Besides subsidizing the lower-income people, she said, governments job would be to ensure transparency creating an information system rating each doctor, hospital, drug and procedure on their outcomes so that customers could make clear choices.
Shed also create an agency like the Securities and Exchange Commission to provide clear information on insurance plans, their coverage and costs.
But it would be different from the exchange contemplated by current legislation, which would prescribe services to be covered by any eligible plan.
A government exchange will be very dangerous, she said. Inevitably, the government will micromanage. Congress will get lobbied hard to include things like massages, acupuncture and in vitro fertilization as mandatory.
I like massages and I have sympathy for childless couples, but that kind of coverage shouldnt be mandated, she said.
Also, she said, current proposals for a public plan like Medicare and play or pay requirements by employers will inevitably lead to a single-payer government-run insurance system and eliminate choices for consumers.
Play or pay proposals involve low-level fines for employers who dont provide coverage. That, plus generous subsidies for the uninsured, will lead employers to drop coverage and force their workers into an expensive private insurance market.
The workers, in turn, will gravitate to the cheaper public plan and, over time, private insurance companies will be driven out of business.
And, while they are trying to survive, private plans will merge. So will hospital systems all diminishing choices available to patients.
Ideologically, Herzlinger calls herself a Jeffersonian Democrat, a believer in smaller government and maximum individual choice. Shes a registered independent.
Her plan partly resembles that advocated during the 2008 campaign by Republican Sen. John McCain (Ariz.) and proposed now by Sens. Tom Coburn (R-Okla.) and Richard Burr (R-N.C.) and Rep. Paul Ryan (R-Wis.).
But its also different. They would eliminate the current tax exclusion for employer-based health insurance and provide workers with a tax credit for buying health insurance.
Inevitably, that idea is open to political attack as taxing health benefits, she said. Giving workers cash tax-free, she said, is more salable.
Moreover, her plan would cover all the uninsured and would not be revenue neutral.
If you want to cover the uninsured, its going to be expensive, she said. Are you willing to pay extra taxes to cover these people? I am. But I want to do it in the most effective way possible.
Opponents of free-market health ideas argue that health is too complicated for ordinary citizens to navigate. But Herzlinger points out that buying auto insurance isnt and that millions of workers are successfully managing 401(k) retirement accounts.
To the objection that insurance companies would cherry-pick cover the healthy and leave the sick she proposes that insurance companies reinsure each other, spreading risk evenly.
Theyd do it themselves as in Switzerland out of fear that, if they didnt, the government would do it.
Right now, most health care reform plans being considered in Congress dont even give consumers a role in controlling costs. Letting them run the system is hardly on anyones radar screen.