The Pandemic Exposed a Major Flaw in America’s Health Care System

by Robert Brent Toplin

Robert Brent Toplin was a professor of history at the University of North Carolina, Wilmington and at Denison University, and taught occasional courses at the University of Virginia after retirement. Toplin has published several books and articles about U.S. and global history. Contact: Toplinrb@uncw.edu.

The coronavirus emergency exposed a serious shortcoming in America’s health care system: insurance provided through the workplace. The U.S. approach to health security, an unusual arrangement among modern societies, did not serve the American public adequately during flush times. Now, in hard times, it is glaringly insufficient. The system is in desperate need of reform.

The United States’ largely employer-based insurance arrangement became prominent during World War II. Millions of workers left home to serve in the armed services, creating labor shortages. President Franklin D. Roosevelt worried that Inflation would spike because companies needed to raise wages to compete for an inadequate supply of workers. He responded with an executive order in 1942 that froze wages. Employers managed to attract laborers nevertheless by offering employer-sponsored health insurance. In 1943 Congress made that benefit tax-exempt, an action that reduced the cost of health coverage for individuals and families. In the prosperous decades after World War II, numerous American businesses provided health insurance as an employment perk.

World War II contributed to the formation of a different approach to health insurance in Europe. Economies were in ruins after the war. The Europeans could not establish employer-based systems in an unstable business environment. Programs that emerged on the European continent and in the United Kingdom varied greatly and sometimes included large components of private insurance. But governments served as the primary organizers of medical insurance. Government-sponsored programs brought universal health care to the public.

The Europeans were more aggressive than the Americans in keeping health costs under control. Washington had less political clout than European governments when dealing with medical industries. In the USA special interests, including insurance companies, doctors, hospitals, drug companies, and medical device firms merged, lobbied, and competed tenaciously for profits. In this fragmented, free-market environment spending on medical care surged. Health care in the United States became, by far, the most expensive arrangement of modern developed nations. Health care spending represents 18% of gross national product (GNP) in the USA. Switzerland, second highest, spends 12% of GNP on medical care.

America’s employer-based insurance system served nicely during the booming Fifties and Sixties, but over the years changes in employment practices left more and more people with inadequate coverage. Years ago, millions of American workers received impressive medical benefits secured by unions. No longer. Union membership has declined substantially. Many Americans now work independently as contract workers or consultants. They must secure health insurance on their own, often at considerable expense. Others hold temporary positions that provide no coverage or limited coverage.

Then the pandemic hit, making employment less secure. In just a few months, businesses placed numerous workers on furlough or released them completely. Unemployment claims jumped to 38.6 million in nine weeks. Workers in restaurants, retail stores, hospitality industries, airlines, manufacturing, and other fields joined the ranks of America’s unemployed. The coronavirus produced more than just a job crisis. It created a health insurance crisis.

A survey in February 2020 revealed that many Americans suffered from medical insecurity before the Covid-19 emergency. The NBC News/Commonwealth Fund reported in early 2020 that one in three Americans worried they could not afford health care. One in five respondents said they had problems paying or were unable to pay medical bills during the past two years. Now, with the pandemic destroying jobs, additional millions are insecure.

During the Twentieth Century, reform-minded political leaders in the United States tried to improve health security, but they were unable to achieve what European societies accomplished. Franklin D. Roosevelt wanted to include medical insurance in the 1935 Social Security bill. He dropped the plan to win support in Congress. Harry S. Truman sought universal coverage as part of his Fair Deal but encountered enormous pushback from the American Medical Association and other organizations. A huge Democratic victory in the 1964 elections helped Lyndon Baines Johnson and Congress to establish Medicare and Medicaid in 1965, yet those measures targeted only a portion of the total population. In 1994 President Bill Clinton and his wife, Hillary, had to back away from a bold plan to expand coverage after encountering fierce opposition.

The program created by President Obama and Democratic lawmakers in 2010 has been under attack in recent years. GOP lawmakers and conservatives at the Supreme Court chipped away at Obamacare’s provisions. Now Republican governors and President Trump threaten to take down Obamacare entirely. On May 6, Trump said his administration would continue backing a constitutional challenge at the Supreme Court. “We want to terminate health care under Obamacare,” Trump declared. The president and Republican legislators have long targeted the Affordable Care Act but never identified a comparable replacement. If the GOP’s challenge at the Supreme Court succeeds, twenty million Americans will lose medical insurance provided through the Affordable Care Act.

The United States is the only modern, industrialized nation in the world without universal health coverage. Its insurance system, based primarily on employer-sponsored programs, failed to protect the public before the pandemic. With unemployment now approaching Great Depression levels, the system is woefully insufficient. It needs radical overhaul. Reform will not be generated by the Trump administration or the current Senate leadership. The system might get an overhaul if Democrats win control of the White House and both houses of Congress.

In view of the long history of unsuccessful efforts to reform health insurance in America, many pundits expect powerful groups will once again crush proposals for change. But the severity of the present economic downturn could make a difference. The United States is now in a position somewhat like Europe after World War II. Europeans dealt with the crisis of smashed economies by establishing government-organized health insurance. Now American society is reeling from fierce attacks by an invisible enemy. Covid-19 damaged American businesses. It produced a severe employment problem and a related medical insurance problem. Employer-sponsored health insurance now appears less promising because many jobs are at risk. The present emergency could excite broad-based support for universal health coverage, a reform Europeans embraced long ago.

During the 2009-2009 financial crisis, Rahm Emanuel, President Obama’s Chief of Staff, made an insightful comment that is relevant to the current situation. “Never allow a good crisis go to waste,” advised Emanuel. “It’s an opportunity to do the things you once thought were impossible.”