A few things, specifically about the US health care system:

1) Unlike medical procedures, for dental procedures it's pretty easy to get price quotes from multiple dentists: they will tell you their sticker price if asked. They will also give you the procedure code so you can ask your dental insurance (if any) to what extent that's covered so you'll know what the actual price to you is. People will in fact comparison-shop for major dental procedures, based on cost, dentist reputation, etc.

2) The situation with emergency or time-sensitive procedures (pneumonia, tetanus shot, cut inside mouth) and scheduled non-emergency ones (hip replacement, say, or laser eye surgery) is a priori quite different. It is in fact possible to sanely price-shop for hip replacements if people are willing to tell you prices and there is reputational data available. Unfortunately the medical establishment works hard to prevent both. Laser eye surgery is a particularly interesting case, because there _is_ freely available price information there; you may want to look at what's happened to its price over time. Learning as much about such a procedure as people tend to know about buying cars is not actually all that hard: people don't know that much about cars and there really isn't that much to know about some of the fairly standardized scheduled procedures.

3) People do in fact do the "90% functionality at much lower cost is just fine" thing all the time, with glasses (e.g. buying reading glasses at CVS instead of getting a prescription pair), dental procedures, and some scheduled medical procedures. You're right that "50% less effective treatment at 50% of the cost" doesn't happen much, though. Instead you get 100% less effective lack of treatment at 0% of the cost....

4) Since you brought up baby deliveries.... Sorry, pet peeve. If a hospital is charging you $20000 for a low-risk birth with no complications (which they definitely do!), that's an excellent indicator of how broken the system is. If you shop around for how much that sort of thing costs with people who specialize in low-risk births (birth centers, midwives), you will discover that the typical price for birth plus prenatal visits with no complications in the US is in the $3-5k range. Of course such a setup will not do the various wholly unnecessary things that will be done in a typical hospital birth setting, nor will it be subject to typical hospital billing practices.

5) A good bit of care in the US is end-of-life care, where it is in fact quite possible to make price/time tradeoffs to some extent, as well as comfort/time ones (e.g. hospice vs aggressive cancer treatment that might prolong life for a few months) and people who are in a position to make that choice can in fact make it in an informed way.

In practice, what we call "medicine" is a bunch of separate services that have totally different economics, often being bundled together with completely opaque pricing put on top. For some of them, there is lack of informed customers and lack of choice in outcomes, as you say. For others one or both are present. And even today some parts of "medicine" (e.g. scheduled dental cleanings) work quite different from other parts (e.g. pediatric well-child checkups; try to get a price quote from a doctor for one of these!) for no particularly good reasons that I can see.

The "right" solution to this problem is unclear to me, unfortunately, because as you point out there is a fair amount of emergency medicine where a free market cannot possibly operate. A good example of such a thing is the total lack of any possibility of a free market in emergency ambulance transport, from the patient's point of view. We should stop our attempts at a fake free market in those areas, but we should also try to create actual free markets in medicine where possible. And for quite a few things I believe it is in fact possible.