Very few people believe that the USA’s healthcare system is good. Of course, the wealthy have access to the best diagnostics and care in the world, and most people get their healthcare as part of their benefits package from their employers (albeit with a lot more restrictions than the truly wealthy), and therein lies the problem.
This is the first in a series that I will write to describe the current state, and my humble thoughts on how to move forward.
We will begin with the rise of employer sponsored health insurance, as it is a significant factor in the problems.
Employer Incentives
Since the early 1950’s when Congress passed legislation that gave employers the ability to deduct the cost of healthcare from payroll taxes, the stage was set for healthcare to be tied to employment.
From that time on, the net effect has been that employees had virtually no visibility into what their healthcare actually cost. The insurers had large risk pools, and a perk initially negotiated by unions became nearly universal.
However, as medical knowledge grew, technology improved, the amount (quantity) and raw cost of healthcare grew proportionally, while the rank and file were blissfully ignorant.
Beginning in the early 2000’s, this cost growth began weighing heavily on the bottom line of employers, causing an increase in how much they began withholding from employees to “share” the costs. And to be sure, many employees began to become cognizant of the cost of this health insurance. Yet, the bulk of the burden fell on employers.
In many cases, coverage for a family of 4, lead to a $200 per month withholding from their paycheck, but the actual cost to the employer was quickly approaching $20K. This was getting near and beyond the breaking point, and began to cause benefits committees at large employers to steer employees into lower cost systems, with more out of pocket costs, or “skin in the game”. HDHP or high deductible health plans were on the rise, with little coverage until an annual deductible was reached (my current HDHP has a deductible of $6,000 for my wife and I, then 70% coverage until you had $10K out of pocket expense, then 100% coverage for about $1,100 a month, and access to an HSA)
Sidebar: in the 1990’s with the rising costs, a wave of changes called HMO’s or Health Maintenance Organizations, were put forth, to universal hatred by the consumer. Limited choice, forced to be “in network”, these plans were reviled, and largely retooled into PPO plans.
The fact that about 72% of Americans have health insurance provided by their employers is a huge contributing factor in the opposition to the ACA. They just don’t see the problem, or the enormous cost of the plans they currently have. Their employers shoulder the brunt of the burden.
Summary
One of the chief reasons that the healthcare market in the US is so broken is the intertwining of health insurance with employment. This means that 70+% of the population are pleased with the status quo, and largely shielded from escalating costs of health care.
The next post will talk about the individual market, and why it was so messed up prior to the ACA, and why so much of the population appears to be against it.
