John F. Cogan - Healthy, Wealthy, and Wise: 5 Steps to a Better Health Care System

When we published the first edition of this book in 2005, our country faced an important fork in the road in health policy: shift to more patient-centered health care, with incentives to control costs and promote innovation, or surrender to pressure for expansion of the role of government, with diminished incentives for both cost containment and innovation. With the passage of the Patient Protection and Affordable Care Act (PPACA) in 2010, President Obama and the Congress chose the second path.

This new law represents a wrong turn. Unpopular with the American people in no small part because of the uncompromising legislative process through which it was enacted, the law put the crucial first step of cost containment and innovation in the back seat of a car driven by costly expansion of access within a system of flawed incentives. This approach will lead to higher health spending, greater government involvement in health care administration, and negative effects on the U.S. economic activity.

There is a better way.

Fundamental reform centering on tax changes, insurance-market changes, and the redesign of Medicare and Medicaid can slow the rate of growth of health care costs, expand access to high-quality health care, and slow down the runaway budget train. While we wish the PPACA had not been passed and we believe Congress should start over, we also present pathways toward sensible reform within the recently enacted law and, importantly, within the existing frameworks of the Medicare and Medicaid programs.

It remains the case that unintended consequences of a handful of public policies are in large part responsible for the problems of the health care system. These policies share a common feature, now amplified by the PPACA: they fail to promote the proper functioning of markets. In two areas in particular, tax policy and health insurance regulation, government policy continues to actively hinder the operation of markets for health services.

Since the books initial publication, we have conducted additional research on the consequences of tax policy for health spending and health insurance. We present that work, along with updated estimates of the impact of our proposal on the federal budget, the number of insured Americans, and health care spending.

Our closing point in the first edition is now more true after the passage of the 2010 law: the time to implement sensible reforms is now. Failure to do so will exacerbate the problems of wasteful cost growth and lack of insurance. It will inevitably increase the pressure for more public intervention, with adverse consequences for the quality of health care and economic growth more broadly.

John F. Cogan R. Glenn Hubbard Daniel P. Kessler