Editor's note: This is the first in a series looking at our uniquely dysfunctional health care system.

There are times when it's comforting to imagine that at some point in our history Satan hired Dr. Frankenstein to help him stitch together our health care system.

You can picture the Dark Lord standing over the good doctor in his underground lab barking orders for creating the most insane and irrational health care system in the industrialized world.

"It must cost more per person than any other health care system, and it must leave tens of millions uninsured!" Satan cackled. "It must rely on private markets that give most people no choice in who covers them! It must produce hundreds of thousands of bankruptcies every year! And, and, and! It must produce a system where some patients get excessive and wasteful care, while others have to shuttle off to emergency rooms just to receive primary care treatment! Mwah-ha-ha!"

The reason I consider this scenario to be "comforting" is because it's far less depressing than the actual truth, which is that our medical system has been haphazardly pieced together over the last century almost by accident.

After all, even the most dedicated malevolent entity lacks the creative imagination to devise a system that swallows up 16 percent of our economic output on health care while still producing lower average life expectancies than most industrialized nations.

This raises the question, though, of why our system is so screwed up.

Part of the problem that reform advocates have had in making their case to the public is that our insane system has so many moving parts and uniquely inefficient features that it's been extremely difficult to craft a master narrative that the average person can understand (opponents, meanwhile, only have to tell people that Barack Obama wants to slaughter the elderly).

This article is meant to serve as a basic guide for why our health care system is the most inefficient in the industrialized world and why reforming it has proven so incredibly difficult.

Follow the Money

Let's start with a simple premise: The problem with American health care has nothing to do with the quality of our doctors and hospitals and everything to do with how we pay them.

Most industrialized countries pay for their health care either through a single-payer system where hospitals receive payments directly from the government, or through a series of nonprofit private insurers who pay fees based on a rate negotiated by the government. In both models, the government assumes the role of primary negotiator for setting prices.

In the United States, needless to say, this is not the case. We rely on private insurers as the primary price negotiators for medical services. But because insurers lack the cohesion and clout to really drum down prices, Americans spend a lot more on health care than any other country in the world. A lot, lot, lot, lot more.

In 2007, the United States spent an average of $7,290 per person on health care -- 16 percent of gross domestic product. By contrast, our Canadian neighbors  spent an average of $3,895 per person, or 10 percent of GDP. The British spent $2,992 per person, or 8.4 percent of GDP. And the Japanese, who have some of the longest life expectancies in the world, spend $2,581 per person, or 8 percent of GDP.

The numbers for the U.S. are ridiculous by any measure, even if all this spending was producing a race of super beings capable of outswimming sharks and defeating grizzly bears in steel-cage death matches. But no: most studies of the world's healthiest nations don't even place the United States in the top 10, and the World Health Organization ranks our health care system 37th, just ahead of Slovenia's.

Although private insurers lack the ability to effectively bring down costs, they are able to compensate for high treatment prices in other, more pernicious ways.

First, they work like hell to deny coverage to people. Not only do they refuse to sell insurance policies to people with pre-existing medical conditions, but they spend a great deal of energy trying to rescind coverage for patients who dare to rack up big medical bills.

As they've faced increasing pressure to pay for rising medical costs over the years, insurers have expanded the definition of "pre-existing condition" to include such modern plagues as acne, pregnancy and hemorrhoids.

The other way insurers compensate for rising medical prices is to simply pass the cost on to the consumer, something that they've done with great success recently; insurance premiums have more than doubled over the last decade and have grown more than twice the rate of inflation.

Now, you might say that if premium prices get too high, then more consumers will opt out and thus force the insurers to bring down prices. And if Americans primarily purchased their insurance on an individual basis, that might certainly be the case.

But no! In America, most people get their insurance through their employers. This means that price increases are passed on to them indirectly in the form of stagnating wages.

In other words, if you've wondered over the past few years why you've gotten a paltry raise, no raise or even a pay cut, chances are it's because your company is struggling to foot the bill for your health insurance premiums. The bottom line is that insurance companies can get away with gouging consumers because consumers don't really know that they're being gouged.

It Gets Worse

As if all this weren't bad enough, our system adds several stupid little wrinkles to the equation that drive up costs even further.

The first and most obvious wrinkle is that the high cost of health care in this country prices tens of millions of people out of the private insurance market.

People who don't have insurance cannot afford to get good preventative care from a primary care physician and must therefore rely on emergency rooms for their medical needs. Needless to say, emergency-room care is really damn expensive, and having millions of people rely on it so heavily is another reason health care costs keep going up.

The second wrinkle is that even Americans who have insurance have a tough time getting it to pay for their preventative care.

You might think that insurance companies would have every reason in the world to wring long-term savings from the system by investing more in their customers' preventative care, and in a rational world they would. But since Americans change jobs [PDF] -- and therefore insurance plans -- once every five years, insurers figure that they're better off not paying for chronic-care investments that will hurt them financially in the short run without providing them with long-run savings.

Or as New York Times writer Ian Urbina put it in an article on the difficulties of funding long-term diabetes treatment, "any savings from preventative measures will only go to [the insurers'] competitors."

The third wrinkle is the amount of money it costs for doctors to practice medicine.

American doctors have to pay a ton of money for malpractice insurance and medical school. In other countries, doctors are far less likely to be sued successfully for large sums of money, and the government will pick up some or all of doctors' tabs for medical school.

T.R. Reid notes in his book, The Healing of America, French doctors typically pay less than $1,000 per year for malpractice insurance, while American doctors on average pay tens of thousands of dollars, even in states that cap malpractice awards. Because of this, American doctors are far less willing than doctors in other countries to take less money for the services they perform.

And finally and most infuriatingly, there's the cost to hospitals for keeping track of all this crap.

Since hospitals have to deal with such a wide variety of payers for their services, they often have to waste ungodly amounts of time and money just trying to keep track of who the hell owes them money.

According to Reid, hospitals are increasingly hiring more "compilers" who serve as "middlemen who compile the bills that doctors submit and then shuttle them through a payment system."

Or put another way, providers have been forced to create a layer of wasteful bureaucracy whose sole job is to deal with wasteful bureaucracy.

If you aren't hitting your head against your desk yet while reading this, then I am clearly not doing a good enough job in explaining the utter lunacy of this "system." When you stand back and look at the totality of this calamitous mess, with its warped financial incentives, its appalling inequities and its fragmented payment structure, you can't help but grudgingly appreciate it as a true masterwork of bad systemic design.

After all, if stupid health care policy were artwork, the American system would be the equivalent of "Mona Lisa" or "Starry Night" (or, perhaps more accurately, "Guernica").

It takes a uniquely American, red-white-and-blue, star-spangled failure to produce a private market that miraculously offers most consumers no individual choice of their provider, but we've somehow pulled it off.

Next: We'll take a look at why it's been nearly impossible to reform.

Brad Reed is a writer in Boston. His work has previously appeared in the American Prospect Online, and he blogs frequently at Sadly, No!

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