The United States health care system is a tragic product of blind distrust of government and unquestioning faith in markets—the belief that the market will always do a more efficient job of allocating resources better than the government. However, health care is a peculiar commodity that differs from other goods and services that are distributed in the market. There is a real question about whether it is appropriate to provide health coverage pursuant to an insurance model, let alone provide it through an insurance model in the market. While the pooling of risks guarantees a greater number of people will suffer the full impact of loss, the insurance model yields corrupted results because it is subjected to the dictates of the market, and profit maximization prevents high-risk individuals from entering the pool of insured individuals.

Fragmented coverage for some individuals, and no coverage for many others, produces negative externalities in the form of higher costs, which is why the insurance model is defective: it depends upon the exploitation of externalities for its success. Attempting to provide coverage through this model results in inadequate health coverage and ineffective cost containment. The appropriate governmental response would be to provide subsidies that induce the production of positive externalities, while prohibiting or penalizing activity that produces negative externalities. Without federal intervention, citizens will not consume health care at socially optimal levels. Unfortunately, efforts to intervene have resulted in insurers and employers engaging in or threatening a flight from health insurance, which may leave even fewer people protected. In effect, American health care policy is being held hostage by infatuation with markets, reducing coverage for increased payments along the way.