Virtually all current health-care-reform plans feature a monopoly health-insurance store, operated by federal or state governments, for those who lack employer- or government-sponsored insurance and want to qualify for government subsidies. Advocates claim these monopoly markets will control costs through their purchasing power and enhance price competition by simplifying comparison shopping. When insurers are forced to compete on price, they will prod health-service providers for increased efficiency.

It’s true that retailing innovations can enhance productivity. The retailing sector is credited for 34 percent of the 1995–1999 surge in U.S. labor productivity and continuing growth through 2002; retailers achieved these results through innovations such as convenient web outlets (eBay, Amazon, Netflix); inexpensive, stylish goods (IKEA, Target); and widening ranges of products that enhanced competition, a trend that produced more than 170,000 book titles, 211 car models, and countless custom-designed PCs.

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But before we get swept away, let us remember that these health-insurance markets would be monopolies run by government, two characteristics that normally do not enhance consumer welfare. Picture the efficiency of your Division of Motor Vehicles, for example.

Also consider government-run monopoly liquor stores. Despite their ability as the single payer to extract better volume discounts from wholesalers than private liquor chains can, their prices are not lower than private stores’. Additionally, they slight consumers through shorter operating hours, inconvenient locations, limited brand availability, and inadequate advertising. By forcing consumers to adjust their shopping habits, they raise prices through loss of time. Although some advocates hope that these features limit liquor consumption, this is not the case.

The results attained by government-run health-insurance markets in Massachusetts and the Netherlands provide equally cautionary evidence: Such markets limit competition, do not control costs, discourage entrepreneurial efforts, and thus cause consumer dissatisfaction.

Government health-insurance markets limit choice, through plans with standardized benefits packages — insurance speak for “you can have it in any color as long as it is black.” Massachusetts’s government-designed insurance policies require enrollees to purchase 52 benefits, some of them very costly. In vitro fertilization, for example, raises the price of insurance by up to 5 percent by itself. We all should empathize with families needing in vitro fertilization, but is this the kind of medical care for which insurance is designed, and if not, is it fair to raise everybody’s family insurance prices by as much as $900 (at 2009 insurance rates) to pay for it?

Most likely, many consumers would not buy all of these government-required benefits if they had freedom of choice. For example, Swiss consumers — who are required to buy their own health insurance — are demonstrably price sensitive. There’s no reason to believe that Americans are any different, and researchers at a recent event at the American Enterprise Institute claimed that 12 million uninsured would find affordable insurance if they could shop for plans that required fewer benefits. Monopoly markets run by the national or state government obviate that possibility.

Massachusetts’s government also prohibits some plan features, such as very high deductibles. Surely some consumers would find lower-priced, high-deductible insurance better than none. But the 57,000 Massachusetts tax filers who are uninsured and cannot afford to buy insurance will not find this option in the government store. (These policies also control costs. The concern that high deductibles diminish health status was dispelled by a massive  RAND Corporation study and more recent results for middle- or more  income earners.)

Why do government-controlled markets require insurance plans that people may not want and prohibit others they may want? The reason is simple: Legislatures that run government markets respond to lobbyists financed by providers and insurers. These interests prefer to sell expensive policies rather than cheap ones; and no one lobbies for consumers. Also, the politics of empathy play a role: People with uncovered conditions often lobby, through the government and media, to force insurance companies to cover their maladies.