> The value the government brings here is extreme negotiating ability with the private insurance providers that individual citizens lack.

This is not good, it distorts the market too much. Look at the negotiating power Spotify and Pandora have over musicians. Pandora negotiates rock-bottom prices with musicians on behalf of its consumers and the consumers think it's great because low prices. Long-term you've decreased compensation for becoming a musician, sound engineer, etc. and harmed the entire music ecosystem.

It's a trade-off between clear short-term gains and diffuse long-term costs.