Government health care in America - part 2 — VOICES for REASONVOICES for REASON

In Part 1 of this post I described how government tax policies dating back to World War II have led to more than half of Americans obtaining their health insurance as a benefit provided through their job. Another important feature of health insurance in the United States that has been fueled by government intervention is the fact that it is almost always comprehensive.

Contrary to other kinds of insurance, which typically cover only catastrophic expenses, our health plans cover routine care such as annual check-ups. Homeowners insurance covers fire damage but not your monthly electricity bill, car insurance protects us against the cost of an accident, not an oil change. Yet health insurance pays for our physicals and basic tests. How come?

In the 1930s, the United States was mired in the Great Depression and the health insurance market was still in its infancy. Out of fear of bills going unpaid, hospitals and doctors formed their own insurance companies. These companies, which would later become Blue Cross and Blue Shield, offered pre-paid plans that provided comprehensive coverage of services provided by any hospital or doctor within the network. The U.S. government laid the groundwork for this comprehensive model to become the U.S. standard by granting non-profit status to the Blues, which exempted them from taxes and insurance regulations. In the emerging health insurance industry, this made the Blues’ model of comprehensive insurance profitable and gave them a huge advantage over other insurers, who were compelled to offer, at great expense, the same kind of comprehensive insurance package to remain competitive. Unsurprisingly, the Blues experienced explosive growth, covering 59 percent of the insured by 1945. The government further served to entrench the comprehensive model as the U.S. standard when it established Medicare and Medicaid in the 1960s, and adopted it as their basic mechanism.

Thus, thanks primarily to government interference, about 95 percent of the insured population in America—roughly 240 million people—is covered by comprehensive health insurance provided by a third party. (These figures are my own calculations based on these statistics from Kaiser Family Foundation.) While there is nothing inherently wrong with comprehensive or third party-provided insurance (provided the third-party isn’t the government and provided these features are voluntarily offered and voluntarily chosen), the fact that this form of insurance has come to dominate the insurance market through government intervention is a major cause of our current health care crisis—as I’ll discuss further in my next post.