When it comes to health care costs, the United States is far and away No. 1 in the world. Left as it is, our system will destroy the nation’s fiscal as well as physical well-being — and nowhere is that more obvious than in the Golden State.

Skyrocketing health care costs are a major contributor to California’s budget disaster. If the governor’s proposed cuts are accepted, 2 million more Californians will join the ranks of the uninsured, bringing the total to about 8.5 million, or more than 20 percent of the population. The damage to the economy will be felt in many ways, not the least of which is the soaring cost to the public of emergency room visits, the only care left to families who can’t otherwise see a doctor.

California cannot afford to have President Barack Obama’s comprehensive reform initiative go down in defeat this year.

Obama will take his case directly to the American Medical Association on Monday as part of a major national push for reforms. The president no doubt will mention that the U.S. spent $2.4 trillion last year on health care, far more per capita than other industrialized nations, which also manage to provide health insurance to all their citizens. Obama says he’s flexible on the final outline of a plan, but he continues to favor a government-backed insurance option that would provide competition for private insurers. The AMA announced its opposition to a public option last week. But given the amount of money now lost to middlemen in private plans, the president is persuasive.

It seems counterintuitive that the government would be capable of outperforming private industry in the world of health care. But Medicare has lower costs, far lower overhead and higher consumer satisfaction than private insurers. The contrast is most obvious in overhead — basically paperwork and salaries of middlemen and executives. Private insurers consume 30 percent of health care dollars on overhead. Medicare uses just 3 percent.

The AMA and others fear that the public option would eventually drive private insurers out of business, leaving government with no competition. But that won’t happen if private companies become more efficient. The current margins are ridiculous. Besides, Medicare has its own weaknesses, including an ineffective fee system that underpays hospitals and doctors for services and ends up rewarding volume more than quality of care.

Providing universal coverage will deal with the health care crisis on a personal level, but from the standpoint of the national economy, cutting costs is even more important. A brilliant article by Atul Gawande in the June 1 New Yorker makes the challenge clear by looking at one community with high health care costs. Gawande argues that the U.S. system must focus first on effectiveness of treatments, while “discouraging overtreatment, undertreatment and sheer profiteering.”

If we can accomplish that goal, Americans won’t care whether the system is public, private or, most likely, a combination. But it’s hard to see how to get the cost savings without some competitive pressure.