How did Makeup, WWII, & Communism Create U.S. Healthcare?
If there's one debate you can't avoid today it's what do about the US health insurance. While many countries around the world have some form of nationalized, government run healthcare most people in the US have their healthcare provided by their employer. Why is that the case?
What happens when you combine a weird history of makeup, World War II, and the threat of Communism?
...Well....oddly enough you end up with an employer based health insurance system.
Now I know I can't stop you from engaging in the polite civil debate YouTube comments
are known for, but arguing about the current state of our healthcare system isn't really
what this episode is about.
Instead, we're going to focus on how the US healthcare system emerged due to a strange
set of historical circumstances.
Now, in the US almost 50% of people with health insurance are covered through their employers.
But considering jobs don't pay for other vital expenses like car insurance, utilities,
or Amazon prime, it's worth asking, why do they provide health care at all?
Well to understand the history of employer based healthcare we have to understand what
medicine was like about 100 years ago.
Spoiler Alert: it was messed up.
Before the 20th century most people couldn't afford a doctor and that might have been a
Doctors were doing all sorts of kooky procedures like inserting goat glands into patients' bodies
Or displaying premature babies in incubators at Coney Island freak shows.
Plus people usually went to the hospital to die rather than get better.
So most Americans didn't really worry about health insurance.
Fast forward to the early 20th century and medicine is actually getting good.
There's vaccinations, antibiotics, and better training in medical schools so doctors weren't
just hacking people up.
Now people actually want to go to the doctor.
Only problem (as always) is that real treatment costs real money.
But even as late as the 1920s most hospitals still had lots of empty beds, because in spite
of improved outcomes for patients, people couldn't pay.
What was the solution?
Okay, stay with me.
An official at Baylor University hospital noticed Americans were paying more on average
for cosmetics than healthcare.
That gave him a major light bulb moment when he said:
"We spend a dollar or so at a time for cosmetics and do not notice the high cost...yet it would
take about 20 years to set aside [money for] a large hospital bill."
This was a big development because then Baylor started selling plans to Dallas public school
teachers at work.
The teachers started paying for health insurance the same way people pay for makeup:
in small increments.
The plans became really popular and Blue Cross was born.
As a result health insurance started making headway in America.
But this brings us to our next question, why did the employer based system became so widespread
in the US?
It's odd because by 1920, 16 European nations had adopted some kind of national, compulsory healthcare.
Why didn't the US follow suit?
Well, because the more things change the more they stay the same.
In 1933 Franklin Delano Roosevelt and the Democrats pushed for a national health care system
as part of his social security legislation.
But Republicans, with the help of the American Medical Association, were able to shoot it
down by calling it "socialism"
and arguing that a health care program was "government overreach."
Basically, if your grandparents and great grandparents had facebook, they would have
had the exact same arguments as you.
But in order to understand how employers got involved in the health insurance game we have
to dive into two of history's most exciting subjects: WW2 and tax breaks.
Now, while Hollywood mainly makes movies about the battles, running a war is actually very
difficult and logistically complex.
And during World War II, the federal government was fighting Nazis and their own fear of post-war inflation.
And rightfully so.
The administration saw what happened when hyperinflation wreaked havoc on the German
economy after World War I.
So they were determined to hold it at bay through wage and price controls.
This of course, did not make workers very happy.
In reaction to the wage controls, many labor groups threatened to strike, which could have
been devastating to, ya know, winning the war.
So in a concession to unions, the War Labor Board exempted employer-paid health benefits
from wage controls and income tax.
Plus, the government offered big tax breaks for providing coverage.
As a result employers started offering health plans to attract new employees, unions didn't
strike and by the end of the war, health coverage had tripled (source)
So because history loves irony and unintended consequences, it was FDR and Labor Unions
who played a big part in generating the modern employer based healthcare system.
But what does Communism have to do with this?
Well post world war II, employer based health insurance, wasn't guaranteed.
President Truman pushed hard for a nationalized health care system, but was defeated by Republicans
with a big assist from Communism!
But first, a quick post war recap.
In Great Britain, devastations from bombings during WW2 led to a post war political consensus
and the formation of the National Health Service.
The fact that average citizens were hurt during the bombings in the UK, played a big role
in pushing this agenda forward.
In the US, this wasn't the case.
Other than the attack on Pearl Harbor, American soil remained almost entirely unscathed and
most non-Veterans were physically okay.
So rather than dealing with a devastated populace, American politicians were trying to bring
war time taxes under control and size up it's next enemy: Communist Russia.
In 1945, when Truman proposed his 5 points (source) for better national health, including
national health insurance, the threat of communism was used to defeat it.
Remember the American Medical Association?
Yeah it still wasn't too keen on universal healthcare.
The AMA used the "red scare" to convince the public and congress that Truman's plan
was "socialized medicine".
They called the administration "followers of the Moscow party line", which, despite
sounding like a line dance, was actually a pretty strong condemnation of Truman.
Of course Truman didn't appreciate being called a communist and used the
"Christian Values" argument against the AMA saying: "I put it to you, it is un-American to visit
the sick, aid the afflicted or comfort the dying?
I thought that was simple Christianity."
But ultimately, Truman's efforts for universal healthcare failed.
After that defeat, the Korean War took hold, and the 1950's boom economy lead to
greater employer based health insurance and America got more set in it's healthcare system
So what do we get when we add this all up?
Well, things that we rationalize as normal often need a lot of historical turns to arrive
at that same point.
Without a combination of creative marketing, the complex economic regulations of WW2, and
a post war boom economy mixed with the the threat of communism American health insurance
could have ended up in a very different place.
Oh and, remember that thing about displaying premature babies in incubators at Coney Island
Yeah, that one actually worked and paved the way for neonatal health care.
History's a weird place.