{"id":409,"date":"2010-02-16T09:36:08","date_gmt":"2010-02-16T09:36:08","guid":{"rendered":"http:\/\/rayharvey.org\/?p=409"},"modified":"2017-11-20T00:22:31","modified_gmt":"2017-11-20T07:22:31","slug":"how-the-american-healthcare-crisis-began","status":"publish","type":"post","link":"http:\/\/rayharvey.org\/index.php\/2010\/02\/how-the-american-healthcare-crisis-began\/","title":{"rendered":"How The American Healthcare Crisis Began"},"content":{"rendered":"
\"\"<\/a>
Staff of Asclepius, symbol of healing<\/figcaption><\/figure>\n

What is now termed modern medicine actually began in the early 1920s when science \u2014 in particular, germ theory \u2014 culminated to a point that sickness and disease were at last being treated reliably. <\/p>\n

It was then that doctors and hospitals got much better at the business of saving lives. This more highly developed service and expertise raised the value of their work, and they charged accordingly for their increased skill and labor.<\/p>\n

And that, really, is when the situation started: when lives can be saved and health can be gained because of developments in technology, everyone suddenly believes that it\u2019s his or her right to have that thing. <\/p>\n

We see the same principle at work in, for example, the platitude \u201cNo one should go hungry when Americans are throwing away food.\u201d<\/p>\n

The error in both cases is the fraudulent notion that survival should be assured. This notion neglects the singular fact that abundance and technology are produced<\/i> \u2014 and produced, moreover, by individuals.<\/p>\n

No one has the right to the life and labor (i.e. production) of any individual, including the life and labor of doctors.<\/p>\n

An easy way to demonstrate this truth is by asking the following: where was that right before these goods and services were produced or invented?<\/p>\n

It is a fact that American medicine is already 50 percent socialized. <\/p>\n

It is also a fact that there’s a clear correlation between rising healthcare costs and the socialization of medicine in this country. More government intervention will only compound the problem. <\/p>\n

In the 1920s, when advancing healthcare became more expensive (though still very reasonable), the administrator of Baylor Hospital in Dallas, one Dr. Justin Ford Kimball, created a system called Blue Cross. The Blues (so-called) were nonprofit health insurers. They served local organizations like the Rebeccas and the Elks Club, and \u2014 please pay attention \u2014 they kept their premiums low in exchange for tax breaks.<\/i><\/p>\n

Tax breaks are one of the main components to our current healthcare crisis. They’re what initially created the problem.<\/p>\n

Blue Cross, you see, was successful only because<\/i> of these tax breaks. Up until then, commercial insurers had always regarded medicine as a mediocre market, and therefore commercial insurers didn\u2019t deal too much in medicine. But when commercial insurers saw that the Blues were making money, it convinced them to enter the medical field. This was not a problem, at first \u2014 until the 1940s, when private insurers increased their efforts to get around wartime wage controls, thus:<\/p>\n

During World War II, Franklin Delano Roosevelt\u2019s price-and-wage people, who didn\u2019t generally permit wage increases or price increases (regardless of market forces) sanctioned a form of tax discrimination: specifically, they allowed employers to pay for employee medical insurance with pretax dollars.<\/p>\n

This quickly became one of the few ways employers could attract new and better employees, since FDR had actually mandated that employers were no longer permitted to pay out higher wages. (How this ridiculous idea came about is another story, for another time.)<\/p>\n

To this day, those who get employer-financed healthcare are purchasing their healthcare coverage with pretax dollars. On the other hand, those who buy their own healthcare are purchasing it with after-tax dollars.<\/p>\n

This is a much bigger issue than you might at first realize.<\/p>\n

As far as the employer was (initially) concerned, this wasn\u2019t any different from additional labor costs \u2014 which is to say, medical insurance was not, from the employers perspective, any different from a rise in wages, and yet FDR\u2019s price-and-wage control people did not at all see it as a wage increase. They therefore allowed it, which may seem surprising in light of FDR\u2019s desire to control the entire economy<\/a>.<\/p>\n

Likewise, the IRS bureaucrats under FDR did not regard this maneuver as a wage increase, and for this reason they didn\u2019t slap a tax on it. Neither did the employees see it as a real raise in wages \u2014 a fact that is singular to how this whole horrible precedent was set \u2014 because these costs are what economists call hidden costs.<\/p>\n

The upshot: people didn\u2019t and very often still don\u2019t know that it is, after all, their own money paying for this prepaid medical coverage, and that medical coverage isn\u2019t free.<\/p>\n

In fact, health insurance today isn\u2019t even really health insurance. It\u2019s more properly called prepaid healthcare. But \u2014 and this is an another crux \u2014 it gives the appearance<\/i> of being free or substantially free to the user, and it therefore substantially increases the demand for it and therefore its cost. <\/p>\n

Of course, the root of this whole problem is the misbegotten notion that healthcare is not<\/i> a good and service to be traded on the open market, but a right.<\/p>\n

Let us remember what insurance actually is:<\/p>\n

Insurance, properly defined, is what you purchase in order to avoid financial ruin in the case of a rare emergency.<\/p>\n

Under the dangerous system FDR created, employees came to regard their healthcare coverage as a kind of blessed phenomena which came without cause or consequence. Quickly, this phenomena was absorbed into the working culture and as quickly was taken for granted: employees got used to receiving free goods, which goods, however, were not actually free. Employees just could not see that they were paying for them, and paying for them, furthermore, with pretax dollars.<\/p>\n

A family in the bottom fifth of the income distribution pays about $450 more in taxes than insured families at the same income level. For families in the top fifth of the income distribution, the tax penalty is $1,780. On average, uninsured families pay about $1,018 more in federal taxes each year because they do not have employer-provided insurance. Collectively, the uninsured pay about $17.1 billion in extra taxes each year because they do not receive the same tax break as insured people with similar income. If state and local taxes are included, the extra taxes paid by the uninsured exceed $19 billion per year (\u201cAre the uninsured freeloaders?\u201d National Center for Policy Analysis, Brief Analysis No. 120).<\/p><\/blockquote>\n

Among other things, this illustrates again why entitlements are such a deadly precedent: once they\u2019re entrenched, it\u2019s virtually impossible to retrogress. Why? Because people acclimate to entitlements and in no time cannot imagine life without them.<\/p>\n","protected":false},"excerpt":{"rendered":"

What is now termed modern medicine actually began in the early 1920s when science \u2014 in particular, germ theory \u2014 culminated to a point that sickness and disease were at last being treated reliably. It was then that doctors and hospitals got much better at the business of saving lives. This more highly developed service … <\/p>\n

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