“ Then we would only need insurance companies for rare catastropic things”
Just think how expensive car maintenance would be if every time you got your oil changed, it had to go through an insurance company. Especially if you were on something likeMedicare where everything goes through Medicare and your back up plan. The amount of paperwork is incredible.
That is true. However....
The biggest reason they have to do that is for fraud/cost control. If they just paid everything that came in without checking it, fraud would be completely unchecked.
Nor do you avoid the problem by having the government take over that role, because then it has to do the exact same kind of fraud control. Except probably much less efficiently.
The only way to avoid it is for everyone to simply pay cash out of pocket, and have no group insurance of payment of any kind. And if people wish to do that...they can.