May 22, 2016 at 2:26 pm #369
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From price controls during the Great Depression to Obamacare, American health care has grown into a quagmire of bureaucratic nonsense. It’s no wonder so many people think the government should step in to fix all of the problems. The situation is so complex that the average citizen doesn’t even know where to start. Once you understand that nearly every government intervention in health care has lead us to where we are today, it becomes easier to untangle the mess.May 22, 2016 at 2:31 pm #370
Accidents Of History Created U.S. Health System
“Soon, Blue Cross coverage was available in almost every state, though not many people bought in. The modern system of getting benefits through a job required another catalyst: World War II. Thomasson says that if the Great Depression inadvertently inspired the spread of employer-based health insurance, World War II accidentally spread the idea everywhere.
“The war economy is an entirely different ballgame,” Thomasson says. The government rationed goods even as factories ramped up production and needed to attract workers. Factory owners needed a way to lure employees. She explains that the owners turned to fringe benefits, offering more and more generous health plans.
The next big step in the evolution of health care was also an accident. In 1943, the Internal Revenue Service ruled that employer-based health care should be tax free. A second law, in 1954, made the tax advantages even more attractive.”May 22, 2016 at 2:34 pm #371
How We Got to Now: A Brief History of Employer-Sponsored Healthcare
by David Rook
“Once America became embroiled in World War II, there was great concern that rampant inflation would threaten America’s military effort and undermine its domestic economy. The concern was valid, as Americans had witnessed what inflation had done to war-torn Germany, devastating its economy and giving rise to Hitler’s regime.
To combat inflation, the 1942 Stabilization Act was passed. Designed to limit employers’ freedom to raise wages and thus to compete on the basis of pay for scarce workers, the actual result of the act was that employers began to offer health benefits as incentives instead.
Suddenly, employers were in the health insurance business. Because health benefits could be considered part of compensation but did not count as income, workers did not have to pay income tax or payroll taxes on those benefits. Thus, by 1943, employers had an increased incentive to make health insurance arrangements for their workers, and the modern era of employer-sponsored health insurance began.”June 29, 2016 at 7:27 am #414
How Government Regulations Made Healthcare So Expensive
“The history of medical cost inflation and government interference in health care markets appears to support the hypothesis that prices were set by the laws of supply and demand before 1980 and perhaps 1990. Even the degree of monopolization and nationalization promoted by politicians before 1965 was not enough to cause significant cost inflation and spending increases until demands created by Medicare and Medicaid outstripped the restricted supply of physicians and hospitals.”
“The government has also encouraged clinics and hospitals to respond by merging into concentrated provider monopolies (while continuing to limit the supply of doctors and hospitals). These government-private partnerships called “managed competition” resemble centrally-planned fascism (Richman 2013). Government sets prices, which has predictably led to reduced quality, rationing and other perverse gaming. Moreover, the bureaucracy has brought standardized care, higher administrative costs and high executive salaries. Although costs have continued to rise at the same double the rate of inflation, it is questionable the extent to which prices are now set by the laws of supply and demand. Obamacare is expected to expand coverage by about 22 million people with subsidies and another 17 million through Medicaid. Regardless how the current problems with mandates play out, demand will likely skyrocket without increasing supply proportionately (Fodeman 2011). Higher prices and costs and/or lower quality can be expected to result in calls for nationalization (e.g., “single payer”) by Democrats while Republicans counter with private insurance and tort reforms. The search for alternative economic systems should include free markets through a closer reexamination of the health care marketplace before 1980 to 1990 to determine whether prices offered by physicians and hospitals were ever set by the laws of supply and demand.”
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