John Cogan, Glenn Hubbard, and Daniel Kessler discuss market-based ways of reforming health care.
One of Cogan, Hubbard, and Kessler's primary suggestions to control costs is to get rid of the tax-preferred status of paying people in health insurance dollars.
Milton Friedman said that it's easier to spend other people's money on yourself. This is exactly what the current tax-preferred status of health insurance premiums does. We work and get paid partially in health care premiums because typical money wages are taxed and health care premiums are not. When someone decides whether to go to the doctor, he compares the value the office visit gives him to his co-payment. It doesn't matter whether the overall cost of the doctor's visit is $100, $1000, or $10,000. As long as the person's value of the visit to the doctor is more than the co-pay, he goes. "Other people" pay the balance.
Taken society-wide, we probably tend to go more often than we otherwise would, putting more pressure on health care resources and pushing up costs more than is optimal. The tax-preferred status of health care premiums have the effect of raising the demand for health care (assuming health care is a normal good). Eliminating the tax-preferred status of health insurance premiums would be a useful way to bring these costs under control.