Health-Care Plan Founded on Free Market

Odysseas Papadimitriou is founder and chief executive officer of Evolution Finance, the parent company of Wallet Blog and Card Hub, an online marketplace for credit cards.

WASHINGTON (TheStreet) -- I've criticized the Obama administration's health-care plan without offering an alternative. So here's my vision of a comprehensive, national health-care plan. It will work because it's driven by the fundamentals that shape the free-market economy.

I propose to fix the elements of our system that don't work and leave those that do. One rarely hears complaints about the quality of U.S. health care. Coverage and cost are the problems. If a health-care system is to work, it should strive to maintain today's level of quality while driving down costs and increasing coverage.

The economics of health care are shaped by consumers, who through insurance or Medicare are allowed to purchase coverage as if they had a credit card with an unlimited credit line and for which they never see a bill. There's no incentive to weigh the cost of each doctor's visit, test or procedure. Instead, Americans pay their insurance bill and go about their business without financial consideration or obligation. They're not encouraged to shop comparatively, so they don't. They don't ask questions of their doctors concerning cost, nor are they bothered when physicians request excessive tests or inflate expenses with unnecessary visits. Because of the system's design, the health-insurance market is dominated by a handful of providers, including Aetna(AET Quote), UnitedHealth(UNH Quote) and Cigna(CI Quote), which make decisions on rates and payments with no motivation to keep prices competitive.

A lack of competition and cost inflation are made worse by our justice system's American Rule, which drives up malpractice-insurance expesnes and forces doctors to over-treat patients to cover all contingencies and provide maximum protection against lawsuits. Of course, those costs are passed on to consumers, and the price of health care keeps rising. So the American Rule must be done away with.