In the NEJM, Jon Gruber lays out the case for ending the tax exemption on employer-provided health insurance subsidies, as a method of helping pay for expanded insurance coverage. To economists, at least on the most basic level, before you start thinking about employers dropping insurance altogether, this qualifies as a no-brainer. Tax exemptions are subsidies that encourage more spending. Everybody grouses about out-of-control health care costs; this would clearly qualify as a "two-for-one" kind of policy, by reducing demand.
The problem is that nobody ever thinks quantity demanded is the culprit in rising costs. I would agree that it's not necessarily clear that it is, but neither is it clear why the free-market level ought to be insufficiently high that we should subsidize it.
