Whatever its flaws, Medicare is one of the few voices of rationality in healthcare finance. Due to the system's huge amount of leverage--it covers about 55 million Americans--it is able to negotiate prices for care that tend to be far lower than other payers. That big pharma lobbied to ensure that Medicare could not negotiate prices for drugs purchased in bulk shows the power of the program.

But Medicare is a closed system. If you're under age 65 or are not disabled, you can't enroll. If you earn more than a relative pittance, you also can't enroll in Medicaid or the Children's Health Insurance Program, which also keeps prices down for care. Those two programs cover even more Americans than Medicare--71.6 million....

What does this all mean? Absent much tougher reforms, a widening gap. But the Health Affairs study made mention of a proposal floated last year by two Dartmouth healthcare economists, Jonathan Skinner and Elliott Fisher, and James N. Weinstein, the chief executive officer of the Dartmouth-Hitchcock health system. It was elegant but blunt: Cap commercial insurance hospital charges at 125 percent of Medicare.

"If every patient and every insurance company always had the option of paying 125 percent of the Medicare price for any service, we would effectively cap the worst of the price spikes. No longer would the tourist checked out at the ER for heat stroke be clobbered with a sky-high bill. Nor would the uninsured single mother be charged 10 times the best price for her child's asthma care," they wrote on the Health Affairs blog last year. "This is not just another government regulation, but instead a protection plan that shields consumers from excessive market power."