Last week, the U.S. Census Bureau reported that 1.5 million more Americans had lost their health insurance coverage. The uninsured now number 45 million. Some became uninsured when they lost their jobs, others when employers could no longer afford premiums that are roughly doubling in cost every five years.

So, though it will play third fiddle behind the economy and the war in Iraq, health care will be a big issue in the presidential election. George Bush and John Kerry have both outlined plans to make health insurance more affordable and available. But neither candidate has called for the kinds of changes that must be made if Americans are to receive quality health care at a bearable cost.

Americans pay far more for health care than residents of most developed nations yet they die sooner and otherwise suffer poorer health. In 2003, it cost an average of $6,200 per employee to provide health insurance and nearly twice that to insure a family. As costs rise, more people lose coverage. Providers recoup the cost of caring for those without insurance by raising the price paid by the insured.

Tinkering cannot save this dysfunctional system, business professors Michael Porter of Harvard and Elizabeth Teisberg of the University of Virginia said in a recent essay in the Harvard Business Review. They're right. Progress will only be made, no matter who foots the bill, when all sectors of the industry compete over the right things.

The authors argue that competition in health care has long been a zero-sum game that does nothing to improve the quality of service and little if anything to hold down costs. "The system divides value instead of increasing it," they write.

Hospitals compete against hospitals and strive to be all things to all people. Insurers battle each other not over the higher quality of patient outcomes but to offer a lower-cost product. Good information - does Insurer A, all things being equal, keep its subscribers healthier than Insurer B? - doesn't exist. So employers choose health plans based largely on cost.

Costs are shifted "from the payer to the patient, from the health plan to the hospital, from the hospital to the physician, from the insured to the uninsured and so on.

Passing costs from one player to another, like a hot potato, creates no net value," the professors said. Players compete by growing larger to gain greater bargaining power. But bargaining shifts costs; it doesn't reduce them.

The length of health plan contracts - typically one year -creates another problem. It results in little incentive for an insurer to invest in the preventive care that would pay big dividends in the long run, since the benefit could accrue to another insurer, not them. Stockholder pressure for a good return quarter-by-quarter, year-by-year provides another disincentive to invest in preventive care. And insurers compete to sign up health customers, not to keep current ones healthy.

The constant battle by insurers to deny care and by patients to secure it creates mountains of paperwork, which increases administrative costs. Delayed and rationed care leads to the need for more expensive treatments later. Penalties for seeking care out of the network limit choice and minimize competition among providers.

Disputes are resolved in the legal system, robbing the health-care system of resources that should be devoted to patient care while encouraging doctors to practice defensive medicine. Pressure to minimize costs forces doctors to spend less time with patients. The result is unhappy patients, unhappy doctors and outcomes that are far less satisfactory than they could be.

In sum, the system is an unsustainable mess.

Tomorrow: Some prescriptions for healing.