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As (Nobel Prize-winning economist) Vernon Smith put it, the way healthcare usually works is that party B tells party A what A needs, and party C pays for it; there's no market solution to this problem. Health care consumers on comprehensive insurance plans have no financial incentive to shop around for more efficient providers and even less to choose less expensive treatment options-last year's state of the art-over new, expensive, marginally better ones. Comprehensive insurance breaks the free market and drives up costs for everyone.

Insurance is supposed to be a hedge against risk, not insulation against all costs whatsoever. The US tax code exempts compensation by provision of health insurance from income taxes, tying health insurance to employment and providing a financial incentive for employees to get as many services as possible, including routine "well-baby care", bundled with insurance coverage. Thus the tax code bears the ultimate blame for breaking the free market in health care. Amending it, and perhaps providing a shock incentive to decouple insurance from employment will reduce the prevalence of comprehensive-care plans and thus restore market pricing mechanisms to health care.

It is worth noting that parity with European or Canadian aggregate health care costs is not a worthy goal; as the low total nationwide expenditures per capita in states where health care is socialized are achieved through various, subtle forms of rationing. The object of health care reform should be to make market pricing and competition work again while preserving the freedom of choice we enjoy, even if that freedom of choice means that people with terminal illness spend until they exhaust their options. Cost of health care cannot be measured by nationwide aggregate.

Insurance-and one must be careful to not confound health insurance with health care-is more expensive than it needs to be for several reasons. Adverse selection is one; healthcare economist Arnold Kling has recommended adoption of overlapping five-year coverage periods to reduce its influence. Mandates are another: State and Federal insurance coverage mandates-requiring insurance policies to cover certain treatments, procedures, and preventative measures-make it difficult to by cheap insurance, equivalent to requiring all people who purchase cars to buy BMWs or Lexuses and banning Chevys and Fords. Deregulation, that is to say removal of these mandates, would drive down the cost of insurance,

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