3,361,596 members
12,339,752 petition signatures
$17,571,785,510 diverted from Big Pharma
How Did We Actually Get Into the Current Healthcare Mess?
The answer: Government laws, rules and regulations—everything from price controls on wages to tax rules had a role. If these government actions were never taken, the entire concept of health insurance would be different, and like life insurance, car insurance and insurance for your house, you would be buying it on your own. Your employer wouldn’t be involved and neither would the government.
It all started during World War II. The government froze wages below market rates. In order for employers to compete, they had to offer workers other incentives. Health insurance became one such incentive. Some employers paid for health insurance, to make up for the shortfall in wages that the employer was prohibited by the wage freeze from paying.
Still, the number of employees receiving employer paid for healthcare was small. Indeed, the number that actually had health insurance overall was small. Like a payment to fix your car, most just paid for healthcare as they needed it.
David Goldhill explains what took place nexts:
.,,,as late as 1954, only a minority of Americans had health insurance. That’s when Congress passed a law making employer contributions to employee health plans tax-deductible without making the resulting benefits taxable to employees. This seemingly minor tax benefit not only encouraged the spread of catastrophic insurance, but had the accidental effect of making employer-funded health insurance the most affordable option (after taxes) for financing pretty much any type of health care. There was nothing natural or inevitable about the way our system developed: employer-based, comprehensive insurance crowded out alternative methods of paying for health-care expenses only because of a poorly considered tax benefit passed half a century ago.
Got it? It was tax deductible for employers paying the healthcare insurance premiums and the payments were non-taxable to employees. Thus, the tax law created a situation where, for an employee, it was best for the employer to pay for insurance directly. Since if the employee received the amount in cash, it would be taxed before insurance could be purchased.
This is the key link between healthcare and employee sponsorship of health insurance programs. If it wasn’t for a government wage freeze during World War II, followed by distortions in the tax wage structure that created incentives for employees to seek out health insurance from their employers, the health insurance industry and employers link would have been as likely to have developed as an employer sponsored underwear purchase program.
But it gets worse. Because there is no tax for the employee, he wants everything possible thrown into this “insurance.” Since, if he had to do it direct, he would have to pay tax on the cash received first.
In a non-distorted market, a person would want only catastrophic health insurance. Under the current distorted system, the employee wants everything thrown in. Think of it in terms of auto insurance. Currently, automobile owners buy insurance against theft and accidents, i.e. catastrophic events. BUT, if the government created a situation where the employer payment for auto insurance was tax deductible for the employer and non-taxable for the employee, then the employee would want everything from new tires to a fill up of the gasoline tank to be covered under “insurance”, and paid for by the employer.
Thus, the problem has been expanded in healthcare to where even minor procedures and doctor visits are covered under current day healthcare that wouldn’t be covered if there wasn’t perverse tax incentives.
With these perverse incentives creating a bizarre healthcare structure, Congress then created Medicare and Medicaid based along the lines of, guess what? The bizarre healthcare structure.
This mad maneuver has led to the spiraling healthcare prices. Goldhill explains:
In designing Medicare and Medicaid in 1965, the government essentially adopted this comprehensive-insurance model for its own spending, and by the next year had enrolled nearly 12% of the population. And it is no coincidence that the great inflation in health-care costs began soon after. We all believe we need comprehensive health insurance because the cost of care—even routine care—appears too high to bear on our own. But the use of insurance to fund virtually all care is itself a major cause of health care’s high expense.
So it is with this as background that we now find an out of control healthcare system caused by a variety of government rules, regulations and legislative moves.
The President’s solution to the problem? More government rules, regulations and legislation.
He wants to set up a healthcare board that will rule on maximum prices. This will result in shortages, as any student of Econ 101 should be able to understand. It will also reduce incentives to create new treatments. Who wants to spend the time and effort, when a bureaucrat will determine what price you can sell your new product at?
Of course, with everyone covered for all kinds of services, demand for medical services will go through the roof. Increased demand on one side and supply shortages on the other is not a pretty picture. Healthcare will have to be rationed in a non-price fashion, and those surrounding Obama will be the deciders as to who gets treatment and who doesn’t.
It is important to note that on the free market, prices have a tendency to go down and the quality of service goes up. From personal computers to cell phones, prices have collapsed and quality has skyrocketed. This won’t happen in the healthcare sector under the price controls, rationing and the overall regulation of Obamacare. In fact, the opposite will happen. There will be less service, less incentive and less investment in the sector.
posted by Robert Wenzel at 1:18 AM
http://www.economicpolicyjournal.com/2009/08/how-did-we-actually-get-into-current.html
i guess there is a lot of reason y but y cant we fix it
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I watched a documentary about healthcare in Canada. It is run by the government. They talked to several people and they were very pleased with government paying for healthcare. Now I realize, they probably wouldnt talk to anyone against it, but they really were for it. They made it sound so good. Almost too good to be true. I am so confused about the whole deal. Is there an article somewhere where it can explain to me the healthcare reform in laimants terms? I am soooo confused……..
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Scott Reply:
August 29th, 2009 at 11:58 am
The reason you are so confused is because you have been so completely brainwashed and dumbed down by the liberals who want to turn this country into a socialistic society, and they have made it difficult for people to think things through on their own anymore, and control the media to only allow THEIR twisted propaganda to get through. Furthermore, OBVIOUSLY as you stated, the report you heard was BLATANTLY biased and would NEVER let you hear the opposing views, at least not without their careful engineering of watering down even THAT perspective. ALl you have to do is a little search around the internet, posing some questions like “Problems with canada’s healthcare”, or “Problems with socialized medicine”, etc. There a TON of problems with Canada’s (and ALL socialized) healthcare system. Naturally there will always be SOME who are for it, just like there are SOME who would be in favor of a socialized government, namely those who want something for nothing and are not motivated to go out and get things on their own. As Margaret Thatcher once said, ”
The problem with Socialism is that eventually you run out of other people’s money”. The liberals today are all in favor of “making the RICH pay”, and of course that sounds VERY appealing, especially to the poor (and lazy!!). But one of the many problems with that scenario is that if you suck a vast majority of money from the rich, to “equalize” those with less money (IE Wealth Re-distribution”, you have just taken away incentive for people to “Rise above” their current situation, to “make something of themselvez”, and rather there will be no reason for someone to try hard and work hard to “better themselves”, and will be happy to sink into the welfare state that we are fast becoming, and just expect the governmemt to provide EVERYTHING for us.
The problem is, once you have taxed the rich into middle class (or below) status, who will be there to continue paying for all the benefits of the people who are happy to sit in squalor and laziness?
It is because of the Governments’ involvement in and handling of healthcare that it is so expensive to begin with, and why there is such a crisis.
With socialized healthcare, everything becomes CONTROLLED, and often rationed. You eventually do not have any choice of who you see for a Dr, the Dr does not have choice of where they will practice, or what kind of medicine they will practice, they will be “informed” of what and where they are needed. You will not have a choice of what kinds of treatments will be available, or that you can receive. It will be decided FOR YOU what is “Best” (IE, economically favorable for the government), and it will be decided FOR YOU when it is no longer “necessary” to continue trying to keep you allive or healthy, as it is no longer in “best interest” of the “Hive”.
This is socialized mentality. Beyond that, think logicaly about this: Name ONE THING, just ONE THING, that the GOVERNMENT has taken control of, EVER, and ran as efficiently (Let alone MORE efficiently),
than when it was privately controlled. Just name ONE!!! Go on, I challenge you. I’m not saying name one thing you happen to LIKE the way it run better, (as again, there will be MANY who if their present condition of squalor are happy to be receiving “free” benefits), but name one thing that is being run MORE EFFICIENTLY by government. Believe me, the illegal aliens
(or as liberals currently want to call them – “undocumented workers”, who are THRILLED that they can SNEAK ILLEGALLY into this country, to get out of the poverty situation if their own, and suck all kinds of free benefits from our country that are paid for by taxpayers which they have never contributed to; things such as FREE HOUSING, FREE HEALTHCARE, FREE COLLEGE, FREE SOCIAL SECURITY, etc etc. Many of these things being things that many TAXPAYING AMERICANS cannot afford!!! TEll me how that if fair, or how it is even logical??? HOW can a trend like that contine when they are continuing to allow and PROMOTE letting MILLIONS MORE illegals in each and every year??? Google this – there are PLENTY of articles and reports out there who will do the math for you, and show you the CRISIS this country will be in some 10 or 20 years from now. Think about it, it’s not Rockete SCience!!! If you think we are in a economic crisit NOW, wait till all these ridiculous liberal policies come to fruition in a few years! All the MORONS who are too brain dead to think for themselves, (and who simply suck down the liberal coolaid they are literally immersed in on a daily basis from all the liberal media POUNDING us with their one sided, editited and orchestrated hogwash 24/7), and who have sadly been allowed to vote without having to prove they are capable of rational thought, have almost completely DESTROYED this once Greatest Nation ever, a
place that was created by those who were trying to get away from just this exact same kind of garbage and lack of freedom, and was paid for by the blood and sacrifice of thousands who died to see that YOU and I would have the freedom and liberty to never HAVE to live under such control and such tyranny, yet millions of clueless drones have freely chosen to BRING BACK the very thing this country was founded to provide a relief and escape from. There are PLENTY of other countries who already live in this kind of system – why dont’ all the morons who WANT to live like this, simply MOVE to one of these other locations and LEAVE AMERICA the way it has been?? Why do you think we HAVE such a problem with millions and millions of people TRYING TO GET IN every year???? IF the places they are living are so great, why don’t those countries have the same problem?
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This is a great article and makes perfect economic sense. One thing that was not mentioned is the corrupting influence of pharmaceutical companies on the practice of medicine.
This phenomenon is described in Dr. Jon Abramson’s book “Overdosed America.”
Now with the government poised to mandate insurance coverage for all Americans the insurance companies will profit even more, and Americans will be forced to buy insurance with even fewer choices than before.
We should also be able to purchase health insurance across state lines. I live in Massachusetts and they Mass state government through their regulations keep most insurers out which they grant a de-facto monopoly for a handful of companies who no doubt have lobbied state government for this monopoly.
Lastly, the war that has been conducted on alternative medicine needs to stop. Many alternative treatments are both cheaper and more effective than traditional treatment, but are fought by the medical establishment.
These alternative treatments would allow better health at a lower price, but don’t hold your breath waiting for the government to do things properly or fairly.
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Sherri bowthorpe Reply:
August 29th, 2009 at 11:18 pm
Yes, I agree that the big money makeing has distorted the whole idea of actually caring for our citizen’s health. The drug, medical and insurance industries thrive off of SICKNESS!
The idea that we benefit by relinquishing responsibility for our own healthcare to others exasparates the problem by diminishing motivation to put forth the effort to stay healthy. In the natural free-enterprise structure where we deal with the cost of medical bills as they come naturally encourages everyone to educate themselves and do all that they can to keep from getting sick–basic nutrition and excercize don’t have to cost much money, yet yeild significant results.
They should channel more energy and money to education and awareness of ways to NOT need so much SICKCARE…focus more on HEALTH than on sickness.
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Ummm . . . a singe payer system of health care wasn’t mentioned here and none of the problems listed would have occurred if we had gone to a single payer system as most other countries did.
With our system the most profit goes to the insurance company that sells the most insurance to the healthiest and avoids covering the neediest. This is the opposite of normal capitalism that sells to the people who need the product or service the most.
This makes perverse Incentives leads to a system where everyone has the incentive to do the wrong thing.
Doctors turn people away who have inadequate or no coverage.
Patients forgo treatment until their conditions become urgent.
Adults working full-time jobs are advised to go part-time to qualify for Medi-Cal benefits.
Others are encouraged to spend down everything they’ve saved to get public assistance.
Hospitals are forced to inflate rates because insurance companies cut reimbursements.
We build hospitals without emergency rooms to serve only the insured.
Health insurance companies try to sell to the healthiest people and then limit their sales in the area needed the most, pre-existing conditions
We pay for care in the least efficient way possible — after people get sick and need emergency or hospital care
So, there is Medigap, Medicare, Medicaid, Medi-Cal, and a medic with medevac, when all that is needed is Single Payer.
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The American health care system is broken because it is based a “for profit” model. Any time you can benefit financially from any other person misfortune, you have put a set of blinders on yourself that only allows you to focus on the profits you can make. By this “profit based model” one has effectively broken any good that can come from your involvement in that effort. This is a basic flaw in the thinking, thus the intent of such programs. That is the same for foreign aid programs as well which are tied to all sorts of perks for those that administer them. It becomes, “what is in this for me, rather than what is in it for them.
Perhaps it is just a flaw of the so-called free enterprise system. But what it does is destroy the potential for any good that can come from these efforts. As you sow, shall you reap.
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Government run insurance is not the problem!!! It is the ANSWER!!! Medicare is NOT government run insurance–it has been contracted out to private industry to run—AND that was when the problems began—because private industry is only interested in their profit–not quality and there is no government monitoring as this would be doubly expensive.
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American health care is not spending more per capita with poorer results than any other industrialized nation because the public demands too much for nothing from employer based coverage. It’s the 30% overhead that private insurers take from every health care dollar we give them. That overhead includes underwriting to figure out who not to insure or who to drop from coverage before they become expensive, outrageous salaries, and money to buy legislators. And what is it exactly that private insurers do for our health?Ironically, their main product is denial of coverage for health care in order to maximize profits.
Each year private insurers take $350 billion for overhead. We can use that money to provide quality health care to every American. Doctors, hospitals, medical device makers, etc, could all remain for-profit, only the payer would be non-profit. It’s a matter of trust in the government that prevents us from this reality. But we should trust ourselves (the government). Medicare overhead is about 3% and I wouldn’t trade it for anything. Would you?
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Those shouting down politicians in the town halls are not hearing the despair of those without insurance to pay for medical care. And NO ONE is hearing any discontent from those who have insurance through government programs! The federal employees, Medicare, Medicaid, VA benefits — the complaints are that we DON’T HAVE what they have. We have no one covering our emergencies, our pre-existing conditions, our bankruptcies. What is YOUR ALTERNATIVE?? Offer a solution to the problem. Otherwise your “opinion” is part of the problem that will cost many people their well-being, their capacity to earn a living, and/or their lives.
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The previous posters have made points that support the single payer system. health education and personal responsibility.
When the naysayers will point out an occasion when someone under a foreign system’s national health care didn’t get the immediate help they wanted for their condition, they blanket the whole system as a failure. Meanwhile the 46+ million without health care here can point to 46+ million reasons why our system has failed.
As someone who didn’t have any health insurance for 2 decades, my health is now protected under medicare. There should be a medicare option for all the uninsured. Then and only then will everyone be covered.
The billions that now go into ‘for profit’ medicine will be there to cover everyone. Not to mention the percentage of the cost of paperwork and medical fraud.
As Teddy Kennedy had always said, ‘Health care should be a right, not a privilege’ … in his memory, I hope that health care for ALL Americans comes to pass.
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CPONOE Reply:
September 1st, 2009 at 12:23 pm
Citizens rights are clearly stated in the US Constitution. Where is healthcare mentioned???
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