Yesterday was a rough day for those few hearty souls who think Washington is going to do much about fixing our health care system any time soon.

Congress failed to override President Bush’s veto of legislation to expand the State Children’s Health Insurance Program (SCHIP). At almost the same time, the House Budget Committee held a  hearing on whether tax incentives are the best tool to increase private insurance coverage. All we learned on Oct. 18 is that most Democrats and Republicans remain dug into their respective trenches in the ongoing battle between government programs versus private markets. Or, if you prefer, between socialized medicine versus rapacious insurance companies.

At least the SCHIP veto will eventually lead to modest growth in the program—less than Congress prefers but much more than Bush would like. The hearing led—nowhere. Galen Institute president Grace-Marie Turner argued, as she has for years, that tax incentives will lead to creation of a dynamic individual market for health insurance. Tax Policy Center director Len Burman countered that, while there may be a greater role for private insurance, using the tax code to expand health coverage is fraught with risk.

Getting beyond the current impasse will never be simple, but one way is to remember what we want to accomplish by retooling health care. So, here are five rules to live by:  

1. It is about the outcomes, stupid: However we finance care, our aim should be to provide the best medicine possible to the largest number of people. This doesn’t mean the most intensive, or the most expensive. It means the best. These sound like platitudes, but true quality care is hard to do. 

2. Covering more people and reducing costs may be contradictory goals. Amy Finkelstein at MIT makes a persuasive case that the wide availability of insurance is a major cause of rising health care costs. Which goal takes precedence?

3. The only way we are going to cut costs is to use less health care. Maybe government or insurance companies will ration care, or perhaps individuals will reduce demand on their own. But, however we do it, we need to encourage people to get the care they need while reducing their use of procedures that are dangerous, unnecessary and not cost-effective.

4. Money matters. Critics of both SCHIP expansion and tax incentives make the same argument: Each is an inefficient subsidy because it benefits many people who already have insurance. To some degree, both sets of critics are right. Money also matters to individual families. A new paper by Linda Blumberg at the Urban Institute shows that coverage would be unaffordable for many working poor even with a tax subsidy that reduces their cost by 10 percent or 15 percent.

5. Choice is complicated. Do we want to pick our own doctors and hospitals, or choose our insurance coverage? We can’t do both. In addition, and to the dismay of many economists, it appears that many patients don’t really want choices. They are much happier being told what to do, especially in times of medical distress.

I don’t know if well-designed tax incentives will achieve these goals, but if not, we need to look elsewhere.