It adds one crucial feature every healthy, functioning market needs: honest feedback.
Right now nobody, and I mean literally nobody, makes rational economic decisions for medicine in the US.
Neither the hospital, doctor, administrator, insurance company, or patient really has any real idea 1) the cost of the health care being provided 2) the amounts being charged or 3) the dollar amount of benefit gained by the patient. The actors above who do have some pieces of the data largely aren't the ones making the decisions.
If you abolish insurance and state prices up front, at least you force hospitals to charge something closer to the true cost for services, and you force patients to evaluate whether they would rather have care or dollars in their pockets. Over time, they would figure out what's good value for their health and what isn't.
Of course one could argue that the government should be making all these decisions because it has access to more information, and that's probably true; but that's not what's happening in our Frankenstein ('s monster) of a system.
The root cause tho is that the consumer of the product (patient) is generally different from the payer (employer). Insurance isn’t the real problem. The invaluable argument could be applied to your house too.
Currently though, even if the patient is paying for insurance out of their own pocket, the real decisionmaker is generally still bureaucrats (in the literal sense) at the insurance company + hospital.
Speculation to follow: Health care as an industry is significantly more profitable than the proactive/preventative healh programs. Eliminating insurance removes a volatility dimension. Preventing problems (if possible) saves infinite suffering but costs someone profit.
