Under F.D.R.’s wage controls, firms competed for workers through perks, like healthcare benefits, since they could not legally compete by offering higher wages. That resulted in the first middlemen (in this case firms) between the customers (patients) and the suppliers (doctors). The result of adding the middlemen, and also adding a variety of regulations, is a “market” that is opaque, inefficient, and slow to innovate. Rather than drain the swamp, the response has been to add more middlemen (Medicare, Medicaid, Obamacare, and Pharmacy Benefit Managers, aka PBMs), that have only thickened the mire.
(p. B11) The roots of today’s fragmented system can be traced back to a quirk in U.S. history. Unlike most high-income countries, which created centralized government systems to ration care in the 20th century, the U.S. followed a different path shaped by historical circumstances. During World War II, wage controls prompted employers to offer health insurance as a tax-free benefit to attract workers.
Medicare and Medicaid, followed decades later by Affordable Care Act exchanges, were added over time to cover those who couldn’t get insurance through their job, creating a highly decentralized and convoluted system. . . .
. . . the pressure to increase their earnings means insurers have looked for ways to overbill the government and skimp on patient care, always staying a step ahead of regulators. In recent years, they have become vertically integrated conglomerates, controlling doctors, pharmacies and payment-processing systems.
. . .
One of the most frustrating aspects of the system is a tactic called prior authorization, a process requiring providers to obtain insurer approval before delivering certain services. While that might be disagreeable, there is little public data on how often insurers deny care. This lack of transparency allows insurers to wield prior authorization aggressively, particularly when expensive treatments are recommended.
For the full commentary see:
David Wainer. “How to Fix Health Insurance.” The Wall Street Journal (Saturday, Dec. 21, 2024): B11.
(Note: ellipses added.)
(Note: the online version of the commentary has the date December 20, 2024, and has the title “How American Health Insurance Got So Infuriating.”)