Chapter 9
Privatizing Health Politics:
The Origins and Enduring
Dilemmas of America’s Public-Private
Insurance Framework
Jacob S. Hacker
© 2008 Delmar Cengage Learning.

U.S. Health Spending:
More than Meets the Eye
37.6
36.4
35.7
40
35
30
25
20
15
10
5
0
20.3
20.8
30.4
21.8
26.5
30.1
25.9
17.1
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Kingdom
• At first glance, the U.S. (far right), appears to spend far less on health care than (otherwise) comparable nations…
Unit ed St at es
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© 2008 Delmar Cengage Learning.

30
25
20
3
15
10
18.7
5
17.7
3.5
U.S. Health Spending:
More than Meets the Eye
1.8
1.6
0.8
0.8
3.9
3.8
1.4
8.3
1.5
Publicly
Regulated and
Subs idized
Private
Spending
Public
Spending,
Including Tax
Expenditures
23.6
25.1
25.9
25.4
22.1
20.9
21.2
17.3
16.2
0
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• Once one factors in tax breaks and publiclyregulated/subsidized private benefits, however,
U.S. spending levels (again, far right) rise considerably.
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• Early battle by progressives to enact national health insurance drew attention to the need to expand health coverage
• Such groups as AMA, insurance companies championed private coverage as an alternative to government intervention
4
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• Early treatment of employer contributions to health plans as non-taxable fringe benefits led firms to use employer-sponsored health plans as a means to entice, retain workers
5
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Expansion of
Private Health Coverage
• After first successful employer group insurance plan (Baylor Hospital, 1929) arose
– Concept caught on across the country during the 1930s and 1940s
6
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Expansion of
Private Health Coverage
• Following second (failed) attempt to enact national health insurance in association with Social Security
– Private insurers redoubled efforts to expand coverage
7
© 2008 Delmar Cengage Learning.

Expansion of
Private Health Coverage
• Price/wage controls in wartime made health coverage particularly important as a recruitment tool
• President Eisenhower (1954)
– Clarified tax status of private health plans, confirming their tax-exempt status
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Covering the Consequences: Political
Legacy of Private Health Coverage
• Spread of private health coverage gave rise to numerous parties with an interest in defending the status quo
– Thus limiting the political “room” to enact comprehensive reform
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Covering the Consequences: Political
Legacy of Private Health Coverage
• Use of private enterprise to serve public goals gives government little leverage over the health care system/industry
10
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Covering the Consequences: Political
Legacy of Private Health Coverage
• Most, though by no means all, receive some form of health insurance under present system, blunting demands for reform
• Costs for switching from largely private to public provision of health insurance would now be monumental
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© 2008 Delmar Cengage Learning.

The Dreamers: Attempting to Develop a
System of National Health Insurance
• President Truman famously failed to attain national health insurance in late-1940s
• Passage of Medicare and Medicaid in mid-
1960s represents first (and only) broad expansion of public health coverage
12
© 2008 Delmar Cengage Learning.

The Dreamers: Attempting to Develop a
System of National Health Insurance
• Competing visions of national health insurance in early-1970s withered in the shadow of Watergate
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The Dreamers: Attempting to Develop a
System of National Health Insurance
• President Clinton’s attempt to enact national health insurance failed
– Private insurers implemented portions of it
– Shepherding policyholders into managed care plans
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Chapter 9 Summary
• U.S. spends greater proportion of income on health care than it initially appears
– Once tax breaks and private benefit structures are taken into account
• Nonetheless, the redistributive aspects of health spending tends to favor the rich
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© 2008 Delmar Cengage Learning.

Chapter 9 Summary
• Though many have, over time, recognized the need for a greater government role in health coverage and spending
– The rise of private insurance and its vast consequences have made national health insurance little more than a perennial fantasy
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© 2008 Delmar Cengage Learning.