It does seems that he only way to avoid the issues of people falling between the cracks is to get everyone in the risk pool. You can't do that w/o mandating it, and who is going to mandate it other than the govt?
I think there may be some value in keeping a distinction between those who are receiving government assistance and those who are not. When govt is providing the benefits, there will be rationing--there must be. (Yes, I know we are having de facto "rationing" now, but hang in with me here). With a finite amount of taxpayer money, we'll need to decide between full vaccinations for 10,000 children or a heart transplant for a 300 lb 80 YO smoker. The taxpayers cannot fund every conceivable procedure. So, why not government clinics staffed by government docs (no insurance middleman to pay, few forms to fill out, no billing, etc.) Anyone can go to these clinics, but priority goes to the poorest. The care here is bare bones--expect to wait, expect to be on a ward with many other patients, expect to see many more PAs than physicians, expect limitations on the pharmacy formulary options, and expect to be told "we can't help you" if you need an expensive procedure and don't meet some fairly stringent criteria. Stillm, these places would provide the basic care that helps people recover and helps avoid more costly care later.
Now, everyone can go to these clinics, but those who can afford it will probably choose to go for private care. You can pay out of pocket or with insurance. The laws will be changed to:
1) Break the link between employment and insurance. This can be done simply by eliminating the employer tax deduction for employee insurance premiums and transferring either a deduction or a credit to taxpayers.
2) Mandate standardized health insurance policies (as we do with Medicare Supplemental policies) to make price comparison easier. This has been a big help in bringing choice and competition to the market.
3) The government should take additional steps to reduce friction in the insurance marketplace. For example, making health care outcome information easily available and understandable, making customer satisfaction and compalints against various insurers easily accessible, etc.
4) Cross-state portability. Sorry, but this is a "states' rights" area that probably needs to yield to the feds. It's the only way we can have an efficient market and to cut costs for everyone.
5) Keep in place incentives for individuals to fund health savings accounts and to purchase high-deductible health insurance policies.
6) No medical underwriting or exams will be allowed. Those selling insurance have to take everyone who applies. But, we'll need to come up with a mechanism to preclude people from upgrading to a more comprehensive policy upon receiving news of an expensive illness (just as you can't buy fie insurance once the house is ablaze). Maybe a two-year phase-in period for new benefits?
Result: A safety net of compassionate universal coverage, but no government mandate that everyone buy a particular type of policy. This system also fixes a problem we haven't spoken much about: It protects the stupid, ignorant, lazy, and incompetent (SILI, or insert your own PC wording). The government clinic is where you go when you are sick. Simple. Today there are millions of people who qualify for various government benefits (health care coverage for their children, free food, etc), but they don't file for them because enrollling is difficult and because these people are SILI. We'll have the same problem in a national health care system, and when these people get sick they'll still try to go to the nearest hospital ER, driving up costs in the private system. No--go to the govt clinic unless you are having a bona fide emergency.