US Healthcare, Socialism Then Soaked in Cronyism

An Enviable Beginning

In 1954, when the US Congress reversed an IRS ruling and thereby made employer provided health insurance non-taxable, the life-expectancy in the country was nearly 70 overall and approximately 65 for minority Americans.  There was no crisis for anyone in access to healthcare.  The cost of healthcare, even hospitalization, was affordable and essentially stable.  

Hospitals and physicians were paid whatever the market demand for medicine allowed for.  As a business model the physician was the proprietor and the patient was the paying customer.

In 1954, less than one-half of American families had health-insurance coverage.  Many of them, including among the elderly, had coverage unconnected to their employment, past or present, often lifetime insurance policies for individuals. 

If someone without health insurance was in a terrible accident or contracted a lengthy illness, family and friends would work together with doctors and hospitals to keep the system working smoothly in a humanitarian way.  Back then, community drives to fund the medical costs of unlucky people were commonplace, especially when the patient was a stricken young child.

Physicians in 1954 were well-paid, but seldom became multimillionaires.  Hospital profits did not generate big Wall Street numbers.

In 1954 public hospitals and clinics served the poor as they always had taking all comers.  These services for the poor were largely financed by local government going back to the adoption of the Elizabethan Law in Colonial America. “Poor relief” was by far the largest item on most county and city budgets in 19th Century America often more than half of spending (at a far lesser overall fraction that today).

The Elizabethan Law placed the responsibility for sick care and housing and food on the spouse, the parents or any adult child the needy person may have.  Applicants were thoroughly vetted by an “overseer for the poor”.  Funds paid by the locality would be repaid by the recipient should their fortune in life greatly improve.  The same applied for services rendered to their children. 

Should someone become ill or be injured while traveling, the person would be provided emergency care in the place it happened, but transferred back to his or her locality as soon as they could travel.  Reimbursement of expenses paid were commonly made by the home locality of the aid recipient.

Public hospitals and clinics in 19th Century America running on empathy and a shoestring budget were quite effective in saving lives of every stripe.  All were privately owned and managed.

Such places inspired the best impulses in the medical professional and in the patient’s family.  There was no federal and state eligibility paperwork to contend with as the first priority back then.

Free market US healthcare in the 1950’s was the best medical care system in the world by far, bar none, whether measured in life-expectancy or in successful outcomes or especially when it came to creating amazing medical advancements.  The system covered everyone with no new laws needed.

As it existed in 1954 the healthcare system was all but immune from political fluctuations.  There was never a serious prospect of large shortages in services or medicines causing spikes in prices. 

Indeed, back then there was very little public controversy at all when it came to American healthcare.  The practice of turning sick patents away altogether for lack of funds never happened.  People in the 1950’s were seldom deterred from seeking needed healthcare due to overbearing costs.  People were not dying due to an absence of healthcare for them. Healthcare was not at all the province of the federal government, uninvolved, beyond advancing basic medical research.

Then, the United States government began coming to the rescue of healthcare in America.

One Power Grab Leads to the Next

The impact of making one form of employee compensation immune from the federal income tax was huge over time.  By the time the first major bailout of the new healthcare system was needed only ten years later the landscape of American healthcare had changed completely.

Congress nurtured the seed of eventual destruction by separating out health-insurance to become a hugely collectivist project suddenly.  Employers now instead of individuals would be persuaded to fund health insurance for all due to the gaping income tax loophole Congress created. 

This gigantic artificial subsidy to one industry created the pattern that became the mold for Washington, D.C.  The People’s national treasury was now going to auctioned by Congress to the highest paying special interest.

Worst of all, now the very high-risk group that health insurance is designed to plan for, the elderly, were left on their own outside of the new system.  Normally, that would be a good thing, but not so much when your access to individual insurance is disappearing.

By buying more health insurance for the employees rather than increasing wages, the employer was saved from paying its half-share of the Social Security tax.  Employee income taxes were far less. Private sector unions, they meant something then, wanted health insurance plans.  State and local workers, far fewer then, were completely swept up in the general rush to obtain employer health insurance.

By 1970, almost 90% of full-time jobs in the US carried health insurance benefits. The health insurance industry had mushroomed in size.  A health insurance policy offered for individuals and families though, the core of the business in 1954, was already near extinction.  Lifetime health insurance policies had been effectively abolished by the shift from the individual to the collective.  Such policies were no longer offered to anyone, something still true today.

So, now the employers of Americans decided whether and what health insurance Americans would have.  One size would fit all employees in a giant plan.  If you lost your connection to the workforce, then you may not even be able to find health insurance of any form, the first great anomaly of access to health insurance.

So, by 1970, the physicians and the hospitals were paid by the insurance companies mostly, with all of their accompanying rules and exclusions.  The idea of the patient being the customer to satisfy in order to be properly paid had already gone out of fashion in the medical profession.

Congress was hugely pleased with itself for this first venture into degrading the free market in American healthcare.  Employers and employees seemed to love the maneuver.  Health insurance companies became Washington D.C. power players.  Medical professionals, another political powerhouse, were getting paid far better.  Everyone loved the idea of lots of healthcare.

It was a first thrilling taste for Congress in the post-war period of the successful manipulation of national markets by federal tax rewards.

So, the next pair of statist revolutions in the economics of American medicine would be far, far bolder.  They would venture well beyond a brazen financial giveaway well into the realm of federal central planning.

A Moral Need as a National Program

The concept of healthcare for all guaranteed and administered by government is one that perfectly portrays the competing impulses of individualism and of forced collectivism.

Like so many collectivist programs, “universal healthcare” invokes the empathy for the needy or unlucky that admittedly we all should share. 

Leftists go on though, in typical contradictory fashion, to reverse the voluntary provision of charity by society into a mandatory public program now somehow.  To Leftists the natural tendency of humans to help one another is simply far from enough empathy for their vision of society.  Empathy must be forcibly extracted from citizens now.

No reason in morality for this transformation in society is ever offered.  Basic morality would rely instead on the kinder instincts of humankind, as society always had, rather than sudden mass compulsion from the top. America’s legendary charitable giving was stronger than ever in 1965 America.

Charity of the state-sponsored sort must be borne by everyone, whether they are charitable people or not.  That though is among the least on the injustices to a Republic caused by national healthcare planning.

In a public system, the needy are no longer parsed between the deserving and the undeserving, the fakers and the infirm.  The shame of dependency on others is extinguished as a sense of entitlement and gamesmanship sinks in instead.  The natural tendency to contribute to private charity is vastly undermined across the board.  The amount of healthcare spending stolen by con men skyrockets to an estimated 10% of all government paid healthcare. 

In Europe, the tide of early 20th Century Progressivism led steadily to creating nationally run healthcare systems across the continent.   Healthcare for all, rather quickly, became essentially a public obligation in western Europe. 

However, a federal universal healthcare system did not even get on the political agenda of the United States during the early 20th Century: Or since actually, at least as something that has a realistic chance of passage in Congress.

The only US President so far to stand foursquare in favor of federalized universal healthcare was Harry Truman in 1948 as part of his proposed Fair Deal.

It took an unusual moment of national history to suddenly change things in US healthcare forever in grand ways.


A Tidal Wave of Awareness and Compassion Empowers Washington, D.C. 

The two years following the election of Lyndon Johnson as President in 1964 was like no earlier period when it came to achieving “progressive” government in the US.  It was the Great Society and the War on Poverty along with a fundamental reordering of society in the South when it came to the question of full citizenship for all.

Roosevelt’s New Deal never approached such raw use of legislative power to direct a national economy that sprawls an entire continent.

Unlike Woodrow Wilson’s Federal Reserve Bank and National Income Tax, LBJ’s changes were not to be gradual in their nature. 

The Kennedy Presidency had further encouraged people in the belief that the federal government could effectively tackle national problems. His “New Frontier” legislative program offered interventions into the economy of many stripes, but all statist in their approach to policy.  Kennedy pledged to go to the Moon via government transport.

More importantly, President Kennedy had (finally) endorsed a sweeping federal civil rights law and an anti-discrimination law for voting.  This policy was all but forced onto Kennedy by the amazingly successful civil rights revolution occurring organically within the nation from the 1950’s forward. Television was now bringing the horrors of Southern racism into the homes all Americans nightly, beating and jailing people for standing up for their rights as a citizen.

Ironically enough, the progressive push for old-age Medicare was driven by the vanishing ability of older Americans to obtain health insurance coverage.  Retired people were no longer connected to the workforce in the new American, employer-based healthcare system.  The new system had carved out for noncoverage the very “risk-on” patients that insurance carriers would rather not have as startup customers.  The absence of actuarial planning for older people was vastly undermining the new system.

Early on in his administration, Kennedy was unable to get Congress to begin to enact a national Medicare bill for elderly citizens. In an amazing leap toward central planning, Kennedy’s bill would pay from the federal treasury nearly all of the medical expenses a person might need after he or she reaches the age of 65.

In April 1962 President Kennedy tried to override Congress by proposing in a national address to form a “Crusade for Medicare”.  The entire Kennedy messaging machine went into overdrive in this effort.  Yet, the program still fell flat on its face in Congress.  There was no populist crusade for Medicare resulting.

President Kennedy never proposed a Medicaid law that would cover the medical expenses of the poor. Sick care for the poor had always been managed quite effectively in the United States. 

Things had changed though.  Many, many low-end paying jobs simply did not offer health insurance coverage as a benefit.  The workers were effectively too poor to obtain health insurance.  This was another growing army of millions unprotected by the new healthcare system.

Kennedy’s assassination in Dallas in 1963 had the effect of galvanizing support for many of his policies, especially those favoring civil rights for all citizens everywhere with no legal obstructions applying. 

The long, long overdue need for US racial equality had not only reached its own point of fruition on a grand scale.  This liberty oriented revolution brought along with it into new laws other national policies that were actually of the opposite orientation.

LBJ was an entirely different kind of person than JFK was.  Their backgrounds could not have been more different.  But it was LBJ, the master of legislative maneuver, who managed to deliver on the hopes of Kennedy’s progressivism, like no American before or since.


LBJ had a lot of help.  Democrats beginning in 1965 held the Senate by a margin of 68-32, a supermajority.  Democrats held the House of Representatives by a margin of 295 to 140, a near identical supermajority.  LBJ took full advantage.

Having passed the legendary Civil Rights Act of 1964 already, by the end of the summer of 1965 LBJ’s Congress passed into law Medicare and Medicaid in largely the same form the programs have today.  Even these major new social programs were overshadowed that year by the passage of the Voting Rights Act of 1965. 

That year also saw Congress begin the college student loan program that has since wholly undermined secondary education in the United States over time.

Medicare covered post-65 hospital costs and 80% of physician cost. 

The existing structure of poor laws in the States were now to be subsidized by one-half by Washington, D.C. subsidies through Medicaid spending.  However, eligibility for assistance was to be effectively decided by the federal government, now by income-ranking.  Washington D.C. has ever since made certain that ranking always allowed for many low-paid workers to also obtain poor law medical relief.

These hugely broad legislative strokes shifting massive liabilities to the federal public sector did seem to patch the major leaks in the new American healthcare system.  Congress was proud once again of vastly deforming the free enterprise system for the system’s own good.

Consequences Never Truly Considered

All of the compassion flowing from the Great Society and the War on Poverty certainly was founded on the need to address societal problems.  With the advent of television, the needy and the desperate would regularly tell their stories of grief to literally everyone.  The implicit plea was for Washington D.C. to solve all of these problems, too. 

It was the method fashioned in 1965 to address the problems of old age and poverty that would bring a halting end to the American free market in healthcare.

Now the patient was not only remote from the business concerns of his or her doctor.  Many patients, largely the old, suddenly had become remote from the basic principle of limited supply of health services.  Now there was unlimited almost free medical care for the old and, oddly, the poor as well, at least in theory.  Once hypochondriacs reached a certain age or sunk below the poverty divide, they could spend most days in the doctor’s office. 

Patients could care less about what the government was paying.  Seemingly, neither did Congress.  The taxpayers were picking up in high fashion the medical expenses of the very group of patients that broad insurance coverage should be designed to pay for over a lifetime.  The basic model of insurance coverage had been deformed in 1954, leading to a divided healthcare system. 

The wave of compassion of the mid-1960’s had become, in a true sense, the first huge government bailout program created due to past central planning mistakes.

With the advent of Medicare and Medicaid the physician’s office had an entirely new form of paymaster.  It was a Colossus that one should shudder from crossing.  Payment for medical services became a feat of federal paperwork and a distant date on the calendar. 

Since patients now had few concerns with payments, one dealt with Colossus in a different hemisphere.  It was a place of imaginary numbers where every document one had to sign carried the weight of future imprisonment.

Because Colossus demanded about a 50% discount for public relations purposes, the entire payments system for healthcare services became grossly distorted by that single maneuver.  Every doctor’s office caring for the elderly or the poor simply had to substantially increase the prices paid by the other patients in order to discount Colossus’ discount and remain able to pay the monthly bills.

Once health insurance carriers had their provider payments zoom higher as a consequence, the industry began demanding from doctor’s offices huge discounts of their own in an effort to rebalance the divergence between public -sector payments and private-sector payments.  Two, in this instance, could play the monopolist’s game, now Colossus versus the health insurance cartel.

So, with the source of 90% plus of revenues for medical practices and hospitals demanding huge discounts, the concept of math in a real world became a near impossibility.  The numbers were very much incapable of working. Healthcare pricing was now a political function, not an economic one.

So, the numbers in the real world became unreal as the government and the industry leveraged each other to the hilt.  The share of US GDP taken by the healthcare industry overall grew well over the rate of inflation now for five decades running reaching the obscene height of 19%, about twice the figure paid in solely government run systems in other nations. 

By the time of the 1980’s, if US healthcare were not a service that every person absolutely needs at some point, the entire industry would have imploded due to its warring titans.  Instead, the nation and its finances went to ruin.

The evidence for this grandest of market distortion is displayed by reviewing a hospital or physician’s bill for services in 2017 to the uninsured patient, the people who, under the new US healthcare system, are absurdly supposed to pay for all of the government and industry discounts. 

A few days stay in the hospital will burst into six figures.  A two-hour surgery may be billed at $10,000 for the surgeon only.  Yet, neither of these numbers are every paid by anyone, especially by those unprotected by the system. 

Those unfortunates simply have to lose everything they own becoming bankrupts or debt serfs for life, all in order to keep the fantasy of deep discounts in play within a hall of mirrors.

As US employers began to bear the far heavier price of the newest healthcare system, something had to change.  So, it changed.  Small employers tended to disappear altogether.  Large employers tended to move operations overseas where employee benefits were non-existent.

In many US industries, the business ethic of providing employees with health insurance had to be discarded permanently in order to survive in a real world.  Their workers became the largest group of the unprotected in the healthcare system by far, those who earned too much to qualify for Medicaid. 

For these people, a serious illness in the family became an unaffordable event.  Short of going to the emergency room which had to take all comers under federal law, it was cash for services only typically, with services charged at twice what is paid by most others, no exceptions possible under federal law. 

A consequence became that long-term illnesses tended to go undiagnosed for the unprotected patients in the system until the illness had reached a mortal stage.  US longevity numbers stalled overall, actually declining for the unprotected and the semi-protected poor.

So, another rescue by the federal government was sorely needed.

Escaping Impossible Numbers by Shifting the Burden

President Richard Nixon, LBJ’s unlikely successor in office, was a foreign policy genius.  Nixon forced the SALT I and SALT II nuclear arms control treaties through Congress.  He opened the door to China.  Nixon seriously began détente with the Soviet Union and promised more.  He ended the Vietnam War finally.

Had Nixon not been run from office in 1974, the artificial global East-West Divide might have been largely extinguished.

If only.


The Father of Obamacare 

But Nixon was far from a genius when it came to economics or domestic policy generally.  That did not stop Nixon though from being thoroughly effective at enacting laws in that policy area as well. He never let the fact of a Democratic Congress get him down, except that one time at the end.

Nixon imposed his own Presidential wage and price controls across the board.  He founded the EPA.  Nixon abolished the Bretton-Woods gold-standard in a single Executive stroke.  Nixon was a fervent Keynesian in all ways.

Nixon, like Democrats, loved the collectivist command solution for just about every social problem, whether real or political in nature.  Nixon especially loved dreaming up methods to distort the economy in ways he saw as helpful.

It was Richard Nixon who came up with Washington’s eventual policy solution for the now unreliable, steadily sinking American healthcare system.

Nixon’s solution was to shift the paymaster duties away from Colossus, who could not pay over the long run, while keeping all of the same people paying for the system, now in an artificial guise created by Nixon’s guile.

The first command ordered all employers in the United States to provide all full-time employees a basically uniform health insurance coverage that was to be split in payments 75% for the employer and 25% for the employee.  Federal subsidies for all along the way.

The poor, the unemployed and those still without insurance would participate in a “voluntary” healthcare marketplace where federal subsidies were especially generous, eventually replacing the Medicaid program.

The elderly would have to remain completely on the federal dole though, because even Nixon could not dream of a better way to have other people pay for those costs.

So, Nixon created in his own mind a brand new free-market US healthcare system for all where a wonderful Master of Oz behind the curtain orchestrated the entire affair.  It was a truly grand illusion.  The system would be self-sustaining, ever improving actually, just like the old US healthcare system.

Of course, this particular Nixon fantasy never came close to passage into law, thank god.

That is until 2010, with the unprotected millions rapidly mounting, when a brand new Democrat supermajority in Congress passed the ironically named Affordable Care Act, more properly known as NixonCare. 

That law retraced Nixon’s vision for US healthcare in its basic outline, another huge legislative victory for the old master!

Renamed ObamaCare for the placeholding President of the time, Nixon’s legacy on this one is proving to be similar to the Watergate scandal.  And the EPA.  And abolishing the gold-standard.

Obamacare happens to be the very federal law that has most often been voted to be repealed by the House of Representatives, 55 times and still counting.  Turns out Nixon was not much of a Republican, after all.

Six years on, the Obamacare open marketplace for health insurance survives only because of $7b annually of life support handed under-the-table to the health insurance industry by Obama and now Trump, too.

The Final Blow

So, one might ask, what exactly has Obamacare accomplished?

Oh, it is far from all bad.

Obama had a talent, even beyond LBJ and Nixon, for bribing every special interest needed to pass pet legislation.  Obamacare was a record treasury buster.

Obamacare simultaneously paid off the American Medical Association, the National Hospital Association, the health insurance industry, the pharmaceutical industry, State governments, the AARP and even Planned Parenthood.  Everyone was to be richly rewarded, especially the health insurance carriers who Washington was now going to order all Americans to buy from or else.  The “free-market”, self-sustaining panacea for all was about to begin.

What could go wrong with such a perfect plan?  Richard Nixon must have been proud.  Obama, through Nixon’s plan, now had the magical genie of the free-market actually working on the side of Colossus.

Obamacare is indeed great for many of the intended beneficiaries. 

The pharmaceutical industry is further encouraged in its pillaging of US consumers and the federal treasury.  If only aspirin could be patented, pills could be sold for $5 each, just in the US though.

This industry had already shown its adept talent at buying legislation in Congress a few years earlier.  The pharmaceutical companies were handed new Medicare coverage for their products at full price, now largely free to elderly consumers.  This was done by George Bush and his Republican Congress, when not stirring up war across the globe.

Second in the Obamacare beneficiary line are the healthcare providers.  Already grossly overpaid physicians and hospital administrators skimming a captive marketplace could now become even more fabulously wealthy.   They have done so. 

Hospitals and physicians under Obamacare continue to be able to charge any amount they can possibly get away with, just by doubling the figure and submitting it for payment.  The number of Lamborghinis and Ferraris in the hospital staff parking lot has spiked again.  Physicians and hospital administrators in other nations are paid a pittance compared to these favorites of Congress.

Also under Obamacare, many of the unprotected are washed into the Medicaid system, if their State government went along.  Now if those people can only find a doctor who still takes Medicaid.

A strata of lower income middle-class families under Obamacare can begin to afford health insurance coverage because their premiums are so heavily subsidized.  These families are placed largely on the federal dole, Medicaid by another name and method.

What else has Obamacare wrought?

The families earning one US dollar above the income level for Obama marketplace subsidies have seen their insurance premiums skyrocket ever since Obamacare was passed with no end in sight.  These families are more unprotected than ever before. 

In a perverse phrase, one can say that Obamacare produced two jobs for every one that would have been created otherwise.  That is because employers avoided the Obamacare mandatory premiums by creating two part-time jobs rather than one full-time job.  Now the workers have two jobs instead of only one, work longer hours and without employee benefits entirely.  A part-time job is the face of Obamacare.

Hundreds of billions of taxpayer dollars have already gone down the variety of money sinkholes created by Obamacare with the gusher certain to multiply.

Sometimes greed leads to a quite perverse end.  The greed shared by the health insurance industry in its Obamacare negotiations has gone to naught, actually much worse.  It turns out the marketplace magic expected by Nixon and later Obama just never arrived, quite the opposite.

Without some form of major bailout soon, well beyond 7b/year under-the-table so far, the Obamacare marketplaces will have no offers to share with consumers and the nation few health insurance carriers left.

Obamacare has achieved one last huge ratcheting up of healthcare payments by supercharging the existing structural weaknesses and injustice.  It is likely to be the last effective supercharging of healthcare prices though. 

Certainly by now the US healthcare system is ready to collapse from any major shock to revenues.  This state of affairs mimics so much of the present American socialist/crony economy built on counterfeit and impossibilities. 

The Nixon/Obama play in healthcare financing has failed spectacularly.  There is no reform plausible, no coming back this time.

There is no Plan B left, short of fully socialized medicine, as the convolutions in Congress today clearly show.  Fully socialized medicine is something the US healthcare elite in their mansions simply will never stand for.  That is until the day when even their deep-pocket opinions do not matter much anymore.

So, Colossus and its captives have ended up in more trouble than ever before.  Even the fabulously rich from the system must stare down the abyss now.

Colossus appears close to ready to devour the oligarchs around it now, the special interests it has always served, all as a last desperate measure to save itself. 

Whatever happened to the magic on the way? 

The magic elixir combining free people and free markets was never in Nixon’s or Obama’s bottle.  One cannot turn paper into gold or water into wine.

The voluntary choices of millions best for them can never be programmed into a grand collectivist plan of command.  Freedom, the only plan that truly works for the whole of society, is exactly what the word implies.  There is no substitute.     EDITOR