What's wrong with American healthcare


The "insanely, outlandishly expensive" U.S. health insurance system is the product of random WWII-era tax provisions," according to Vox's Sarah Kliff, in an article published today.

In the article, titled "8 facts that explain what's wrong with American healthcare," Kliff explores why the American healthcare system has run off the rails, including some of the history behind the employer-based healthcare found in the U.S.

"If you want to understand why we are the only developed country with an employer-based health insurance--really, the only one--then you had better get familiar with the 1954 Internal Revenue Service Tax Code, Kliff writes. 

The 1954 Internal Revenue Service Tax Code codified that companies can provide health insurance benefits to workers tax-free. This affirmed a 1943 IRS Tax Court ruling that had also decreed health benefits to be non-taxable, Kliff notes.

"The early decisions were made in the context of a wartime tax code. There were overwhelming taxes meant to stop wartime profiteering and keep unions from shutting down production to extract wage gains," according to Kliff.

A dollar in un-taxed health benefits is worth more to a worker than a dollar in wages, she explains. "That's a huge discount off the price of health insurance," says Melissa Thomasson, an economist at Miami University, quoted in the Vox article. "And it happened very quietly."

Flash forward about 80 years or so, and the health insurance tax break is the biggest in the federal budget; the government loses out on $260 billion annually by not taxing health benefits. The majority of non-elderly Americans get their health insurance at work, and with good reason: the tax-free dollar can buy a lot more medical care, writes Kliff.

While it might be true that tax-free healthcare brings savings to premiums, it doesn't always do much for out-of-pocket expenses, FierceHealthcare previously reported. 

Out-of-pocket spending per person was $768 in 2012, an increase of 4.8 percent, according to the report. Nearly half of all out-of-pocket dollars went to professional procedures, such as doctor visits or lab tests, according to the HCCI report. Furthermore, the report indicates that adults ages 55 to 64 outspent those under 18 nearly three to one, and women spent approximately $200 more than men, FierceHealthcare notes.

For more:
-read the entire Vox article
-see the 1954 Internal Revenue Service Tax Code (.pdf) 

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