Trump's biggest mistake in health care failure

Maybe it's a coincidence. But the first full business day after the GOP health insurance bill failed in Congress, the White House announced a new team to revamp the federal bureaucracy by using efficient business strategies.

That's encouraging, because President Trump, who promised to run the country using his business smarts, fumbled the Obamacare replacement bill just like the same old partisan politicians we've endured for decades.

Now that Trump has learned the hard way that the phrase "this is the way Washington works" is an oxymoron, perhaps it can go forward with more confidence than ever in its own independence.

But how can the White House move forward on health care? There are many ways approaching that issue like a business person could actually succeed. Let's look at the top five:

1) Demand? Meet supply

All business operates in the basic law of supply and demand. Government doesn't. The first and biggest mistake politicians have been making about health policy is they continue to conflate the demand for health care with the demand for health insurance. This is no accident as politicians can really only win quick political points and grab big campaign donations if they focus on working with the existing insurance companies.

By contrast, any decent business person would simply look at the situation in the health care market and see that increasing supply via innovation and other methods are the obvious ways to lower costs and improve access and quality. That's priority 1 because even if there were a bill that would give everyone in America great insurance coverage, it won't be worth a dime if there aren't enough doctors and hospitals and drugs to treat all these newly-covered patients.

2) Pricing, Pricing, Pricing

There are few things more vital to the legitimate business world than pricing transparency. That's what makes people watch those stock tickers religiously during stock trading hours. But a clear and strong law forcing total health care price transparency didn't make it into the GOP Obamacare replacement bill. And that's a shame because if patients truly knew the real costs and the options they had every time they consider or are told to get a medical procedure, prices would go down. That's a basic economic fact.

3)  Subsidies? We don't need no stinking subsidies!

Imagine if the local electronics retailer sold flat screen TV's at different prices to different people, depending on their income. Ridiculous. But in the political world, it makes obscene sense to sell health insurance as if supply were no issue and give out lots of subsidies in order to spread the political patronage around as much as possible.

Business people know that every seller charging the same price to any and all comers is the best way to spur more supply, more competition, and better quality. That's why flat screen TV's are better and cheaper with every passing year. And the opposite is why health care and health insurance are more expensive every year. Subsidies skew the system in favor of political concerns.

4) Choice, choice, choice

Only the highest end auto dealers sell super expensive cars with all the amenities with no other choices for consumers. Everyone else offers buyers the chance to pay more for more and less for less in their chosen car. And they do that to make sure they have something everyone in the marketplace could want. Politicians don't have to do that, so Obamacare and the original form of the GOP replacement bill forced everyone to buy health insurance plans loaded with the same "essential benefits" for everyone.

And the old style "major medical" plans that the Affordable Care Act outlawed were still not resurrected by the Republican plan even in its final form. And that's because politicians from both parties don't want to face any backlash from any voters who may protest having to, (gasp!), pay more for more services. But the idea of having to pay more for more is a given in the marketplace and that's just one reason why the marketplace is better than the political world.

5)  Stop bundling and go a la carte

The rise of Netflix, YouTube, Hulu, etc. has taught the cable industry a hard lesson about just how much the public dislikes paying for channels and entertainment it doesn't want just to get the channels and entertainment it does want. The "cut the cord" movement is all about fighting back against that bundling in your cable bill and it's a creation of the free market through and through.

Politicians haven't learned that lesson when it comes to health bills or really any bills for that matter. Every bill is jammed with fine print and added entries that simply wouldn't stand a chance of passage if they were examined and voted on as single items.

A good business approach would be to strip the massive health bill and other bills like it into smaller pieces that could at least be turned into "sales" much more easily. The political class likes big omnibus bills because it helps indemnify them from individual criticism and helps them avoid having to actually work with the public any more than necessary. Good business people know that the only way to succeed is never to lose that kind of connection with their customers and potential customers.

Speaking of that political disconnect versus what we see in successful businesses, there's a real snobbery and falsity to the political class argument about how government functions. Their point is to "ensure" us that governing is so complicated that it really should be left to the experienced bureaucrats. The truth is the only complicated thing about it is the cowardly nature of the political class and its inability to govern properly.

Trump didn't handle the health bill well, precisely because he let the political class from the GOP side handle it way too much. Trump should go more with his outsider gut, reject the nonsense of the political class, and get to work.

Commentary by Jake Novak, senior columnist. Follow him on Twitter @jakejakeny.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.