How America’s Health Care System Got Broken

(Bloomberg Opinion) -- Democrats won big in the midterms by promising to protect the Affordable Care Act, but they shouldn’t celebrate just yet. That, at least, is the implication of “Ensuring America’s Health: The Public Creation of the Corporate Health Care System,” which leads my list of interesting reads this year. This history by Christy Ford Chapin asks and answers a vexing question: Why does the U.S., almost alone among developed nations, have such an inefficient, byzantine health-care system that charges exorbitant rates for ever-diminishing coverage? 

Chapin avoids the usual simplistic explanations, exploring the deep historical roots of the current impasse. She convincingly shows that the U.S.’s predicament is born of politics, not market forces. This has created a curious hybrid system that has entangled public and private power in ways that work at cross purposes.

The author’s deep, careful research reveals how the medical profession of the early 20th century -- working through the American Medical Association, among other intermediaries -- fought against the prospect of corporations controlling the provision of care on the one hand and the specter of government control on the other. In seeking to maintain the autonomy of the traditional medical practice, the AMA reluctantly and haltingly embraced what Chapin calls the “insurance company model” of health care. Third-party insurers, the AMA concluded, offered the best hope of preserving the traditional model for delivering health care via individual practitioners.

As Chapin makes clear, this solution eventually crowded out other ways to structure the provision of health care. Private insurers, working in concert with the medical profession, warded off efforts to fundamentally reform the way that health care was delivered and paid for. Private health insurance became entrenched, and the power of the insurance companies, channeled via the Health Insurance Association of America, began to grow. Chapin deftly shows how health insurers, originally subservient to the health care profession, eventually became the masters of medicine. The insurance industry, which had been viewed as the best hope for preserving the autonomy of doctors, began to dictate the terms of care. Yet as Chapin notes, insurers lacked the power to regulate the supply and demand of medical care, fundamentally constraining their ability to bring market forces to bear on skyrocketing costs.

The author is particularly good at capturing the unintended consequences of the short-term strategies of the actors in these debates: for-profit insurers, doctors, trade associations, non-profit insurers, regulators, and a host of others. This is a tremendous work of political economy, weaving together the history of the state, politics and corporations in one coherent, persuasive narrative. The treatment of the rise of Medicare is particularly powerful. Although ostensibly a significant expansion of the state in the marketplace, the government program in fact implanted private insurance in the heart of the American health care system. Chapin explores this irony in detail.

Her conclusion is sobering. Obamacare, she writes, “built new rooms atop a defective, jerry-built edifice.” Precisely because it maintained the centrality of insurance companies, Chapin observes, “it will be unable to rein in costs while also maintaining or improving the quality of care.” 

In the coming years, we may be able to grasp that Obamacare, far from marking a new direction in the nation’s health care, may have in fact been nothing more than a last gasp of the insurance-company model before the inevitable embrace of single-payer, universal health care that is ubiquitous in other advanced, industrialized nations of the world.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Stephen Mihm, an associate professor of history at the University of Georgia, is a contributor to Bloomberg Opinion.

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