NCPA - National Center for Policy Analysis

Steps toward a Better Health Care System

May 5, 2011

The U.S. health care system faces criticisms about cost, accessibility and quality of care.  While these criticisms are not without foundation, a more productive approach is to ask whether consumers of health care -- and taxpayers in public financing -- are obtaining the highest "value" for the resources devoted to health care.  Achieving this objective stands the greatest chance of success if health care markets function well, but market-based reform is neither a silver bullet nor a cure-all, say researchers at the Hoover Institution.

Markets will not eliminate growth in health care costs -- an inevitable product of technological change -- or uninsurance.  Markets will never solve the problem of how to finance care for the low-income chronically ill.  But the power of markets to allocate resources efficiently -- power evident in every other sector of the economy -- is a critical part of the solution.

Yet, markets cannot flourish without the appropriate institutional support for consumer incentives and choice, provider accountability, and competition.  These needed features are held back in the United States in substantial measure by the unintended consequences of public policies in five areas.  Any serious reform of the U.S. health care system must begin by changing these policies:

  • Reform should increase individual involvement in health care decisions.
  • Insurance companies that meet certain federal standards should be permitted to offer plans on a nationwide basis free from costly state mandates, rules and regulations.
  • There is a need for better provision of information to providers and consumers.
  • There is a need for an explicit public goal to control anticompetitive behavior by doctors, hospitals and insurers.
  • There is a need for reforms to the malpractice system to reduce wasteful treatment and medical errors.

Source: John F. Cogan, R. Glenn Hubbard and Daniel P. Kessler, "Healthy, Wealthy, and Wise: Five Steps to A Better Health Care System," Hoover Institution, April 27, 2011.

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