I'm not the poster you're replying to, but I'd guess (given "It's the healthcare problem writ large") s/he is thinking of the notion that the demand for products genuinely essential to life (such as life-saving medicine, or water) will be very price-inelastic, and as such, allowing a free market to determine the price may lead to a price that is cripplingly high for consumers at the low end.

In my mind, it's nowhere near as simple as that in this case (although I'd say it is nearly that simple for, say, the life-saving medicine case (but I'm getting side-tracked here)) -- there's a lot of non-essential uses of water, and those sources of demand would be price-elastic, which may be enough to prevent that sort of market failure. I suppose it would depend on what proportion of the demand for water is "essential".