so·cial·ism (sō'shə-lĭz'əm) Pronunciation KeyNear the beginning of World War II, the Franklin D. Roosevelt administration imposed wage and price controls. As a result, employers looked for other ways to compensate their employees. One of the ways was to provide health insurance benefits.
- Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.
On October 26, 1943, the Internal Revenue Service, in ruling that this was a legal practice, stated that employees were not required to pay taxes on health benefits provided to them by their employers. Gradually thereafter, employers began to foot the hidden bill for health care costs, and this benefit came to be looked upon by employees as a right. But less gradually, the cost for an employer to insure an employee has accelerated until the average cost for an employee's annual health premium for themselves and their family members is over $10,000.
The main (perhaps unintended) result has been that government makes far too many decisions regarding American health care, resulting in costly diseconomies of scale. This is why your health insurance premiums go up by 10% or more year after year. This is part of the reason why that although you bring home more money than you did last year, you feel poorer.
The least-easy-to-see result of the IRS decision has been an effective penalty on the self-employed and the unemployed. Because while others can get the pre-tax benefit of health insurance, the self- and unemployed must pay the taxes as well. Partially as a result of this, nearly 50 million Americans are without health insurance, and, as employers are stretched further and further to pay for costs that their employees never see, more and more Americans will be priced out of the health insurance market.
Another unintended result has been that employees no longer control or care how most of their health care dollars are spent, because government and insurance companies are the ones that actually pay for treatments that run the gamut from orthodontia to open-heart surgery.
- An extra night in the hospital for observation?--No problem.
- Don't know how much that hip replacement surgery costs?--Who cares?
- Don't really need that cosmetic surgery? Oh well, it's cheap--my health plan pays for it.
- No anesthesia, because you don't need it? Well, just take it, because it doesn't save me any money not to.
"Nobody spends somebody else's money as carefully as he spends his own," said Milton Friedman. This is the problem with United States health care. It's not that we should change to a system more resembling Canada's or Britain's or Sweden's (actually it does resemble theirs, and actually they're starting to see skyrocketing costs, and they're changing to become more privately oriented--i.e. less socialistic.) The problem with the rising cost of US health care is that we don't care how much our health care costs.
Government needs to provide a fair playing field for health insurance and health care, by providing for more flexible, incentivized health spending, such as Health Spending Accounts. Government does need to live up to its commitments to those who currently qualify for Medicare and Medicaid, just like it needs to live up to its Social Security commitment.
But other than that, government needs to get out of the way. When it does, health care will cost less for all of us.
Stay tuned for the solution...