How to fix health-care

Allow markets to work, of course. John Cogan, Glenn Hummard, and Daniel Kessler review what the root problem is with our health-care trouble is and what solutions naturally follow in this piece in the WSJ. Excerpt:

Free markets are a proven way to discipline costs, encourage innovation and increase quality. The starting point to fixing the health-care system is recognizing that a handful of existing public policies prevent markets from working, and then changing them. Poorly conceived federal tax policies, insurance regulation, and barriers to entry, in particular, have insulated consumers from costs and inhibited competition.

Rising costs lie at the heart of the health-care problem. Each percentage-point rise in health-insurance costs increases the number of uninsured by 300,000 people. This also creates a vicious cost spiral because when healthy individuals opt out of insurance, the costs for the remaining insured rise. The recent increase in costs also has impacts beyond the health-care market. For many employees, rising insurance costs have become a serious drain on their disposable income. The typical worker now pays $750 more per year for insurance than just three years ago. ...

Using third parties to pay for health care is so pervasive that we accept it as a natural part of the health-care system. Yet there's nothing natural about it. Food and shelter are even more basic to our well-being, but we don't use insurance to buy bread or repair broken windows. ...

Leveling the playing field between employer-provided insurance and out-of-pocket payments is an essential step to fixing health care. Either the tax exemption for employer-provided health insurance must be repealed or a broad-based tax deduction for out-of-pocket expenses must be created. The former faces enormous political barriers (it would add about $1,500 to the typical family's annual tax burden) and would ignore a positive effect of encouraging everyone to have private insurance coverage.