What is needed is a referee between patient and provider, one that has no such conflict of interest.
That's one reason why we need to go to single payer, a government-run insurance system like Medicare. But I don't think we can go there all at once, because of the political power of the insurance lobby.
Other reasons for why single payer makes sense: Medicare has higher costs only because it has the highest cost clients, the elderly and those rejected by private insurers for health reasons; it has lower overhead than any private company. It also would cause lower costs by eliminating massive duplication.
What I think Obama and Congress could do is cobble together a system where Medicare offers insurance to all comers at Medicare rates--$96 a month in 2009. Medicare would be able to afford those rates by enforcing its prices--fair and "reasonable" would have to be worked out in each region by an impartial board, not a for-profit company, perhaps appointed by Medicare with Congressional approval--and by insuring a considerably younger, healthier population than the one it's insuring now--people like me; I'm 69, a satisfied customer.
Let the private insurance companies continue to offer their products; allow them to demand that providers charge Medicare prices, too, so that health care costs can finally be contained. Let them compete, with their millions-plus paid CEO's against government bureaucrats paid at civil service rates (just as dedicated to their jobs, but with no interest in inflating Medicare income). See who has lower costs.
You already know the answer, don't you?
The private insurers could still offer more expansive coverage, and higher rates to providers. They could insure for private hospital rooms, less or no deductibles, and so on, but they would be competing with a government entity that would force them to stay honest.
In addition, Medicare, or its equivalent, could enforce price discipline in the health care market, which would be a gain for all healthcare "consumers."
At some point it would become obvious: the private health insurers are superfluous, except for offering supplements to basic coverage. Then we could go to single-payer in which all Americans could be enrolled, from birth to death, no exceptions, and if someone couldn't afford the equivalent of $96 per month, that amount would be paid for by taxes, yes, slightly higher taxes.
The subsidy for those who can't afford any health insurance would more than pay for itself in lower overall health care costs, since everyone would have adequate preventative health care. The subsidy would do away with the immense costs of the uninsured waiting until their health reaches crisis levels before rushing to the emergency room. Emergency room visits cost much more than routine care and taxpayers now pick up the tab for the uninsured.
Universal single-payer health insurance would go a long way to making American workers more competitive with their competitors in Europe, Canada and Japan, if not with workers in Third World countries; it would also remove a huge barrier to worker mobility.
Further, universal single-payer would actually cost considerably less, and would be much easier to administer by health providers--they wouldn't have myriad different insurers with vastly different forms and differing sets of payment and referral rules to contend with. In addition, single-payer would NOT AFFECT the relationship between doctor and patient. Most Americans now deal with considerably more restricted provider lists than would be likely when one public insurance entity covers everyone: you could certainly go to the doctor of your choice--at least as much as you can now.
If health insurers cry "Socialism!" people should point out: they made their case in the Cuomo suit; obviously they have a huge conflict of interest. If they contend that they provide better service and lower costs, let them prove it: by head to head competition with Medicare.
Is Medicare financing in trouble? Medicare finances were made much worse by the Bush additions of Part D (covering pharmaceuticals, but not allowing price negotiations) and subsidized "Medicare Advantage" plans. Obviously those problems need to be resolved--negotiate prices, eliminate excess subsidies to private insurers--and some other revenue source probably needs to be tapped, since the payroll tax is a flat tax that is actually regressive in its overall effects. Or the payroll tax needs to be modified to eliminate the cap, and the restriction on direct earnings only.
Wouldn't you prefer to pay a little more in taxes, and then only pay $96 a month for health insurance? Or get paid more, because your employer doesn't have to pay hundreds or thousands a month for your insurance? You could pocket the difference.