If you learn nothing else today, I would ask you to learn that moral hazard is the cause of medical price hyperinflation.

Moral hazard is not just two words that don’t seem to go together. Moral hazard is when the person who bears the economic burden of a decision is not the decision maker. In the health care setting, moral hazard is when the third party payer (insurance/government) bears the economic consequences of a patient’s decision.

When there is moral hazard, the patient cares less about what drugs or procedures cost, and cares less about what doctors charge.  If the “buyer” does not sufficiently care what things cost, of course the prices rise. Why wouldn’t they? If I could sell my 20-cent candy bar for $40 to the first person who comes in the door, why would I not charge $40? If everyone in America let their teenage daughters go shopping for clothes with ad lib unlimited access to the parent’s credit card, think of the effects on the prices at stores such as the Gap and Abercrombie & Fitch. The prices would skyrocket.

High technology is not the cause of medical inflation: high tech in all private sectors of the economy, such as information technology, brings prices rapidly down, and it would do so in medicine but for moral hazard. Medical liability is a contributor to high costs, but again, if the patients bore the financial costs of the defensive medicine tests ordered by physicians, the patients would balk, and unnecessary defensive medicine would decline.

To address the price inflation caused by moral hazard, government mandates price controls, which always and absolutely lead to shortages and misallocation of resources and are uniformly and always proven to fail. We are in this stage currently in our country, with price controls dominating the medical landscape. And it is of course failing.

To reverse medical hyperinflation requires elimination of moral hazard. Either the patient has to pay for the care they choose, or insurance companies or the government that is paying will have to make the medical decisions for the patient. Both of these options eliminate moral hazard and both will bring down the prices of health care. Nothing else will work. The important question therefore is not who should pay for health care, but rather who should be making your medical decisions?  Do you want Obama or Bush making your personal medical decisions for you? Or should you make them yourself?  If you think you should make your own medical decisions, then the only way to solve the economic failure of our medical system is for you to also pay your own medical bills.

Now, with health care prices so enormously overinflated, the concept of paying your own expenses is inconceivable. But again, if everyone pays for his own medical expenses, moral hazard goes away, and prices will fall every bit as fast and as far as the prices of computers has fallen. And think how accessible excellent computers are today. Low prices from the free market will make health care accessible and excellent and far more affordable. In contrast, health insurance makes health care impossibly expensive and it will decay into a situation in which the government will control personal medical decisions.

The cheapest form of health care is to let sick people die. And the government will always need to save money on health care so they can afford to send soldiers to foreign lands that have oil, subsidize big agribusiness to grow corn to make ethanol to destroy our engines, give huge grants to bankrupt companies whose executives support Obama, double the size of the NSA’s Utah data center, or bail out a few more Wall Street looters.

Remember that health insurance  — because of its inherent moral hazard — is the problem, not the solution.

Instead of letting the politicians tell us what to do, we should let the people figure it out in the marketplace of free ideas and free exchange. And as a critical part of this, those who care about the poor should be generous to the poor, directly and personally, as opposed to having their generosity channeled through the corruption of the crony-government coffers. Americans are as a whole the most generous people on the planet. And doctors are the most generous of Americans, or at least we used to be before we as a profession got so consumed and beaten down by the bureaucracy of health insurance and government. Don’t let the government continue to abolish our culture of individual generosity.

We can solve our health care woes. The government can’t. But we can.

John F. Hunt is a physician and author of ASSUME THE PHYSICIAN: Modern Medicine’s “Catch-22″.