It’s easy to assume that the way things are is the way they’ve always been. Take health care, for example.

We might be tempted to believe that employer provided health insurance is the normal way people have always paid for healthcare. About half of working age Americans and their families are covered by employer provided insurance, 20 percent are covered by government insurance (primarily Medicaid), and the remainder purchase their own coverage. The senior population is covered by Medicare (14 percent). If it has always been so, why change it?

Actually it hasn’t always been this way.

As an institution, health insurance is less than a 100 years old. In the late 1920s, Baylor University Hospital began offering teachers a basic insurance plan. For 50 cents a month they could receive coverage for hospital visits. Blue Cross policies, as they were eventually called, spread throughout the country. During WWII, employers began to offer health insurance to recruit employees. The IRS made employer-based health care tax free in 1943 and increased the incentive in 1954. By then, 63 percent of Americans had health insurance. In 1965, LBJ signed into law Medicaid, government insurance for the poor, and Medicare, government insurance for seniors and the disabled.

This employer and government-based system of health insurance has significant drawbacks. Employers may not offer insurance or may provide limited choices. Plus, insurance policies are not portable to the next job.

Medicaid coverage is constricted by price controls and provides meager coverage. Few people know what procedures actually cost because most medical providers don’t provide prices upfront. Even when prices are known, few patients have any incentive to price compare and shop because we expect insurance to pay no matter what.

Congress passed Obamacare (well, technically the “Affordable Care Act or ACA”) to enable more Americans to purchase their own health insurance by providing subsidies and mandates and by expanding Medicaid. Some studies have shown that Obamacare helped 14 million Americans gain health insurance, but many of these policies have very high deductibles and few insurance companies want to provide them.

Since Obamacare became law in 2009, costs have gone up, in part, because some people get insurance only when they need a procedure, thereby forcing everyone else to pay more. When costs exceed subsidies and premiums, insurers have pulled out of the government exchanges. Bit by bit, the ACA is falling apart.

As Congress approaches a rewrite of the ACA, we have to keep in mind that insurance is the government’s responsibility or employers’ responsibility. These assumptions are products of a system that is only about 75 years old.

Rather than make new laws based on the failed assumptions of Obamacare, we’d be better off to adopt the principles that undergird every thriving economic sector in America. Free markets rather than high regulated and subsidized quasi-markets are better at meeting the needs of individuals and creating innovation.

What are your thoughts?

How can Congress reform the ACA so that insurance is more affordable? Is it possible to start over with Health Care Reform?

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