Reforming the US health care system presents a daunting challenge, and there will be no shortage of proposals as the Obama administration prepares to handle it. Appropriately, the early dialogue has focused on extending coverage to the uninsured. However, any reform also needs to address the underlying problem—the relentless annual growth in the cost of health care—or reform will ultimately be inadequate. Poor affordability contributes directly to the unacceptably high number of uninsured Americans and presents a grave threat to the system’s sustainability.

To stem these high and rising costs, the public and private sectors should cooperate to tackle three underlying problems, starting with the high incidence and cost of treating lifestyle- and behavior-induced diseases, such as obesity. These diseases are responsible not only for a majority of the deaths in the United States but also for the fastest-growing share of health care costs. Second, public and private stakeholders should make health care more affordable and improve its quality by minimizing the economic distortions that now tend to prevent consumers and providers from making value-conscious decisions. Finally, we need to simplify the system’s pervasive and unnecessary administrative complexity to remove the waste that drives up costs, to facilitate the real-time...