23 March 2020

How American healthcare became tethered to employment

I found the answer at a Marketplace article:
“You’re coming out of the Depression and all of a sudden hiring ramps up,” said Sherry Glied, professor of public service at New York University. So many men are abroad that businesses are desperate for employees that “wages start to climb and prices start to climb. We start to see major inflation happening in the U.S. economy,” Glied said.

“We shall be compelled to stop workers from moving from one war job to another as a matter of personal preference; to stop employers from stealing labor from each other,” Roosevelt said.

That year, the National War Labor Board forbade employers from raising their workers’ salaries — a wage cap. If our employer-sponsored insurance system has an origin story, it is this.

Beyond the wage cap, the labor board also ruled health insurance was exempt from the cap, so employers began to dangle health insurance as a benefit to attract the best and brightest.

The cherry on top: The IRS decided employer contributions to health insurance premiums were tax free, which meant workers paid less out of their pocket.

By 1952, just a decade after Roosevelt’s fireside chat, the economy hummed along.

People wanted new Fords, the best medical care and shiny everything. Private employer-sponsored health insurance exploded.

“How many people have this important private health insurance? Only 8 million people in 1939. But in 1952, 92 million,” Oveta Culp Hobby said in a speech in the mid-1950s. Culp Hobby was President Dwight Eisenhower’s health secretary and just the second woman to hold a presidential cabinet post.

She pitched Eisenhower’s plan to provide national insurance to the 63 million uninsured Americans who lacked coverage either because they were too old, worked for employers who didn’t provide insurance or were out of work.

It was the third pass at getting some kind of national health plan in place since the end of the war and join most other Western nations in providing coverage for all.

Melissa Thomasson, a Miami University professor of economics, said each time there’s a push to expand coverage, doctors — through their lobbying group, the American Medical Association — launch scorched-earth campaigns. “Doctors have always worried that it would limit their ability to charge patients what they wanted,” she said. Physicians “say if health insurance is nationalized, it’s likely that government won’t stop there. They’ll start nationalizing other industries, too. So they use the fear factor to kill it,” Thomasson said.

That largely ended any serious attempt at national insurance. The employer-sponsored insurance became king.
With massive unemployment on the near-term horizon, revision of health care financing is going to rocket to the top of the public's concerns.


  1. “Doctors have always worried that it would limit their ability to charge patients what they wanted,” she said.

    I think that's starting to change, now that doctor's are pretty much locked into whatever the insurance industry says they're going to charge.

  2. Really impressed! Everything is very open and very clear clarification of issues. It contains truly facts. Your website is very valuable. Thanks for sharing.


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