I’m not an insurance expert, you obviously know a lot about the field.
However I do know that when a system doesn’t have proper feed back mechanisms (i.e. market forces), it eventually becomes unsustainable. Which is what we have now in the Medical field.
Just look at the fields that are outstripping the cost of inflation... Medical, education, etc. They have lots of Government interference and little free market forces at work.
That doesn’t mean I don’t believe in proper regulation. Government clearly has a place in many industries, but we have much over and bad regulations right now.
Your posts are spot-on, but medical insurance presents a very unusual set of circumstances that makes it difficult to assess in traditional economic terms. Here's a good example:
Is there any other type of insurance where a policy holder pays premiums and incurs short-term expenses under one set of conditions, while the insurance company (or a government, in the case of Medicare and Medicaid) is obligated to pay for future medical treatments that may not even exist at the time the premiums are paid? This is probably the biggest reason why medical costs are going through the roof: treatments are getting more complex over time. It's sort of like an auto insurance customer paying premiums for an auto policy for a Chevrolet, then filing a claim a couple of years later that allows them to get a new Lexus through the insurance company.
That's why it's so hard to really compute inflation factors in medical care. The field changes so rapidly that you can't really sit down and compare expenses from one year to the next. The only way to do this would be to go back to a point in time (say, 1970) and calculate the changes in the cost of various medications and medical procedures that existed then and are still in use today (aspirin and X-rays, for example).
I don't know the answer to any of this, but I'm pretty sure that medical costs would still rise dramatically even if government had no role whatsoever in the industry.