Of course, Jonathan could have blown it by having nothing important to say in his book. But on the nuts and bolts of health policy, and even on what his uncle called the “vision thing,” he has a lot to say.

I have been around health economics a long time, having been the senior economist for health policy at the Council of Economic Advisers under Ronald Reagan from 1982 to 1984. I’ve tracked the issues since then, and so I’ve read a lot of health care studies. Bush’s book, co-authored with Stephen Baker, is one of the best I’ve seen in a long time.

Entrepreneurial alertness / Bush is cofounder and CEO of Athenahealth; Baker is a former senior writer for Business Week. They bring a deep appreciation of the entrepreneur to their analysis of health care. “Entrepreneur” and “health care” in the same sentence? Really?

Yes, really. They write, “From an entrepreneur’s point of view, there’s something highly appealing, almost intoxicating, about waste and dysfunction in the industry.” They continue, “Those who can dig down through the morass of rules, paperwork, and bureaucratic obstacles can find new markets.” That last sentence got me thinking back to Austrian economist Israel Kirzner’s discussions of “entrepreneurial alertness.”

In this digging, Bush does not disappoint. In chapter after chapter, he and Baker not only show how dysfunctional the health care system is, but also discuss ways that entrepreneurs can make it better. For example, after noting that a magnetic resonance imaging scan (MRI) at Massachusetts General Hospital would be billed at $5,315 to an insured patient, Bush runs the numbers and concludes that a business that did three images an hour and was open 12 hours a day could charge $99 per MRI and make huge profits.

He goes beyond such stories of possibilities and tells of actual successes. A doctor named Arnold Milstein, for example, had worked with Unite Here, a union representing Las Vegas hotel and casino workers. After analyzing the data, he eliminated the most expensive 10 percent of doctors from the union’s health plan, resulting in a $55 million reduction in health care expenditures. Amazingly, many of those doctors picketed the hotels where the union members worked! Milstein believes that the $55 million reduction was due partly to the disciplining effect on the doctors who remained in the plan. And after being stuck at $13 an hour for the previous few years, the workers’ average wage rose by $1.10. This shouldn’t be surprising because, as economists well know, the cost of benefits is borne largely by the beneficiaries in the form of lower pay.

Birthin’ babies / Bush’s first big entrepreneurial venture was in birthing. He calculated that more extensive use of midwives could save a lot of money and that if he set up a string of birthing centers, he could split the gains with insurers. So he and a business partner named Todd Park started Athena Women’s Health and set up some birthing centers in San Diego, with the plan of ultimately going national.

The system worked—for the pregnant women. Bush writes:

Only 10 percent of our births were delivered by C‑section, about one-third of the national average. Ninety percent of the mothers who gave birth in our centers breast-fed their babies, compared to the 67 percent national average at the time. (Now it’s close to 80 percent.) We avoided the common widening incisions called episiotomies, which are expensive, horribly uncomfortable for the mother, and statistically counterproductive.

Unfortunately, it didn’t work for Athena. Why? Their popularity hurt them. Such is the weird structure of health care and health insurance. Bush writes:

It was the opposite of the way a sane market operates. Because we were popular, we attracted customers for what to most women is the most expensive medical procedure of their pre-Medicare years. Increasingly, health plans that offered Athena would receive three or four months of premiums and then pay claims that averaged $12,000—and then lose the customer. The insurers began to view us as toxic. A s**t magnet. Growing numbers of health plans fired us by kicking us out of their networks.

The result: most of their remaining clients were on Medicaid or were uninsured and paid cash.

What Bush doesn’t tell you, perhaps because he doesn’t know, is that in a world without insurance regulation, Athena probably would have made money. Why? Because without insurance regulation, most insurers would probably not have covered delivery, and people who wanted babies would have paid for birthing directly. As actuaries can tell you, for something to be an insurable event, it must typically have two characteristics: large loss and low probability. Because delivering a baby is expensive, the first criterion is covered. But in this era of birth control and legal abortion, a very large percentage of pregnancies brought to term are planned. So baby delivery does not fit the second criterion. Insurers started to cover it in states in which the state government required such coverage. Insurers not in those states started to cover it only when the federal government started requiring it in employer-provided health insurance with the Pregnancy Discrimination Act of 1978. Without that law, most people would do what my very modest-income parents did: save money to pay for delivering a baby. Under that model, Athena might have been a roaring success.

Beyond birthin’ babies / Of course, that decades-old law was not something that Bush could change, even had he known about it. But, true entrepreneur that he is, he realized his mistake.

In building the business, Bush’s firm had developed software to help the company get paid by insurance companies. Specifically, Park’s brother Eddie built software that incorporated each insurer’s idiosyncratic rules. The software worked well. A venture capitalist to whom Bush was appealing for funds to save his birthing business cut him off. “I’m not interested in your birthing business,” he said. “But I can get you $11 million for rights to your software.”

So Bush’s company pivoted. In 1999, when the dot-com boom was at its height, “the new Athenahealth was reborn as an Internet company.”

Put the Uzi away / The company moved back to the Boston area and did great, even after the dot-com bust. But there was one fly in the ointment: President George W. Bush. Jonathan writes, “My cousin, the forty-third president of the United States, was about to sign a bill that could destroy us.”

How? A long-time “antikickback law” prevented hospitals and doctors “from exchanging services, information, or products of value with each other,” considering all such exchanges to be unethical. In 2004, a bill started working its way through Congress that would give “safe harbor” from that law to hospitals so that they could provide doctors with digital technology. But it didn’t give safe harbor to hospitals that bought Internet services.

A single detail in a law, he writes, “can throw lives or entire companies into a tailspin.” Elsewhere he writes, “Government is like a giant with an Uzi.”

So Bush flew to Washington to lobby Congress. It won’t surprise anyone who has seen complex laws being made that few members of Congress even knew what was in the bill. In the office of Rep. Nancy Johnson (R–Conn.), chair of the health subcommittee of the House Committee on Ways and Means, Bush watched the congresswoman page through the bill and find the relevant section. He pointed to where it said “computers and software” and asked her to add “and Internet services.” He writes, “She did.”

Bush got to see the ugliness of government up close. A single detail in a law, he writes, “can throw lives or entire companies into a tailspin.” In one of the most memorable lines in the book, he writes, “Government is like a giant with an Uzi.”

Conclusion / There is so much more of value in the book. One striking section is five pages of excerpts from a conversation that Bush had with Bob Kocher, who “worked for the Obama administration and wrote most of the original Affordable Care Act.” Kocher went all Milton Friedman on the skewed incentives in the medical system that existed before the ACA and then admitted that the ACA didn’t do much to make that better. I wish that Bush had asked him whether he thought the ACA made it any better.

Unfortunately, amidst all his great insights and stories, Bush forgets everything he learned on his trip to Washington and wimps out. “I don’t intend,” he writes, “to spend this chapter pounding on the government, or proposing a rapid shift to a private health care economy.” While, to his credit, he wants “only a fraction” of the regulations we have today, he does want “smarter” regulations.

He does understand that the more competition there is in health care, the better. How do you get more competition? One way is to get more insurance companies in the business. But he claims that this “is one area where the government could help, perhaps the way it does with Fannie Mae and Freddie Mac in real estate.” Really? Because Fannie Mae and Freddie Mac worked so well? Say it ain’t so, Jonathan.

There’s a much more straightforward way to get more competition in insurance, and it’s one of the few good ideas that many of the Republicans had during the ACA debates of 2009 and 2010: allow people to buy insurance across state lines, with the rules dictated by the state in which the insurer is located. This is done with credit cards now, which is why it’s so much easier to get a credit card than it was in the early 1970s. Such a solution is not only good economics but also good federalism. State governments should not be able to restrict interstate commerce. I was disappointed that, although Bush earlier had recognized the problems with state regulation of interstate commerce, he failed to apply that insight here.

Still, this is a great book. I’m glad that Jonathan chose his career rather that of his uncle and cousin.