That’s the title of a must-read article in this month’s Atlantic by David Goldhill, CEO of the Game Show network. Goldhill’s father was an otherwise hale and still-working 83-year-old who walked into a hospital two years ago with pneumonia. He contracted a series of hospital-acquired infections and died five weeks later. The villains weren’t the competent, dedicated doctors and nurses who cared for Goldhill’s father. The villain was the healthcare system itself, in which most patients don’t pay for their care directly and thus cede control to bureaucrats when they get sick.

Goldhill is a self-described Democrat who supports healthcare reform, but after studying America’s healthcare sector for two years after his father’s death, he came to realize that the usual Democratic solutions (exemplified in the pending bloated congressional bills), involving massive expansion of a more heavily regulated insurance system with its high costs and enormous inefficiencies are all wrong. Goldhill believes that if patients paid most of their own bills, with insurance reserved for catastrophic medical events, the resulting market competition would encourage cheaper and higher-quality care. He writes:

Indeed, I suspect that our collective search for villains—for someone to blame—has distracted us and our political leaders from addressing the fundamental causes of our nation’s health-care crisis. All of the actors in health care—from doctors to insurers to pharmaceutical companies—work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity, and discourage transparent competition based on price or quality. That result in a generational pyramid scheme rather than sustainable financing. And that—most important—remove consumers from our irreplaceable role as the ultimate ensurer of value.

Medical blogger Ultrabrown calls Goldhill’s article a “fascinating read”:

The nut of the article is that we think insurance is free only because it’s pre-deducted from our paychecks and depresses our wages. We’re actually paying for a massive insurance bureaucracy, and removing our names from the checks hospitals see distorts the price and quality signals in a free market. Variable pricing is rampant; bills are inflated up to ten times what insurance companies actually pay. Many hospitals will refuse to even quote a price for a procedure because they want to avoid price comparisons and their real customers are insurers rathe than individuals.

Goldhill argues that insurance ought to handle catastrophic events only, the same way we buy auto or house insurance. Ongoing medical costs should be paid out-of-pocket in a transparent fashion. Laser eye surgery, an elective procedure usually paid out-of-pocket, has fallen in price by 80% over the last few years; the same would happen if you were paying directly rather than through a middleman and could transparently compare cost and quality.

Economist David Henderson calls Goldhill’s piece a “stemwinder” and offers these excerpts:

To achieve maximum coverage at acceptable cost with acceptable quality, health care will need to become subject to the same forces that have boosted efficiency and value throughout the economy. We will need to reduce, rather than expand, the role of insurance;

For fun, let’s imagine confiscating all the profits of all the famously greedy health-insurance companies. That would pay for four days of health care for all Americans. Let’s add in the profits of the 10 biggest rapacious U.S. drug companies. Another 7 days.

If seniors were the true customers, they would likely flock to geriatricians, bidding up their rates–and sending a useful signal to medical-school students. But Medicare is the real customer, and it pays more to specialists in established fields.

Health care is an exceptionally heavily regulated industry. Health-insurance companies are regulated by states, which limits interstate competition. And many of the materials, machines, and even software programs used by health-care facilities must be licensed by state or federal authorities, or approved for use by Medicare; these requirements form large barriers to entry for both new facilities and new vendors that could equip and supply them.

Better information technology would have improved my father’s experience in the ICU–and possibly his chances of survival. But my father was not the customer; Medicare was.

The finder’s fee here goes to Michael F. Cannon, health policy analyst for the Cato Institute. If you’re in Washington on Thursday, Cato will be hosting a discussion with Goldhill in room B-340 of the Rayburn House Office Building at noon. Here’s where to register.