Stumbling blocks to healthcare reform

by Tom Campbell, Producer and Moderator of NC SPIN, September 28, 2017.

It is evident that Congress is unable to pass meaningful and significant healthcare reform. There are two major obstacles in the way. They are health insurance and the government.

Health insurance is a relatively recent phenomenon. While there were some early and isolated attempts to institute health insurance, the practice really gained momentum during World War II. Most able-bodied men and women were needed in military service, but in order to supply our burgeoning military the private sector was required to ramp up production to previously unimagined and historic levels. At its peak, for example, a B24 bomber, with some 1.5 million parts, came off the assembly line every 63 minutes. Offsetting that increased demand for immediate output it wasn’t surprising that wages and material costs increased rapidly.

In response, President Roosevelt issued Executive Order 9250 that established the office of Economic Stabilization. To ensure that civilians did not forsake their duty to serve our nation in favor of higher paying private sector jobs, this agency established wage and price controls that prohibited the private sector from paying wages substantially higher than the military. But there were no restrictions on offering benefits to workers, and many private sector employers offered free housing. Others promised healthcare benefits and, to manage the cost-risk exposure, turned to insurers. The health insurance industry suddenly became a major factor in the healthcare equation.

In 1943, the IRS provided powerful fertilizer to the benefit, declaring that employer-based healthcare insurance was exempt from taxes. In 1940, fewer than 9 percent of Americans had health insurance. By 1950, 50 percent enjoyed the benefit, rising to two-thirds being covered by 1960. This tax break is the single largest tax expenditure in the U.S. today.

America won’t find meaningful and significant reforms to healthcare without reckoning with the insurance issue. But this won’t be easy. Employers don’t want to lose this benefit. Not only is it tax-deductible but they also avoid having to pay employees higher wages. Employees don’t want to lose the benefit and neither do insurance companies. Even though many insurers are nonprofits, health insurance is profitable business to most of them. Further complicating reform is the problem of how to offset the highly escalating costs of healthcare for those not covered by health insurance. The Affordable Care Act attempted a solution but, as we have seen, the legislation and subsequent regulations were fraught with problems. Our current leadership appears more interested in repealing Obamacare than fixing it. To date, they’ve been successful in doing neither.

The second big stumbling block is government involvement. America has evolved into a healthcare system that is neither private, nor public. It is a complicated combination of both. Many vocal and powerful voices want to get the government out of the healthcare business, but that isn’t likely. Millions are provided benefits from Medicaid and Medicare, not to mention coverage for veterans, our military and current and retired government employees. Once provided, a benefit is virtually impossible to eliminate or even reduce.

A growing number have concluded that we won’t reform healthcare in America until a single-payer, basic level of healthcare is provided all Americans. This solution is the least attractive choice for many, but it may become the most acceptable solution to fix our healthcare system.