One option is to separate the verification process from the insurance companies. In other words you have some list of pre defined standards that are covered at some rate and then an independent agency applies those standards and looks for fraud.
Aka a hospital might negotiate a separate rate for stitches with each company, but they don’t get to decide if it was needed on a case by case basis. Alternatively, apply the Japanese system where all procedures have a single agreed upon rate negotiated regularly.
That function is also performed by insurance companies in the US, sometimes known as managed care organizations. Many large companies self insure and use health insurance companies’ resources to implement their health benefits.
Most, if not all, states outsource the implementation of their Medicaid plans to large insurers like Anthem or UHC or Humana, etc.
An agency outsourcing that function to a private company for all care in a state does not invalidate the savings. It’s a question of efficiency and conflict of interest not inherently a government function.
That said, outsourcing them back to the same insurance companies which also offer plans has major issues.
Aka a hospital might negotiate a separate rate for stitches with each company, but they don’t get to decide if it was needed on a case by case basis. Alternatively, apply the Japanese system where all procedures have a single agreed upon rate negotiated regularly.