Healthy, Wealthy, and Wise: Five Steps to a Better Health Care System

Innovation and Economic Growth

Article Snapshot

Author(s)

Daniel Kessler

Source

Washington: AEI Press/Hoover Institution, 2006

Summary

This book proposes policies to improve health care.

Policy Relevance

Reforms could improve the operation of health care markets and reduce the price of insurance.

Main Points

  • Market forces can work in health care, but public policies have stopped markets from working effectively.
    • The tax code affects how people buy insurance.
    • Health insurance is over-regulated at the state level.
    • Information about health care quality is hard to find.
    • Hospitals do not compete enough among themselves.
    • Malpractice liability rules encourage waste and errors.

  • Because of tax policy, most people use insurance plans bought by their employers, rather than paying for care out-of-pocket or buying individual insurance. This raises the price of care and insurance because individuals do not "shop around" for low prices.

  • Price distortions caused by the tax code could be reduced by
    • Revoking the tax deduction for health insurance bought by employers.
    • Making out-of-pocket medical expenses and insurance premiums deductible.
    • Capping tax-free health savings accounts (HSAs) and letting people combine them with any kind of insurance plan to encourage the use of the accounts to pay for medical care out-of-pocket.
    • Giving federal refundable tax credits to help poor people buy insurance.

  • State regulation of health insurance should be replaced by lighter federal regulation.

  • Federal malpractice rules should replace state malpractice law.

  • Antitrust policy could help increase competition between hospitals.

  • Government “report cards” could be made available to give consumers more information about the quality and cost of health care.

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