Economist Daniel McFadden with some health reform ideas in today’s WSJ:

There are a number of reasons for this gathering storm. First, the U.S. population is getting older, and the old require more medical maintenance. Second, we are getting wealthier, and staying alive is the ultimate luxury good. Third, we demand expensive medical innovations, such as dialysis, MRIs, transplants, stents and biotech. About a third of all medical costs are incurred in the last year of life, and are at best marginally effective. The incentives in the system do not force hard choices.

To deal with this future, three substantial reforms are needed. First, we need to wring out some of the inefficiencies. Something like 30% of our health costs come from administrative overhead, legal costs and defensive medicine. These could be largely eliminated in a comprehensive reform; we just need to emulate best practice in other developed countries.

Second, we need universal health insurance coverage, with active emphasis on preventive medicine that is effective in reducing later medical events and costs. Perhaps this can be accomplished by cobbling together existing sources of finance, as in Gov. Arnold Schwarzenegger’s current proposal for California. However, eventually we will have to go to a system that is not channeled through employers, something like a tax-financed medical voucher system.

Third, we need incentives that match choice of expensive treatments with consumers’ willingness to pay for them, a benefit-cost analysis that places treatment choices and financial responsibility on the individual.