Patient Power: Solving America's Health Care Crisis.

• Author: Lee, Dwight R.

Health care is an issue that could easily dominate the domestic political agenda in the 1990s and beyond. It is widely believed that America's health care industry is in crisis, providing fewer people with acceptable care at increasingly unacceptable costs, and that the only way to solve this crisis is for the federal government to increase its role in health care decisions. Undeniably, there are serious problems in the way health care is delivered and paid for in the United States. Improvements can and should be made. But in the rush to make improvements, three things should be kept in mind. First, the health care system is in better shape than recent political pronouncements of a "crisis" have led the American public to believe. Second, many health care problems we do face are the result of existing government policies that distort incentives in the market for health care. Third, many of the proposed solutions to the health care "crisis" would make matters worse.

These cautions will be dismissed by those convinced that our health care system is so bad that making it any worse would be difficult. These people should get a copy of Patient Power: Solving America's Health Care Crisis, by John Goodman and Gerald Musgrave, and read it with care. The more widely the information contained in this book is disseminated, the better the chance that health care reform will be constructive rather than destructive.

Goodman and Musgrave provide an extraordinarily complete explanation of 1) the evolution of the U.S. health care system, 2) the role of government policy in that evolution, 3) the policy-induced distortions in the health care market, 4) alternative policies that would solve many problems that plague the current system by increasing the role of the patient in health care decisions, and 5) the enormous strengths of the U.S. health care system compared to the health care systems in other countries commonly held up as preferred alternatives.

From the end of World War II until about the mid-1980s, hospital and health care was financed largely through a cost-plus system. Hospitals, for example, relied increasingly on third-party payers (either insurance or government), rather than the consumers of health care, to cover their expenses. And third-parties paid hospitals on the basis of costs rather than charges tied to specific services. For example, if Blue Cross patients accounted for one-third of a hospitals patient days, Blue Cross would pay...