President Barack Obama has repeatedly said that health-care reform "isn't about politics. This is about people's lives."

It's also about free markets — the mechanism for pricing health care.

The free market has gone from being a generally successful means to an end to an unconditional political ideology. The free market works well, but with health care, Americans will not be happy with the equilibrium price it sets. In the midst of an inevitable Senate health-care vote, it's an appropriate time to set politics aside and take stock of economic realities.

To understand how health-care prices are set, consider this example: A child sees a lemonade stand offering a cool cup of juice on a hot day for a price inconsequential to his weekly allowance, say 50 cents. He buys a cup, or even two, if it's a real scorcher. The girl selling the juice realizes that increasingly hot days and the popularity of her great recipe have increased how much the neighborhood kids want a drink. She raises prices. The invisible hand is providing equilibrium, and the free market is, indeed, working.

One afternoon, a diabetic boy comes to the stand, requesting lemonade with extra sugar. His blood sugar has dropped to dangerously low levels. Recognizing the opportunity, she offers the juice at a 500 percent markup. The boy reaches in his pocket, noting he only has 75 cents. She says he must promise to pay her the rest from home, whether or not he has the money. Of course, he agrees.

This concept is called the price-elasticity of demand. It is the measure of a person's change in demand, resulting from a change in the price of that transaction. None of the other children would have paid the 500 percent markup, regardless of how hot the day. But the boy's only alternative was sacrificing his health. His demand is infinitely price-inelastic. Free-market mechanisms yielded an equilibrium price, but this time, not a favorable one.

In health care, the insurance companies sell a product, like the little girl at the lemonade stand. They set prices on demand, again, as the little girl did. However, customers for health insurance all but infinitely demand the service, so while there might be equilibrium in transaction, equilibrium prices are very high. Free markets are working very well, but in doing so, setting exorbitantly high prices.