Adam is mostly right, but he’s wrong about very important thing. This mess WAS created by government. First, through the tax preference for employer subsidized medical insurance. That launched the third-party payer phenomenon. Second, through Medicare, Medicaid and other government health programs. Government pays around half of all US medical costs, and it is government that demands the hugest discounts of all against the grossly inflated paymaster.
Private providers, insurance companies, and patients predictably act on the perverse incentives that are inherent to a system that is oriented toward third-party payment.