The title of this article is suggestive of something that has not yet happened, but most likely will.
Without a massive effort, undoing decades of a march towards a single-payor system for the US is almost impossible. There is much that must be reversed that has taken many decades to instill. While the topic of how we got to where we are would take an entire series of books, this series of articles is narrowly focused for brevity’s sake and will focus on only a portion of specific instances of government involvement in health insurance that created a large part of the disaster we currently have in health care.
The basic idea of insurance is to provide a safety net for catastrophic, unforeseen circumstances that cause significant financial loss due to risks that are simply a part of human life. However, modern health insurance is designed to provide a more comprehensive approach to a system to pay for nearly all forms of health care, with some participation of policy holders (for now). Health insurance, unlike other insurance, no longer covers catastrophic events, but also covers everyday health issues. Every level of administration adds to costs, because everyone has to be compensated for work. It takes a lot of administration, both on the part of a doctor and on the part of a patient, to account for a third party who administers the payment and pricing of health costs. When every day health issues are priced into health insurance, it increases both the costs of insurance and the costs of health care in general.
The idea of comprehensive care first formulated and coalesced in the early 1900s through the 1920s. Unions had been paying for employee health issues and the idea of preventative care to prevent catastrophic events became attractive as an enhancement to what was being offered. Having a third party involved in this had the first effects of administration between a patient and their doctor, increasing the costs of basic health care in the US forever.
By the late 1920s, the idea that employers should pay these costs rather than unions was becoming prominent as unions were including it in their bargaining agreements. Although the first instances of health insurance had already been introduced in private markets, they lacked popularity. The idea of having a coverage that would incentivize employees to be bound to their employer with the golden handcuffs of health insurance was appealing to businesses, but they could not add it without incurring prohibitive costs. Pressure from labor unions for businesses to be involved was mounting. By extension, pressures derived from the massive influence unions had in the political realm forced the introduction of legislation in the latter part of the 1920s that attempted to create compulsory purchase of insurance, both by businesses and by individuals. Sound familiar? However, because people found basic health care to be less expensive on their own, the initiatives failed.
When the US entered World War II, the US government established the National War Labor Board to control the costs of material and production of goods vital to the war effort. The National War Labor Board introduced wage and price controls into the US economy. These wage controls forced businesses to scramble for ways to attract employees in a marketplace where the amount of people fighting overseas created a scarcity of labor. In order to work around the wage controls, businesses agreed to the demands of unions and introduced employer-sponsored health insurance that was comprehensive in providing not only catastrophic coverage, but also basic health care needs. Businesses saw this as a way to get around the wage controls to increase wages, demonstrating an important factor in the mindset of people. It proves that health insurance is never free. Even when an employer pays, you bear the costs. That is money your employer would have paid you if health insurance were not available through the employer.
Important effects of businesses being forced into purchasing health insurance for employees include at least four extremely important facts that now dramatically influence American health care.
1) It developed a situation of most people becoming reliant on third parties for nearly all health care coverage.
2) It tied health insurance directly to employers that remains today, creating a situation where whenever anyone loses a job or changes jobs, they lose their coverage, and private businesses bear the burden and costs associated with administration and paying for health care costs – a very inefficient way of managing things.
3) Because people lose their coverage when losing or changing jobs, the problem of pre-existing conditions has developed and wreaked havoc on the entire system of health insurance.
4) People outside of employer group plans represent a disproportionate amount of higher risk and higher medical costs than people within employer group plans (relative to people covered by their employer), because many are often not working for reasons of these risks and health issues.
These four important issues were addressed in later legislation that further pushed the US down the road toward social, single-payor health care. Because even this narrowly focused discussion of the impact on health insurance cannot be covered in a single article, it is necessary to cover it in more than one installment. Please hang on for next week’s column for further discussion of how the US is marching systematically toward a single-payor system, in large part due to government involvement in health insurance.
Danny Chabino
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[…] Click here for Part 1. […]
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