HSA credits by choosing high-value, cost-effective providers.

The platform also simplifies the experience of searching for complex or semi-urgent care. For common but multi-step medical events (such as childbirth or a knee replacement), the platform aggregates the data to display bundled average prices for the entire necessary suite of CPT codes. For semi-urgent care scenarios where patients lack the time to meticulously shop around, the platform offers recommended default provider options based on cost-effectiveness, proximity, and other user-adjustable factors.

Because quality transparency is equally important for making informed decisions, the platform ensures that quality metrics are prominently displayed alongside prices. Quality is sourced through two reliable metrics: subjective member ratings and objective clinical data. Members are required to submit reviews for providers to unlock their voucher reimbursement after a visit's claim has been processed, organically building a robust database of patient experiences. Alongside these member ratings, Medisense provides objective data such as clinical accreditations as well as aggregated health-outcome data.

Furthermore, Medisense will proactively distribute this information across diverse communities to guarantee that everyone can fully participate in the market. Medisense will provide integrated educational resources to help members navigate the database. Additionally, Medisense will open its database to third-party developers, fostering a private-sector ecosystem of innovation in healthcare transparency and app development.

Pillar 4: Affordability through Income-Based Premiums

The natural market forces of Medisense—price transparency, competition, and the elimination of network negotiations—will organically lower baseline premiums. However, even these reduced premiums may remain out of reach for low-income populations. To prevent these members from falling through the cracks, Medisense introduces a simple sliding scale of income-based premium subsidies. This ensures that comprehensive coverage is universally attainable without forcing low-income individuals into separate, inferior health plans. At the same time, Medisense allows policymakers flexibility in fitting this into state budgets, with much of this funding available by strategically re-routing existing safety-net expenditures.

Income-Based Premium Subsidies

To ensure these subsidies empower rather than restrict members, the financial assistance is structured as a simple sliding scale that integrates seamlessly with Medisense's voucher tiers. The subsidy mechanism is deliberately straightforward: members merely input their standard tax filing information to automatically determine their eligibility, eliminating complex bureaucratic hurdles and keeping administrative costs low. For example, a state might offer a 100% premium subsidy for individuals earning below 150% of the Federal Poverty Level (FPL), and a 75% subsidy for those between 150-250% FPL. To calculate this assistance, policymakers select a baseline default voucher tier (e.g., the 30th percentile). Crucially, while the dollar amount of the subsidy is tethered to this default tier, members are entirely free to apply those funds to any voucher tier they choose. Members then participate in Medisense the exact same way as everyone else: they choose voucher tiers, pay premiums net of subsidies, and retain the exact same financial incentive to shop around for cost-effective care.

A key point worth emphasizing about this mechanism is that it represents a fundamental shift from the status quo of fragmented health funding. Instead of finding ways to fund care for low-income individuals, Medisense simply funds access to the healthcare system. This empowers individuals to make their own decisions, find care that fits their specific needs, and easily engage with the broader healthcare market.

Re-routing Medicaid Funds

To fund these sweeping income-based subsidies without drastically raising state taxes, Medisense strategically leverages and redirects the massive pools of funding already existing within state Medicaid and CHIP programs. Through a federal waiver, states can seamlessly re-route these existing federal and state healthcare dollars directly into the Medisense premium subsidy pool. This works by applying Medicaid funding behind the scenes to cover the cost of care for members who qualify for Medicaid. This reduces Medisense's outlays, allowing the system to pass those savings directly to the member as an upfront premium subsidy.

However, relying solely on Medicaid funding may not be enough to cover a state's complete affordability needs. Medicaid funding comes with two potential restrictions: lower reimbursement rates and stricter eligibility criteria. These constraints could lead to a system where vulnerable populations are inadvertently restricted from accessing care. It is important to note that these are not flaws within the design of Medisense, but rather reflections of the political choices made around funding low-income healthcare. In fact, as we will see, Medisense offers far more flexibility and choice to low-income members than the status quo.

The first potential issue with relying solely on Medicaid funding is that Medicaid reimbursement rates may be much lower than the market rates set by providers. Consequently, Medisense's outlays would be completely reimbursed by Medicaid only if members visit providers with prices close to those Medicaid rates. If these rates are low, Medisense must tie funding to a low default voucher tier to remain cost-neutral. For example, if a state's Medicaid rate equates to the 20th percentile of market prices, this would mean fully subsidized premiums are only available for a default voucher tier set at the 20th percentile. This has the potential to limit the choice of zero-out-of-pocket providers for eligible members.

The second potential issue is that traditional Medicaid eligibility criteria are often far more restrictive than the actual population who needs affordability assistance. This means that even if Medicaid rates were sufficiently high to guarantee access to a robust default voucher tier, the funding available from Medicaid alone may simply not be enough to cover the total number of individuals who need financial assistance.

Streamlining Fragmented Health Funds

There is, however, significant additional funding existing in the status quo that can bridge the financial gap left by Medicaid. Currently, states and localities spend billions of tax dollars on various fragmented safety-net programs intended to help low-income individuals access care, such as community hospital grants, free clinics, and disease-specific initiatives. These programs focus on funding the care facility itself, but not the individuals who need the care. Furthermore, their fragmented nature inherently leads to less oversight and redundant overhead inefficiencies.

Medisense proposes integrating this fragmented funding directly into the consolidated Medisense premium subsidy pool. By decreasing administrative bloat, this integration increases the total amount of funding available for direct subsidies. Furthermore, it puts purchasing power directly into the hands of the people who need it most, empowering them to find the care that best suits their needs. Members who previously relied on community hospitals can now access them using Medisense vouchers, paid for through their subsidized premiums.

It is important to note that Medisense is not advocating for the elimination of community hospitals and free clinics, many of which have a long history of providing excellent, affordable care. On the contrary, under Medisense, these institutions remain fully accessible and serve a crucial role as low-cost anchor providers that help keep the entire state's medical market grounded. This ensures that Medisense remains affordable for everyone. In return, instead of relying on the volatility of yearly taxpayer grants to keep their doors open, community hospitals and free clinics are now funded reliably and directly by the patients they serve, who bring the necessary money through their vouchers.

How Far Can the Funding Go?

To get a sense of how far existing funding can be used to expand access to Medisense, consider New York State as an example. New York currently spends approximately $120 billion on Medicaid annually. Suppose 50% can be re-routed to the Medisense subsidy pool. We can also add an estimated $7 billion from fragmented state and local health programs. This means the state can utilize a $67 billion pool to subsidize premiums. Currently, the average private individual premium in New York is roughly $9,000 annually (Empire Center, 2023). That means 7.4 million people could receive private insurance-level coverage purely through redirected funds.

However, this calculation does not even consider the anticipated savings from Medisense's competitive framework, administrative efficiencies, and non-profit status. These elements all serve to lower baseline premiums. If we assume these factors contribute to a conservative premium reduction of 15% (to $7,650), then that existing funding can fully subsidize premiums for 8.8 million members, representing roughly 45% of the entire population of New York State.

Many states may not have as much existing funding available as New York. However, the design of income-based premium subsidies provides policymakers with a highly flexible tool to expand access. Depending on how much additional tax revenue a state is willing to raise, policymakers can expand subsidies further up the income scale and adjust the default voucher percentiles upward to increase care access. Ultimately, this enables a simple but virtuous cycle where Medisense concretely links how additional state revenue directly translates into increased healthcare access for its citizens.

Pillar 5: Stable and Long-term Coverage

A major flaw of the American healthcare system is its historical, accidental tethering to employment. Because employer-sponsored insurance is tax-advantaged and federally mandated for large companies, most working-age Americans get coverage through their employers. This means that individuals face coverage disruptions when changing or losing jobs or often even while at the same employer. This constant churn actively disincentivizes insurers from investing in long-term health since the long-term financial benefits of preventative care for members today will likely be reaped by an entirely different insurance company tomorrow. Furthermore, this dynamic crushes economic dynamism; individuals are trapped in jobs they dislike purely to keep their health benefits ("job lock"), while startups and small businesses struggle with the immense administrative burden of negotiating complex insurance packages. Medisense fundamentally severs this link, creating a portable, permanent public option that directly incentivizes lifelong health.

Establishing Universal Portability

To de-link healthcare from employment without destroying the employer-sponsored market, Medisense integrates into the existing framework through three core mechanisms.

• First, employers will offer Medisense to their employees as an option alongside their traditional private insurance plans.
• Second, employers will subsidize Medisense premiums to the exact same degree as those traditional plans, ensuring a level financial playing field.
• Third, all public institutions and state agencies will transition to offering Medisense as their exclusive insurance option, guaranteeing a massive, stable initial membership base.

Requiring that all employers offer Medisense as an option creates portability for employees. An individual can choose to stay on their exact same Medisense plan when moving to any other employer in the state. If they lose their job, Pillar 4's income-based subsidies automatically kick in to ensure they never face a gap in coverage. Moreover, Medisense does not negotiate with employers – plans are standardized into voucher tiers. Thus, startups and small businesses can more easily offer health coverage that competes with their larger competitors without facing much administrative overhead.

Pathways to Implementation: Navigating ERISA

Because federal law currently restricts state-level regulation of employer health benefits, policymakers have two distinct pathways to implement this employer integration.

• Option 1 (The Requirement Pathway): A state could legally mandate that all employers offer and equivalently subsidize Medisense. However, this pathway faces a significant legal hurdle in the form of the Employee Retirement Income Security Act of 1974 (ERISA). ERISA is a federal law that explicitly preempts states from directly regulating self-insured, employer-sponsored health plans. Therefore, pursuing a strict mandate would require a complex federal waiver or a direct congressional amendment to ERISA laws, which could delay state-level implementation.
• Option 2 (The Incentives Pathway): To bypass ERISA restrictions entirely, a state can rely on indirect financial levers. Under this pathway, states make all state-level corporate tax incentives entirely conditional on an employer actively offering and subsidizing Medisense. Furthermore, the state can aggressively negotiate with major employers to voluntarily adopt the plan. At the same time, the state could provide a massive education and incentive campaign designed to attract startups and small businesses that are eager to offload their HR burdens.

Incentivizing Long-Term Health and Economy-Wide Spillovers

Under the status quo, insurers have no reason to invest in a member's long-term health because that member will likely switch jobs—and therefore insurance companies—within a few years. Because Medisense retains members for decades, it has a powerful financial incentive to lower future costs by investing heavily in a member's health today. Financially, this preventative approach easily pays for itself over time; assuming a standard 5% discount rate, investing $1 in preventative care today is economically justified if it saves more than $2.65 in twenty years. Medical research regularly demonstrates preventative savings that far exceed this threshold, meaning these proactive investments will ultimately lower overall premiums for everyone within the Medisense system.

Financial Rewards for Preventative Care

Medisense actively translates this long-term focus into concrete financial incentives that directly encourage members to seek preventative care. The system offers deliberately increased voucher values for vital preventative services, such as routine primary care provider (PCP) visits, health screenings, and vaccinations. Because higher voucher values mean a greater likelihood that the provider's reported price falls below the voucher amount, members are heavily incentivized to seek out these services in order to earn savings credits directly into their Health Savings Accounts (HSAs). As a crucial secondary benefit, these higher voucher payouts for routine visits make independent primary care practices significantly more financially viable, directly addressing the chronic national shortage of PCPs.

Holistic Wellness and Gamification

To further encourage proactive wellness, Medisense broadens the traditional definition of healthcare by subsidizing health-tangential programs and actively rewarding healthy behaviors. Medisense can offer specific vouchers for proactive lifestyle interventions, such as gym memberships, smoking cessation programs, and preventative physical therapy. Furthermore, the funds members accumulate in their HSAs can be flexibly spent on a variety of health-adjacent expenses, including massage therapy, stress-reduction programs, or wearable health trackers like a Fitbit or Apple Watch. Medisense can even introduce gamification into health maintenance, offering conditional prizes or direct HSA bonus credits to members who successfully meet specific health goals, such as achieving targeted bloodwork results.

It is important to emphasize that Medisense is not funding these programs out of tax-payer funds or because they sound helpful. Instead, Medisense has the direct financial incentive to lower long-term health costs out of its own budget. This implies that Medisense has the incentive to discover programs that are truly cost-effective versus programs that do not end up improving health outcomes to justify their cost.

Ultimately, this combination of lifelong coverage stability and aggressive preventative care generates massive, economy-wide spillovers that benefit the entire state. Continuous, reliable coverage severely reduces the prevalence of uncontrolled, untreated mental health crises, which in turn helps dramatically lower associated rates of homelessness and crime. When combined with the elimination of "job lock," this continuous care creates a significantly healthier population with higher labor market attachment, fostering a more productive, dynamic, and economically resilient state.