Better Way to Reform Health Care, A

Innovation and Economic Growth

Article Snapshot


Daniel Kessler


Wall Street Journal, February 24, 2010.


This oped proposes ways to improve health care by reducing costs.

Policy Relevance

The current health care reform plan should be scrapped and replaced by reforms that would help health care markets work better.

Main Points

  • The health care plan proposed by the Obama administration relies too much on regulation and mandates, and will make the fundamental problem of rising health care costs worse.

  • Five out of every six dollars of health care spending is paid for by someone other than the patient. Patients seek care without worrying about the reality of costs. This means runaway spending growth.

  • To slow spending growth, individuals should pay for more of their health care themselves. Insurance companies and health care providers should compete more vigorously.

  • The tax code makes employer-sponsored health insurance deductible, but individual out-of-pocket insurance is not. For most families, buying health care through their employer is 30%-40% cheaper than buying directly.
    • Making all out-of-pocket insurance expenses deductible would fix this bias. 
    • Health Savings Accounts and other programs to encourage people to pay for health care out-of-pocket should be expanded.

  • Counting employer-sponsored insurance as taxable income would have been helpful.

  • People should be allowed to buy health insurance offered in states other than those where they live. This is currently against state rules.

  • Caps for malpractice damages for pain and suffering would reduce the practice of wasteful “defensive medicine.”

  • These reforms would reduce federal revenues only $3 billion per year, as insurance premiums will fall due to heightened competition, and worker’s taxable wages will rise.

  • Access to health care and insurance will improve as costs are reduced.

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