Unpacking the Flaws in the U.S. Health Care System: Why It’s Time for Change

America’s healthcare system is tangled up in layers of middlemen, and many people are frustrated. Rising costs and unclear processes make it hard to access medical care. Lawmakers are feeling the pressure to make changes, and middlemen are often seen as the problem. However, simply blaming them misses the bigger issue: employer-sponsored health insurance.

In the early days of medicine, healthcare was a simple transaction between patients and doctors. Treatments were affordable but basic. By the 20th century, better medications became common, leading to the rise of health insurance in the 1920s to help protect people from high costs.

The link between health insurance and employment began during World War II when the government limited salary increases to avoid inflation. Companies then offered health benefits instead. This led to tax breaks for employer health contributions, and by 1955, the number of insured Americans skyrocketed. Today, more than half of Americans get their coverage through their jobs.

Why is this system problematic? For starters, the subsidy benefits the wealthy disproportionately. When employers pay for insurance premiums, they don’t have to pay federal taxes on those amounts. For example, a $25,000 premium saves a high-income worker much more than a low-income worker. In fact, according to estimates, 88% of this tax break goes to those with above-median incomes, costing the government around $300 billion a year.

Second, consumers are often disconnected from actual costs. Insurance can inflate prices because people don’t feel the pinch of out-of-pocket expenses. Employers make decisions on behalf of their employees, but they don’t always choose the best options. In many cases, companies hire consultants to navigate this complex system, which only adds more costs.

Without a single government payer, many third parties, like pharmacy benefit managers, are needed to negotiate prices. This introduces even more complexity and expense. Each middleman takes a cut, leading to higher costs for everyone.

Changing this system is a goal for many politicians. However, doing so without causing major disruptions is tricky. One idea is to replace the employer tax break with a flat tax credit that individuals can use to buy their own insurance. As more people adapt to choosing their own health plans, like through the Affordable Care Act, there’s hope for small changes. For example, gradually phasing out the tax break for wealthier individuals while expanding tax-advantaged accounts could be a start. Rewarding people who choose lower-cost options can also narrow the gap between consumers and their expenses.

Americans are accustomed to employer-sponsored care, but it contributes to many problems and high costs. It’s time for lawmakers to recognize these issues so we can move towards a simpler, more affordable healthcare system.

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