Exactly right. The third party payer system disconnects consumers from the consequences of their healthcare decisions, and thus results in unnecessary healthcare. Make them pay directly, and they will make market-driven choices.
Have you ever seen those thick hospital bill printouts? Right now, everyone just ignores them—probably even the insurance carriers. If people had to pay it themselves, they would question every detail & nickel. They would also veto unnecessary procedures. A lot of waste and fraud would disappear overnight.