In the early months of 2020, Americans were engaged in the perennial election-year debate over how best to reform the nation’s health care system. As usual, the electorate was torn and confused. Polling indicated that a small majority of likely voters favored a new universal system that would cover everyone. But that support evaporated when it was made clear that any such overhaul would involve abolishing the private insurance market. At the time, nearly 160 million Americans received their health benefits through an employer, and the vast majority of them liked that coverage just fine — maybe not enough to sing about it, but enough to be wary of a potential replacement.
Then came the pandemic of the century. And the highest level of unemployment since the Great Recession. And the most concentrated wave of job loss in the nation’s history — more than 40 million Americans filed new unemployment claims between mid-March and late May. It will take time to ascertain the full impact of those losses on the nation’s health insurance rate, but an early survey from the Commonwealth Fund is not encouraging: 41 percent of those who lost a job (or whose spouse lost a job) because of the pandemic relied on that job for health insurance; 20 percent of those people have not managed to secure alternative coverage.
Nothing illuminates the problems with an employer-based health care system quite like massive unemployment in the middle of a highly contagious and potentially deadly disease outbreak. For one thing, uninsured people are less likely to seek medical care, making this coronavirus that much more difficult to contain. Also, people with chronic or immune-compromising medical conditions are particularly susceptible to this new contagion — which means the people most in need of employer-sponsored health benefits are the same ones who can least afford to return to work at the moment.
“The pandemic has amplified all the vulnerabilities in our health care system,” says Drew Altman, president of the nonpartisan Kaiser Family Foundation, including “the uninsured, racial disparities, the crisis of unmanaged chronic conditions and the general lack of national planning.”
As dire as the crisis is, though, it’s also an opportunity to look at health care reform with fresh eyes — and to maybe, finally, rebuild the nation’s health care system in a way that works for all Americans, not just the wealthy and the well employed.
The first step will be acknowledging the problems of our current system. If American health care were its own country, it would be the fourth largest in the world by gross domestic product. The nation spends an average of $3.5 trillion per year on health care — more than Japan, Germany, France, China, the United Kingdom, Italy, Canada, Brazil, Spain and Australia combined — and still loses more people to preventable and treatable medical conditions than any of those countries do.
In other words, America has created the most expensive, least effective health care system in the modern world, and the most vulnerable Americans have been paying for that failure with their lives since long before the coronavirus came to town.
In many ways, of course, that system is no system at all. It’s a patchwork in which access to care depends on a roster of factors, including age, employment status and state of residence. It’s a free-for-all in which the prices of life-or-death essentials like insulin and heart surgery are set at whatever the market will bear, and efforts to check those prices are routinely bludgeoned by interest groups that hold enormous sway over lawmakers. It’s a labyrinth in which consultants, billing clerks and administrators vastly outnumber medical professionals. And it’s a voracious beast that feeds American households with well-paying jobs, then devours them with insurmountable medical bills — often at their weakest moments.
The story of how this nonsystem came to be begins during World War II, when a trifecta of policy choices permanently altered the health care landscape. First, President Franklin D. Roosevelt froze wages to prevent the nation’s massive shortage of able-bodied men from sending labor costs through the roof. Then, the National War Labor Board, a federal agency created to resolve labor disputes during wartime, ruled that health insurance would not count as wages; this allowed employers trying to compete for workers in a tight market to offer health insurance to prospective hires without violating the wage regulations. And finally, the Internal Revenue Service determined that such insurance benefits would not be taxed.
The inequities of this arrangement were clear from the start. It excluded elderly and disabled Americans because they couldn’t work, and low-wage workers and racial minorities, because they couldn’t secure the kinds of jobs that offered health insurance. But employer-based insurance was popular — employers had better bargaining power than individuals, and it was easier to have them handle the logistics — and elected officials faced little pressure to create a more robust alternative. In the decades that followed, even as officials fortified public schools, transit systems and utilities, they left health care to the private markets. Eventually, Medicare, Medicaid and the Affordable Care Act filled some of the gaps created by employer-based insurance, but no program ever filled all of them.
By 1960, roughly two-thirds of all Americans were insured by their employers, by 1970 health insurance had become big business, and by the 1980s health care costs were soaring. Some of that increase can be attributed to advances in technology that made care more expensive. But a great deal of the spike resulted from what economists refer to as “price insensitivity” and what the rest of us might call obliviousness. “If the insurer is paying, nobody looks at the bill,” says Zack Cooper, a health economist at the Yale School of Medicine. “So you can raise prices as much as you want, and you can create a much more luxurious system overall, to justify it.”
Unencumbered by the demands of a cost-conscious clientele, hospitals ramped up equipment purchases, expanded hospital wings and workforces, created specialty clinics — and then increased their reimbursement rates to pay for it all. Rather than scrutinize those price hikes, which were passed from hospitals to insurers to customers, employers simply accepted them. And why wouldn’t they? The more generous the insurance package and the nicer the hospitals and clinics, the bigger the tax break for the companies paying the tab. “For employers, it’s essentially the house’s money,” Mr. Cooper says. “But then, for anyone not on that raft of good coverage, it’s enormous costs or nothing.”
That calculus is especially brutal for un- or underemployed Americans, but it’s a bad deal for all workers. Economists tend to agree that health benefits sap wages — meaning that employers recoup at least some of the cost of insuring their employees by paying them less money than they otherwise might. At least some unions say that they spend so much of their bargaining power securing these benefits for their members that they have little left for other crucial fights, like retirement. Lower-skilled workers have long been squeezed out of better paying jobs because, as the economists Anne Case and Angus Deaton note, a labor market skewed by pricey health benefits tends to favor those whose talents can more easily justify the expense.
Perhaps worst of all, employees of every ilk frequently find themselves trapped: changing jobs, foregoing employment or taking professional risks (like starting a business) all involve changes in health insurance and, in the worst case scenario, a loss of coverage. The end result is a medical underclass whose horizons are contracted by the sheer logistics of hanging on to health care.
To change this system, Americans will have to change their thinking. There is a tendency among workers with good health insurance to see those benefits as something that’s purely earned, through work. But employer-based insurance is heavily subsidized by the federal government. Those subsidies are not much different than the ones granted to low-income Americans through Medicaid and the Affordable Care Act, but through the lens of American politics the latter are frequently derided as an outrageous form of welfare, while the former are accepted as par for the course.
That thinking may already be evolving. According to a 2019 poll, nearly 60 percent of Americans agree that health care is a human right and that the government should be responsible for ensuring that as many people as possible can access it when they need to. But to truly realize this ideal, the country will have to stop making employers the sole source of health care for so many people. America must create either a new health care system or offer significantly more options within the current one.
There’s no shortage of ideas for how to accomplish this goal. A single-payer system in which one entity (usually the federal government) covers every citizen regardless of age or employment status, could work. So could a new “public option” that makes federally guaranteed health insurance available to many more people. Any such choice will involve trade-offs and will need to be accompanied by other aggressive reforms, including price controls and checks on the influence of special interests over legislation.
Any of these reforms will be politically difficult. Even in the midst of a global pandemic, Republicans are still trying to gut the Affordable Care Act, and Democrats are still divided over how best to respond to that threat. But if there were ever a time to take bold steps — or to finally undo the mistakes of the past — it’s now.
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