Sept. 11, 2007  -- Most everyone agrees, America's health-care system is a mess.

Millions of Americans lack health insurance and still our annual health-care costs exceed $2 trillion — that's about the size of the entire economy of China. For the country with the world's "best" medical care, a lot of people seem unhappy.

Many hate the insurance industry.

Employers have seen insurance premiums rise 87 percent over the last seven years. General Motors now spends more on its employees' health insurance than on steel. Doctors are fed up, too; the average physician's office spends 14 percent of its income filling out paperwork.

No one seems angrier than the patients who have been denied care. Vicki Readling of North Carolina was diagnosed with breast cancer after she had quit her job and lost her employer's insurance. Readling purchased temporary insurance for herself, but when it expired she was told that because of her pre-existing condition — cancer — she would now have to pay $27,000 a year for a new policy. With an income of $60,000 and twin sons in college, she couldn't afford it.

Insurance industry spokeswoman Karen Ignani is eager to report that most people aren't like Readling. Polls show that while people dislike the insurance industry in general, 87 percent of people with health insurance are happy with their coverage. Only 3 percent of health insurance claims are denied, she says.

In his hit documentary "Sicko," Michael Moore focuses on tragic stories of people whose insurance claims have been denied. His prognosis? He calls for "the elimination of private profit-making health insurance companies" and suggests turning over all health-care spending to the government to provide "free" health care to everyone. He goes to countries like Canada and Britain and implies that their socialized systems are far better than that of the United States.

'What It Costs When It's Free'

There are many problems with health insurance, but that doesn't mean we should put the government in control. If it's decided that health care should be paid for with tax dollars, then it's up to the government to decide how that money should be spent. There's only so much money to go around, so the inevitable result is rationing.

It's just the law of supply and demand. Lowering prices increases demand. Lowering the price to nothing pushes demand through the roof. Author P.J. O'Rourke said it best: "If you think health care is expensive now, wait until you see what it costs when it's free."

When health care is free, governments deal with all that increased demand by limiting what's available.

The reality of "free" health care is that people wait. In the United Kingdom, one in eight patients waits more than a year for hospital treatment and the British government recently set its goal to keep wait times to less than 18 weeks — that's more than four months! In Canada, almost a million citizens are waiting for necessary surgery and more than a million Canadians can't find a regular doctor. In the small town of Norwood, Ontario, a weekly drawing is held in which a townsperson wins the right to access the town's one family doctor.

Governments ratchet down health-care costs in different ways. Doctors went on strike last year in Germany because their government's system pays them less than they thought they deserved and forces them to work thousands of hours of unpaid overtime. In the United Kingdom, one hospital was inspired to save money money by not changing sheets daily. British papers report that instead of washing the linens, nurses were told to just turn the bedsheets over.

Government is less the answer to our health-care crisis than the problem. It was our government that helped to create the absurd system in which two out of three Americans get health insurance through their employer. In a country where four in 10 Americans change their job every year, this system makes little sense; it leaves people like Readling without coverage when they need it most.

The government also makes insurance expensive by mandating the medical services that policies must cover. Required services vary state by state and include massage therapy, pastoral counseling, acupuncture, hair prosthesis and dentures. Such mandates are a reason why an individual policy in New Jersey costs around $4,000 a year while a policy in Iowa costs only a third of that. Yet insurance regulations make it illegal for someone in New Jersey to buy a policy from out of state.

The Way We Pay

Another problem that raises costs, and keeps individuals from controlling their own health care, is the way we pay for medical care. Out of every dollar that the United States spends on health care, only 12 cents comes out of the pocket of patients, according to the Centers for Medicare and Medicaid Services. Most of us have our medical expenses covered by a third party, either an insurance company or the government.

When we pay for health care with someone else's money, it creates nasty incentives. It's good to be covered in case of a medical catastrophe, like a heart attack or cancer, but when patients pay for almost everything from physicals to acupuncture using third-party money, they have no reason to care about cost. Because the buyers don't care about cost, neither do the health-care providers.

"It's gotten to the point where doctors don't even know how much it costs them to provide this service or that service or how much an office visit should cost. Try asking a doctor how much an office visit costs and watch their face go blank," said Michael Cannon, director of health policy at the Cato Institute.

Our health-care system has become totally removed from the competitive market forces that have improved every other area of the economy. If patients cared about cost, health-care providers would compete to attract patients. They'd do innovative things to keep costs low while increasing quality.

Harvard Business School professor Regina Herzlinger, author of "Who Killed Health Care?", reminds people that "when Henry Ford came around, cars cost more than houses." By competing for profit, Ford revolutionized the auto industry. In eight years, he cut the price of cars in half while improving quality immensely. In nearly every sector of the economy, prices drop over time as technology improves. Not so in health care.

Customer Service, Competition, Control

Can you e-mail or call your doctor to ask quick questions? In the 21st century, when even small children regularly use computers, many doctors and hospitals don't.

"Why would they?" said Dr. David Gratzer, author of "The Cure." E-mail and telephone consultations aren't things most doctors can get paid for. Dr. John Goodman of the National Center for Policy Analysis, said, "The federal government has a list of 7,500 procedures it will pay for — the telephone's not on the list [and] neither is e-mail."

But when patients are in control of their health-care spending, things get better. Lasik surgery isn't covered by most insurance policies, so patients pay for this high-tech procedure out of their own pocket. It's for this reason that laser surgeon Brian Bonanni gives out his cell phone number and e-mail address to all of his patients. He knows that he has to attract patients by making himself available.

Competition has also made Lasik cheaper: While in nearly every other field of medicine, prices have gone up faster than consumer prices in general, the price of Lasik has fallen by as much as 30 percent. The quality of the surgery has also improved. The difference is that people care about prices when they spend their own money, so providers compete to offer services that are faster, better and cheaper.

John Mackey, CEO of the supermarket chain Whole Foods, saw his insurance premiums rise through the roof so he changed the way his employees got health care. He proposed a health insurance plan with a high deductible. To help meet that deductible, the company puts money into a "personal wellness account" for each employee and employees use that money to pay for routine care. The money in the account belongs to the employees and puts them more in control of their health-care spending. Employees pay for the small stuff, like sore throats and sprained ankles, but their health insurance covers them in case of a catastrophe. Accounts like these are typically called HSAs, or Health Savings Accounts.

Mackey saw Whole Foods' health-care costs drop by 13 percent the first year the plan was in place. Some employees objected. They wanted the old "full-coverage" plan back. One wanted "pet bereavement services" covered. Whole Foods then held a vote and "77 percent of team members voted for the health plan that we have today," said Mackey. Today he says most of his employees love the plan because it allows them to spend the money how they want to spend it.

'You and Me'

Whole Foods' health-care costs have been creeping back up lately. Mackey says it's because there are so few people with health plans like his. Only 4.5 million people in America have Health Savings Accounts, according to a 2007 census conducted by America's Health Insurance Plans. That's a tiny fraction of the insurance market, but consumer-directed health plans are a step in the right direction toward placing individuals — not government or insurance companies — in charge of their health-care dollars.

The more people control the money they spend on their own health care, the more people shop around and the more providers compete to attract patients by lowering prices while improving quality. It's putting individuals in control that could turn our health-care sector into the vibrant, competitive marketplace that we see in nearly every other area of our economy.

After all, it's our body and our health. Shouldn't we be in control of how our health-care dollars are spent?

Harvard's Herzlinger said, "Who should decide whether you live or die? Do you want the government to decide? Do you want a health insurer to decide? Who's gonna make that decision? Is it gonna be a government? Is it gonna be an insurer? Or is it gonna be you and me?"

Putting individuals in control of our health — rather than our employers or the government — is a better way to cure what ails America's health system.