Thinking more about the healthcare reform problem, the issue comes down, to a large extent, to OPM - Other Peoples' Money.
When a patient goes to the doctor, they're spending the insurance company's money, since their premiums are paid anyway. When the doctor treats the patient, both he/she and the patient are, together, spending other peoples' money i.e. Medicare and the insurance company's money. So the vaunted "doctor-patient relationship" is devoid of economic incentive.
So one would expect the insurance companies to maintain the discipline in the system. Problem is that they took the opposite attitude - it's all OUR money. The more we take in and the less we give out, the richer we get. That's the most direct and well-understood way for the insurance companies to increase earnings. So they piled on a huge red-tape system to reduce payouts while increasing premiums. The physicians offices reacted in kind by hiring staff to fight for payments, with the resulting 20%-30% inefficiency in the insurance claims processing business. Hence the argument that Medicare is more efficient than the private sector. Why? Because Medicare is also paying out OPM - the taxpayers' money. So they're more efficient at disbursing payments to doctors than the greedy insurance companies.
So the fundamental feedback mechanisms (i.e. disciplines) that exist in market economies and other stable systems simply don't exist in healthcare.
I don't have a simple answer to this problem, but it seems that economic incentive is at the root of this problem.
Now there should be some incentive mechanism around patients wanting to stay healthy, doctors wanting to keep patients healthy and insurance companies lowering claims by keeping their customer healthy. But so far, nobody seems to believe that there's a business model in that mechanism. It's hard work for patients to be healthy, no work or reward for doctors if their patients are too healthy, and the insurance companies apparently haven't found a way to make money by helping people become more healthy.
So once again I continue to beat the drum of perverse incentives, in one form or another, being the core issue. Unfortunately, I'm not hearing enough about that in the healthcare debate.