Jeremy Brecher, Tim Costello and Brendan Smith, Truthout: “As Americans respond to President-elect Obama’s call for town hall meetings on reform of the American health care system, an understanding of how that system came to be the way it is can be crucial for figuring out how to fix it.

The American health care system is unique because, for most of us, it is tied to our jobs rather than to our government. For many Americans, the system seems natural, but few know that it originated not as a well-thought-out plan to provide for Americans’ health, but as a way to circumvent a quirk in wartime wage regulations that had nothing to do with health.”

As far back as the 1920’s, a few big employers had offered health insurance plans to some of their workers. But only a few: By 1935, only about two million people were covered by private health insurance, and on the eve of World War II, there were only 48 job-based health plans in the entire country.

The rise of unions in the 1930’s and 1940’s led to the first great
expansion of health care for Americans. But ironically, it did not
produce a national plan providing health care to all, like those in
virtually all other developed countries. Instead, the special
conditions of World War II produced the system of job-based health
benefits we know today.

In 1942, the US set up a National War Labor Board. It had the
power to set a cap on all wage increases. But it let employers
circumvent the cap by offering “fringe benefits” – notably, health
insurance. The fringe benefits created a huge tax subsidy; they were
treated as tax-deductible expenses for corporations, but not as
taxable income for workers.

The result was revolutionary. Companies and unions quickly
negotiated new health insurance plans. Some were run by Blue Cross,
Blue Shield and private insurance companies. Others were “Taft-Hartley
funds,” run jointly by management and unions. By 1950, half of all
companies with fewer than 250 workers and two-thirds of all companies
with more than 250 workers offered health insurance of one kind or
another. By 1965, nearly three-quarters of the population were covered
by some kind of private health insurance.

This private, job-based insurance covered millions of workers, who
had never had health care insurance before. But this victory also set
patterns that are responsible for many of the problems the health care
system faces today.

Because this private system was tied to employment, it did not
provide health insurance for all. Millions of people outside the
workforce were without coverage. Those most likely to be covered were
salaried or unionized white men in northern industrial states. Two-
thirds of those with incomes under $2,000 a year were not covered, nor
were nearly half of nonwhites and those over 65.

Employer-based plans tied workers to their jobs – something that
benefited employers, but not workers or the economy as a whole. The
quality of the coverage was spotty – some plans were excellent, others
completely inadequate. Doctors accepted this revolution because it
didn’t challenge their power; but, as a result, the system provided no
public control over medical costs.

This revolution had a subtle political effect as well. By giving
much of the workforce health benefits, it reduced the incentive for
them to pursue a system of universal care. And it gave unions a stake
in the private, employer-based health care system. As one opponent of
publicly financed health care put it, “the greatest bulwark” against
“the socialization of medicine” was “furthering the progress already
made by voluntary health insurance plans.”

Since then, many layers have been laid on top of employer-based
health care. Medicare and Medicaid provided government-funded health
insurance for the elderly and impoverished. The “managed care
revolution” led to the takeover of 90 percent of employer-based health
care by HMOs, most of them driven by profit rather than health
concerns. But most people continue to get their health care through
their employer.

Many of the problems of American health care grow out of this
history. The system is so complex that even experts – let alone
ordinary people trying to find care for themselves and their loved
ones – are unable to fully understand it. The system spends one-third
of its cost on paperwork, waste and profit over and above the cost of
actually providing health care. Yet, nearly one-third of Americans are
without health insurance over the course of a year. In all other
developed countries, more than 85 percent of citizens have health
coverage under public programs. The American health care system is
full of inequalities: People who work for one company may have high
quality insurance, while those who work for a similar company have
none.

All of these problems are due at least in part to an employer-
based system, the original intent of which was not to provide quality
health care to all, but to circumvent wartime wage regulations. As we
begin to debate how to reform health care, we should keep in mind that
the American health care system was not created to express American
values or to meet Americans’ health care needs. And knowing that, we
should not be afraid to change the system if we can come up with a
better one.