Feature
October 26, 2009Willard Manning Discusses Health Care in America
Professor Willard Manning spoke to Harris School students about the history of United States health reform and its unintended consequences in the 2009 Aims of Public Policy address. “I [want] to provide some sort of context for what’s been going on in the American health care system,” Manning explained, “so you have a better sense of the situation we’re in, in terms of the current structure and how various aspects came into existence.”
At the October 26 event, Manning highlighted two major issues at the center of the current health care debate: insuring the uninsured—through a universal system or a partial solution—and the rapidly rising cost of medical care. He explained, “It has profound implications of what the government will or will not do depending on how these questions are addressed.”
Conversations about health care reform started back during the 1912 presidential election and continued in nearly every decade of the twentieth century. World War II brought a major development in a “set of little known, hardly noted decisions.” To keep inflation minimal, price and wage controls were enacted to prevent war-related factories from paying higher wages. Instead, non-inflationary fringe benefits—such as vacation time, pension, and health insurance—were offered as a way to entice workers to new jobs and were seen by the Internal Revenue Service as non-taxable income.
“The effect of these rulings is that because we have a progressive tax system, we have a regressive health benefits system,” explained Manning. The tax benefits for employer-based insurance are much higher for people with income over $100,000 working at large companies. The incentive for low deductibles, co-payments, and co-insurance rates leads to an increased demand for covered services. And evidence shows that highly insured services are more prone to inflation.
“Combining the system with the fact that it is employer based, it actually provides an incentive for insurance to be somewhat myopic,” said Manning. Thinking that an employee will not be at the same employer for many years, insurance companies tilt away from preventative care, and employees may eschew coverage for the additional income usually removed by employers for health care coverage.
Reflecting on other important developments, Manning noted that the Truman administration laid the groundwork for Medicaid, intended to help the uninsured elderly with expensive medical costs. As a result, the elderly and near-elderly have become a powerful voting bloc, critical of the current health care discussion. President Bill Clinton’s health care task force, while categorized as a “spectacular failure,did bring about the 1997 Children’s Health Insurance Program” and shaped the thinking of the Obama administration.
Ultimately, Manning said few people understand who pays for what portion of services in the U.S. health care system, and Congress and President Barack Obama believe an employer-based system is still a natural way for reform.
“We have to remember that all of this was just an accident of World War II,” said Manning. “If [the government] had decided to fight inflation in the war effort a different way, we wouldn’t have this system in quite its current form.”
Click Here to listen to the 2009 Aims of Public Policy Address.
By Elizabeth Jenkins
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