John Edwards' Health Regulation Plan, er, "Health Markets"

Paul Krugman praises John Edwards' "Health Markets" plan (as quoted at Economist's View). As Krugman explains it:

People who don’t get insurance from their employers would... purchase insurance through “Health Markets”: government-run bodies negotiating with insurance companies on the public’s behalf. ...

Why is this such a good idea? ...[M]arketing and underwriting — ... screening out high-risk clients — are responsible for two-thirds of insurance companies’ overhead. With insurers selling to government-run Health Markets, not directly to individuals, most of these expenses should go away, making insurance considerably cheaper.

As an initial point, it seems a bit Orwellian to describe "government-run bodies" as "markets." It's very deceptive, at the least. This is not a free market plan in any sense. Rather, a federal government entity will be running things. Think of the Post Office for health insurance.

Second, he seems to be saying that we are going to add an extra layer of government bureaucracy to the existing framework, and that will bring costs down. Well, my head is spinning a bit, but maybe I can figure this out. Perhaps he means that the price of insurance will not include the costs incurred by these new government entitities, which will be paid for by taxpayers. As a result, the retail cost of insurance will decrease. Hmm. I think it may be worth trying to calculate the government entities' costs before rendering a verdict on this plan. Something tells me these costs will be non-negligible.