As Obama's proposals for health reform wend their way through the Congress the economists are coming out of the woodwork. They know what the problem is with our health care system and they have a way to fix it. Scott Horsley reports on Morning edition today:

For lawmakers looking for a way to fund a health care overhaul, employee benefits are a juicy target. Taxing those benefits could raise as much as $150 billion a year. But that's not what excites heath care economists: They say taxing benefits also could make the system work better.

"This is one of the rare circumstances where you could actually raise money while improving efficiency," said Katherine Baicker, an economist at Harvard's School of Public Health.

She cites an economic axiom: When you tax an activity, you get less of it. When you subsidize an activity, you get more. "We're subsidizing health insurance," Baicker said. "So we're getting more and more and more health care consumed."

Because workers don't pay taxes on health benefits received through their employers, they're effectively getting benefits at a discount. And as anyone who's ever walked out of the wholesale store Costco with more groceries than he planned on buying knows, a discount can skew a person's decision-making.

"Just like for anything else, if you got 30 percent off on your next car purchase, you'd probably buy a bigger car," said Leonard Burman, director of the Tax Policy Center in Washington, D.C.

America has ended up with the Hummer of health care systems: big, costly and inefficient.

And he is not alone. Uwe Reinhardt has argued this in several posts to Economix in the Times and Carolyn Lochhead has presented this as gospel truth in her discussions of Health Reform in the SF Comical:

At the White House meeting Tuesday, Senate Finance Committee Chairman Max Baucus of Montana pressed Obama to reduce the exclusion of employer-provided health care benefits from taxation.

First used by employers to evade wage and price controls in World War II, the exclusion is responsible for many distortions and inefficiencies that now plague the system. Last year it cost the government $226 billion, offering the only large fund to pay for expanding coverage to the uninsured.

If nine out of ten economists agree on a policy direction should we follow or should we run very fast in the opposite direction?

As the tenth economist Wonks Anonymous would like to present his case:

As a matter of fact this is a very nice story for your basic price theory class. On the one hand we do observe tremendous waste in our current health care system, on the other hand we see a subsidy. We know from numerous other examples - farmers feeding subsidized bread to their pigs and so on - that subsidies tend to cause waste and that waste drives up costs. What could be simpler?

Well, in the case of health care nothing that was strictly compatible with reality could be nearly so simple. The problem with these analyses is that they assume two things which are almost entirely untrue: That people derive satisfaction from the consumption of treatments and tests, independent of their beliefs about the impact of these treatments on their health and that patients are the real decision makers in health care.

While Wonks does understand that some people are motivated by price to seek unneeded treatments - for example Uwe Reinhardt reports that he underwent a colonoscopy on the day after Christmas because tax policy made it cheaper - he is mystified by these folks. Most medical treatments and tests that Wonks Anonymous has undergone are at the best tedious and more often distinctly unpleasant. Even when they are accompanied by drugs Wonks Anonymous has better things to do with his time.

Nor does Wonks Anonymous presume himself to be the final medical decision maker. Wonks Anonymous studied economics and trained as a data programmer and analyst. His doctor spent years in medical school and then in practical training as an intern and resident. Doctors in the group practice that Wonks Anonymous works for do not analyze medical office data, Wonks Anonymous does not presume to have the final say on medical treatments.

We listen to each other, doctors have ideas about data and Wonks Anonymous has ideas about his health, but we need to trust each other's expertise. Wonks Anonymous realizes that some patients would like to be able to stay awake to direct their surgeries and so on but he is, once more, mystified.

Consumer choice in medical care is limited. We choose our doctor or medical group. When we have serious illnesses we may choose to discontinue treatment for personal reasons. In almost all cases we are best off following the advice of a trusted physician

And if doctors choose health care, our current system of incentives, developed independent of tax policy and subsidies, is all wrong. We pay doctors for treatments, the more elaborate and expensive the better. The time that doctors spend talking, counseling and building relationships is heavily discounted or entirely unpaid.

Even assuming that all doctors are pretty good people, which Wonks Anonymous believes, this system distorts the kind of care offered. Even good doctors need to make a living and run their offices, just like anybody else. To do this they need a tream of payments from the government and insurance companies. The tests and the treatments that they order may not be strictly needed but they help to pay for the conversations and consultations that are the heart of medical practice.

And of course doctors who have been corrupted by taking too many undergraduate economics classes will game the system for all that it is worth.

Wonks Anonymous recalls a story that Chinese physicians were paid a retainer by their patients as long as the patient was in good health.  This is probably some Western " Wisdom of the Orient" story. It is the start of a good idea.

We need to pay doctors and hospitals for their relationships to their patients. They would take responsibility for delivering comprehensive health care and receive a risk adjusted capitation payment. This would make real medical decision makers conscious of costs. At the same time patients would be free to change their health care provider which would insure that health care providers delivered overall quality care.

Of course this supposes a major reorganization of our health care production system. Which reorganization Wonks Anonymous has argued for elsewhere. Such a reorganization would require major changes from all parties in the system. In light of this Wonks Anonymous can see the attractiveness of taxing employer health benefits. The change will increase tax revenue and, if it fails to fix the health care mess, we can always pretend that patients are really all powerful consumers and blame their stupidity and inattention for the failure.