Can you explain? Which part of this problem did the government cause - and how?
Two major components. First is the tax incentive to attach health insurance to employment. Second is the stifling of the free market in health insurance. Taxes
: The government allows the cost of health insurance to be deductible. Realize that the employer has no reason to deal with the hassles of health benefits. The tax benefits mean that we as employees are getting our health insurance as a tax deduction.
When my employer pays 2/3rds of the premium it is not coming out of their pocket it is coming out of mine. My productivity brings in $X per year to the company. They pay me salary plus benefits from that $X I produce, and they of course keep some profit out of it. The history of this is that tax rates used to be more progressive, meaning they got much higher as income went up. Employers started offering benefits rather than pay because the benefits were not taxed. It was a way to boost compensation for the employee while getting around high taxes.
If there were no tax benefit to running health insurance through employment we would all buy it ourselves outside of work. Exactly how we do with auto or homeowners or life insurance. We use some of our pay to buy insurances. It makes us superb consumers because we shop for price. We buy the coverage we want. Maybe we want full comprehensive auto insurance, or maybe we want only collision with a high deductible. Maybe we want $1million life insurance, or maybe we don't want any. Insurance companies compete for our business by matching their products to our demands. They compete on price to get us to buy their product. Stifling the Free Market
: But we cannot go out on a free market to buy health insurance regardless if it is available through a job. The fedgov prohibits nationwide health insurance products. Geico advertises nationwide their gecko car insurance, but health insurance cannot do that. So the supply is limited artificially, resulting in less competition. And thus prices are artificially high to buy health insurance. Secondly, the fedgov mandates what must be covered. For example birth control, and dependents up to age 26. If we are putting young adults on parents' insurance, it means more expenses to be covered. Thus our premiums get more expensive. Those young adults aren't paying into the insurance but they are getting coverage due to government mandate.
The fedgov legislates and regulates every aspect of health insurance coverage. Good or bad, the products we can get are designed by government.
So to get to our TAM member's situation which is a common one. He had family health insurance through his employer. When his job ended he lost the insurance. His son became ill and thus had a pre-existing condition which would not be covered by any new private insurance plan. Of course not! If you had no auto insurance and then crashed your car, Geico isn't going to sign you up and then pay for that repair. Fortunately for our TAM member his state had a plan which he was able to utilize.
Now imagine if we had a free market for health insurance untethered from our jobs. Our TAM friend would have kept his insurance just like he kept his other insurances after his job loss.
The government has created the system we have, which is the system which let down our TAM friend.