Executive Summary
Introduction
Diagnosing the Health Care Industry Strengths
The Health Care Wedge
Current Health Insurance Plans Worsen the Wedge
The Empirical Existence of the Wedge
Studies Demonstrate that Government Policies Are the Problem
The Consequences of Rising Health Care Costs
Distribution of Health Care Spending
President Obama’s Reforms Do Not Address the Root Causes of the Problem
Quantifying the Potential Economic Impacts
The Economic Impacts of Obama-Style Health Care on the States
Solutions
Bibliography
Executive Summary
In 1960, the private sector funded over three-quarters of the nation's health care expenditures. Individuals paid nearly one-half of the total national health care expenditures through out-of-pocket expenditures. Read more.
Introduction
President Obama is correct when he says that soaring health care costs make our currentcourse unsustainable. Adjusting for the growing U.S. population, the dollar level of expenditures on health care has exceeded the growth in overall consumer prices in the economy every year for nearly the past 50 years. Such a trend cannot continue forever. Read more.
Diagnosing the Health Care Industry Strengths
Before addressing the adverse incentives and outcomes from the current U.S. health care system, it is worthwhile to quickly summarize its most important strengths. Read more.
The Health Care Wedge
The health care system is facing serious problems. These problems, which imposen significant hardships on many individuals, need correction. Correcting the problems with the current health care system begins with an understanding of incentives to invest one's money one way or another. Read more.
Current Health Insurance Plans Worsen the Wedge
Most Americans do not have health insurance as the term is traditionally understood. Insurance is a tool for managing risk. In exchange for periodic payments from a customer, an insurance company provides protection against a large but uncertain potential cost. Read more.
The Empirical Existence of the Wedge
The empirical data confirm the expected outcomes from the wedge in the health care market health care expenditures and costs are rising faster than our economy. According to the Centers for Medicare & Medicaid Services, total national health expenditures accounted for more than 16 percent of our economy in 2007; and are expected to be about 18 percent of GDP in 2009. Read more.
Studies Demonstrate that Government Policies Are the Problem
Research into the causes of the excessive health care price increases concludes that government policies are the primary reason why prices are growing excessively and coverage is so distorted. Consequently, the most effective method of controlling the excessive price increases is to remove those policies that are causing the excessive price increases in the first place. Read more.
The Consequences of Rising Health Care Costs
Higher expenditure growth can arise for three reasons. Either the price of the service is increasing; the quantity of the services consumed is increasing; or a combination of both. In the case of health care, it is a combination of both, but especially of rising prices. Read more. 
Distribution of Health Care Spending
It is important to note that the distribution of total health care spending is not even. Read more.
President Obama’s Reforms Do Not Address the Root Causes of the Problem
The economic costs from these inefficiencies are large. One study estimates that the inefficiencies of the current system alone could account for 30 percent of the total health care spending in 2007. Read more.
Quantifying the Potential Economic Impacts
Because the concepts behind the Obama Administration's health care reform plans do not address the incentives in the current health care system-indeed, they often worsen these incentives-health reforms based on these concepts will have a significant negative economic impact. Read more.
The Economic Impacts of Obama-Style Health Care on the States
Health care reforms based on President Obama's priorities would affect each state differently. Each would experience lower overall economic activity as well as increased fiscal pressures on the state budget. Read more.
Solutions
By empowering patients and doctors to manage health care decisions, a patient-centered health care reform would directly address the distortions weakening our current health care system and would simultaneously control costs, increase health outcomes, and improve the overall efficiency of the health care system. Read more.
