In Part 1, I describe the market failure that has caused all the major problems in our dysfunctional health care system. Part 2 recommends straightforward government regulatory reforms that will correct this failure. Now, Part 3 describes how these market reforms will allow all Americans—finally and sustainably—to get their necessary health insurance and high-quality medical care at less than half of today’s cost. This is not deregulation of health care, but enlightened re-regulation to correct a fundamental market failure that the government and economists have ignored for decades.

The key action is to place America’s consumers firmly in charge with the money and the authority to make their own purchase decisions from insurers and medical providers that will be forced to actively compete with better value—higher quality, better customer service, and lower cost. This also makes consumers responsible for living healthy lives or else paying higher premiums if they don’t.

In this lightly-regulated consumer marketplace, every American, regardless of health status, will have an annual choice of literally hundreds of affordable, fully portable health plans—including the option not to buy insurance. Each person will make her own judgments about the best mix of benefits, premiums, and providers consistent with her needs and financial resources. People who can’t afford it will be eligible for government financial assistance, but no one will be able to get a free ride by delaying enrollment until they’re sick.

Some health plans will cover only high-cost, essential medical care, with their members buying their own doctor visits, lab and X-ray tests, and most prescription drugs—all at competitive, affordable consumer prices. Others will offer comprehensive coverage and integrated medical care, like the Kaiser Foundation Health Plans. Each person will decide.

In a dramatic shift, insurers—open to all comers—will become accountable directly to their members, not to government bureaucrats or employer HR managers.  Health plans that retroactively deny care, reject appropriate claims, charge excessive premiums, or refuse access to top providers will lose members to responsible, customer-friendly insurers.

Premiums and medical costs will immediately drop from insurer competition, reduced cost-shifting, and removal of unnecessary benefit mandates. Longer term, costs will drop by half or more as market forces yield: (1) massive elimination of waste, (2) widespread adoption of improved standards of care; (3) improved provider productivity; (4) transparent consumer access to provider price and quality information; (5) streamlined reimbursement mechanisms; (6) innovative delivery models; (7) provider price competition; (8) preventable disease reductions; (9) departures of bad providers; (10) elimination of provider and insurance monopolies; (11) better regulation; and (12) alleviation of primary care provider shortages.

All this will engender a virtuous cycle. Consumers, controlling the money, will become the arbiters of value, giving them the authority and responsibility to demand accountability from health plans, providers, and themselves. Part of the consumers’ responsibility will be to earn substantial premium discounts by controlling their own health risk factors—e.g., smoking, alcohol abuse, and obesity—that now account for preventable chronic diseases consuming three-quarters of all medical spending.

Innovative insurers will provide member support and incentives to seek value from even the most expensive medical procedures by offering substantial cash rebates to patients who choose providers with the highest quality and lowest cost. Wasteful provider reimbursement methods will be replaced by streamlined systems, cutting those costs by 90%. Health plans that do all this will command lower premiums, increasing market share, and higher profits, thus forcing competitors to follow suit or lose ground.

Doctors and hospitals will become solely accountable to their patients. They will adopt leading-edge business models and reengineer processes to improve productivity and eliminate the waste that accounts for more than half of all medical costs. “In health care, you can’t do one big thing and reduce the price,” says acclaimed heart surgeon Devi Shetty. “We have to do 1,000 small things.” Medical entrepreneurs and innovators will accelerate patient access to increasingly accurate, affordable diagnosis and treatment. Providers will adopt objective quality standards that focus on improved patient outcomes. Doctors will voluntarily use electronic medical records to measure their quality and to benchmark themselves against others. Those who don’t will lose patients to those who do. And yes, technology will finally drive costs down, as it has in every other industry.

Federal and state governments will have a significant, but dramatically reduced regulatory role focusing on safety nets, patient safety, and insurance market behavior; rather than on micromanaging prices, premiums, and procedures. Restructured Medicare, Medicaid, SCHIP, and TRICARE programs will experience dramatically lower costs, making possible sustainable safety nets worthy of the world’s richest economy.

Employers, freed from the thankless, failed task of choosing and managing their employees’ insurance, will refocus on their businesses. Their employees will take home more disposable income, as declining insurance and medical costs consume diminishing portions of their growing, productivity-led compensation.

All these benefits will emerge only from lightly-regulated, government-enabled markets in which everyone can make their own life-enhancing purchase decisions for medical care, just as we do for food, clothes, housing, transportation, and, indeed, everything else we buy. These reforms, consistent with our historic civil, social, and economic rights to life, liberty, and property will create a uniquely American model to serve as an example for the world.

Please join me in making our politicians make this happen.