1) Competition is good, right? Well, if these health exchanges that PPACA sets up provide more competition to provide insurers, isn't that a good thing? I mean, if the private insurance is so much better than the public health exchanges, everyone will just buy private insurance.
2) Congress isn't exempting anyone. Congress pays for some of the staffers' insurance. This little "exemption" thing (lol) is about how the payments will be handled under PPACA.
3) Tort reform isn't going to fix the incentives. Patients don't have enough knowledge to make intelligent decisions, and their decisions are frequently made under duress. Doctors have huge debt burdens that need to be taken away. Insurance companies have shareholders that they need to pay off. Hospitals make money on every service, so their incentive is to provide as many services as possible, even if they aren't necessary.
IMO, the true potential for reform involves two things.
a) Increase the supply of medical professionals. Supply goes up, price goes down. To make this easier, medical school needs to be less expensive. We need more GPs, fewer specialists, and you don't need to be top-tier to help people with checkups, or general medical treatments for colds, flus, etc.
b) Smaller patient care centers. Imagine a doctor's office, but instead of doctors, it's staffed almost entirely by nurses. They form a triage, identifying people who don't actually need to see a full-fledged M.D. They would take walk-ins, no appointment necessary, so that people are more willing to go see the nurse about their problem, instead of waiting for it to become so bad that they need to go to the hospital. This would take care of the bulk of medical appointments, reducing the burden on doctors so that they can spend more than five or ten minutes with each patient.
Unfortunately, neither of my two suggestions do anything to fix most of the incentives. I'm afraid to say it, but the only thing that can provide industry with proper incentives in this regard is government regulation.