Last week, we highlighted how the Affordable Care Act will increase health care costs for young adults and falls short of the president’s original goal of reducing health care costs.

While we suggested the need for health care reform that stimulates competition and thereby lowers cost, two readers accurately noted that the health care market is not competitive. Their observations only reinforce our position that meaningful health care reform must embrace competitive forces, not regulatory compliance as mandated under the ACA.

In our system, third-party providers pay for the health care services of their program participants. The federal government pays hospitals and physicians for the care provided to Medicare and Medicaid enrollees.

For the many Americans enrolled in employer-based health insurance coverage, private insurers pay providers for their care, and employers pay all or some of their insurance premiums. Co-payments and deductibles require patients to have some “skin in the game” and make small payments for routine physician visits and other services, but most of the burden of financing these health services falls on the third-party.

The result is that patients have no incentive to shop for the most cost efficient health care because employers or the government ultimately pay the majority of the cost.

An influential study from the nonprofit and nonpartisan Rand Corporation found that when patients only pay a minor share of their health care expenses, these patients consume more health care services than they actually need. This increased demand for unnecessary services in turn increases the cost of health care.

The third-party health insurance model also creates “information asymmetry.” Patients trust, sometimes to their detriment, that the health care services they are provided are in fact the services they need, but they do not always have access to information about the cost and quality of their treatment.

The ACA begins to address this information problem and requires health providers to list health outcome information on websites accessible to consumers. To the extent patients use these websites, the increased information increases consumer choice.

However, the ACA does not effectively correct the health care over-consumption problem created in the third-party insurer model. It makes it worse.

Under the ACA, employers with 50 or more employees are mandated to provide health insurance to their employees. The ACA then regulates the type of health insurance employers must provide, further reducing choice and competition in the market. The result is that people will remain isolated from the financial cost of their health care choices, and the price of care will continue to increase.

The Obama administration has obscured this conversation by claiming that the ACA will reduce the deficit. While the most recent Government Accountability Office report supports the claim, the GAO also raises concerns that this projected deficit reduction under the ACA may not actually occur.

As the GAO notes, the ACA achieves deficit reduction by cutting payments to physicians for treating Medicare patients. Congress has consistently overridden cuts to physicians in the past, though, and will have a strong political incentive to do so again. Letting the cuts take effect could deter providers from caring for Medicare beneficiaries.

Under the ACA, though, even if the projected savings materialize, the money will go to finance increased spending on other programs in the ACA, instead of being used to protect the financial solvency of existing federal health care entitlements.

The ACA also includes about $570 billion in tax increases. Reducing the deficit does nothing to reduce health care costs if it requires transferring funds from other programs and raising taxes. A better approach would focus on reducing health care costs first so that more Americans can afford medical care and the government can afford to strengthen the health care safety net.

The best way to lower cost is to remove obstacles to competition in the health insurance market. The market did not create these inefficient third-party insurance systems, the government did.

The government doesn’t count employer-provided health insurance toward a worker’s tax liability. Employees have to pay taxes on the money they earn, but not on the health insurance they earn. As result of this policy, employers supply and employees demand more expensive and lucrative health insurance plans without either party incurring a tax liability.

In effect, government labor and tax policy have reduced employee wages while subsidizing the over consumption of health care.

Correcting that imbalance should be the most important priority of public health care policy. We will explore possible methods and your comments next week.

Ryan Sprinkle is a second-year JD candidate at The University of Alabama School of Law. Tray Smith is the online editor of The Crimson White. This column is the second in a series on health care reform.