And you can thank FDR for that.
In 1942, Franklin Delano Roosevelt inadvertently committed the original sin of American health care. Driven by a wartime economy, inflation had risen to an alarming 10 percent. Economic policy was a bit of a simpler game then, so Congress just passed a law — the Stabilization Act of 1942 — instructing the president to stabilize prices and wages. FDR followed up by ruling that businesses could not significantly increase wages or salaries without authorization by the National War Labor Board. Problem solved.
Except, as it turned out, businesses still wanted to hire the best workers. They couldn’t attract them by increasing salaries or wages, so they looked elsewhere. Health insurance fell outside the scope of Roosevelt’s executive order, so firms competed with each other by funding increasingly generous health-insurance policies. Around the same time, an administrative ruling held that insurance was non-taxable in many cases, a policy that was broadened and written into the statute books in 1954. Over the following decades, private insurance became almost synonymous with employer insurance. Today, 49 percent of Americans get insurance from their employer, with another 34 percent on Medicare or Medicaid and 9 percent uninsured. Only 7 percent participate in the individual market, 4 percent through the Obamacare exchanges. (Another 2 percent get health care from other public sources, such as the VA.)
Much that is wrong with the American health-care system can be attributed to this system, which is now financed to the tune of approximately $250 billion a year in federal tax breaks. If you lose your job in America, you typically lose your health insurance too. The system of government-subsidized, employer-provided health care blunts the incentive to keep costs down, which distorts the market. The need to provide health insurance also makes life difficult for small businesses.
It would seem unbelievable that conservatives should be thankful for such an arrangement, which works counter to all the best workings of the free market. And yet they should be thankful, for this crazy system means that single-payer will never, ever happen.
Now that the GOP health-care reform is dead in all but name, some on both the Right and the Left are starting to wonder about the unthinkable: that a major Northern European–style health-care reform will finally take root in the United States. Charles Krauthammer has predicted that we will have single-payer health care within seven years — an anxiety not uncommon by now in much of the Right. On the Left, Democratic politicians seem to be coalescing around the issue, emboldened by Bernie Sanders’s performance in the 2016 primaries and by opinion polling that suggests wide support for single-payer health care among the Democratic base — and sometimes among the broader electorate too.
If single-payer did happen, it would be the most momentous event in 50 years of American domestic policy. It would essentially nationalize one-sixth of the American economy, and would be the biggest defeat in the history of the modern conservative movement. It would erase by the far the biggest distinction between rugged, individualist America and the social democracies of northern Europe. One can only imagine what the political implications would be: the leftist movement in America would be emboldened for decades to come, while the Republican party and center-left Democrats would be discredited, perhaps permanently.
So let’s be clear. Here’s what single-payer means: Somewhere north of 150 million Americans get insurance through their employers. Because of the government subsidies, these insurance policies tend to offer generous care, and despite some cost-sharing, most employees pay relatively little. Most Americans (including those who are uninsured or on government plans) like their insurance: 77 percent say the quality of health care they receive is good or excellent; 65 percent say the same about their coverage; 56 percent are even satisfied with the total cost they pay for their health care. Overall, about two-thirds of Americans on employer insurance are satisfied with the U.S. health-care system.
Suppose you’re one of those 150 million Americans. Between you and your spouse, you make $76,000, the median for a four-person family. You pay $4,700 a year in premiums for a family plan, the national average, and your employer pays for the other 73 percent. You like your doctor, and your policy allows you to obtain just about any health care you might need, whenever you want it. Your deductibles could be lower and it will always be frustrating to sit in a hospital waiting room, but there are no serious obstacles to obtaining high-quality care. Overall, you’re pretty satisfied with your health care. Now, some politician — maybe Candidate Sanders — offers you the following pitch: You lose your current health care and instead are enrolled in government health care. You do not necessarily get to keep your current doctor. There may be waiting times, as there are in Canada, and there is also a chance that you may be denied access to certain treatments that are considered cost-prohibitive, as currently happens in the U.K.’s NHS. The Democrats promise that quality of care will remain high and perhaps they are right, but no one is entirely sure.
Finally, instead of paying $4,700 a year in premiums, your tax rate will go up substantially. It’s not clear how much: One tax plan mooted by Bernie Sanders would have you paying an extra $9,140, but this probably isn’t a reliable measure. On the one hand, the tax plan was designed to fund additional benefits beyond health care, like free higher education; on the other, it dramatically underestimated the amount of revenue that would be needed to finance single-payer. Your salary will probably increase too — perhaps substantially — since your employer will no longer be on the hook for the other three-quarters of your premiums.
Regardless, the bottom line is that some Americans will end up paying less and others will end up paying more — with the latter probably including a large portion of upper-middle-class America. From your perspective, particularly if you’re closer to, say, the top 10 or 20 percent of the income distribution than the median, the offer will go something like this: Pay considerably more in taxes than you currently do in premiums, with the vague promise that your salary will go up some undetermined amount. Then, your relatively generous private health care will be swapped out for a government plan that may entail rationing and probably will not let you keep your doctor.
Any takers?
Some countries are okay with this deal. Taxes in northern Europe are higher but less progressive than in the United States, a reality far too often overlooked by leftists wishing to emulate countries like Denmark and Sweden. This is because social democracies are incredibly expensive: There simply aren’t enough rich people to carry the entire burden of the welfare state, so everyone ends up paying a lot. All income above 1.2 times the average Danish income is taxed at 60 percent. In America, that would mean a 60 percent marginal tax rate on all income over $60,000. There are also hefty value-added taxes — 25 percent in Denmark — that apply with few exceptions to goods sold in the country. These are actually regressive, since lower-income households spend a greater portion of their income on consumption. As a result of all this taxation, the Danes get the sort of policies floated by candidates like Bernie Sanders — free education, universal health care, expansive public sectors. The Danes, the Norwegians, and the Swedes are all okay with this: It’s their version of the social contract (no doubt in part because, unlike America, they have a well-deserved reputation for highly efficient and well-run government programs).
Poll after poll has found support for single-payer — up until the moment that people are told it will increase their taxes.
But it’s not ours. Poll after poll has found support for single-payer — up until the moment that people are told it will increase their taxes. It turns out that while everyone is very happy with the idea of universal health care, paying for universal health care is divisive. Now, some might say that support for the tax hikes will grow once Americans are suitably enlightened of the virtues of a single-payer system. Maybe. But the evidence suggests otherwise. Vermont is perhaps the state where single-payer would be most likely to work: It is the state that elected Bernie Sanders to the Senate, it is one of the most consistently liberal states in the nation, and it has the high levels of trust and social cohesion associated with Scandinavia. But even Vermont found that single-payer was too expensive: Governor Shumlin abandoned the idea in 2014 after realizing that it would require unacceptable increases in payroll taxes.
Then there’s the disruption. Think of how acrimonious the debate over Obamacare was, when the disruption to existing health-care plans was relatively minor: Obama’s dishonest promise that “you’ll be able to keep your health-care plan” was not mere bluster; it was critical to the defense of his bill. Now imagine what the debate would look like when every single American with some form of private insurance knew that they would not be able to keep their health-care plan. The Tea Party, Sarah Palin, the town-hall meetings of 2009: That would be nothing compared to the public outcry against a policy of universal government health care financed by massive tax hikes. Obamacare cost the Democrats 63 seats in the House and 680 in state legislatures. The exchanges enroll 4 percent of America. Imagine what the repercussions of a universal-health-care bill would be.
If there’s one thing we can learn from the Republican health-care catastrophe, it is that it’s far easier to talk about health-care reform when you’re in the opposition and everything is theoretical. But suppose that it’s 2021. Suppose that Sanders is president, and that the Democrats have just over 60 seats in the Senate and a majority in the House. For a moment, single-payer would seem tantalizingly possible. What will happen when upper-middle-class liberals start to worry about tax hikes larger than they have ever seen? What will happen when they realize that the end result of these sacrifices will be the loss of the health-care programs that have always proved sufficient in times of need? How many senators and how many representatives will be willing to stand by Sanders once they realize that it would mean electoral defeat on a scale far beyond 2010? Those are the stakes arrayed against single-payer. They are simply insurmountable.
Indeed, given the basic outlines of the problem — Americans are not likely to tolerate large tax hikes on the middle class and most Americans do not want to lose their current insurance — it is hard to imagine any transformative left-wing health reform. Any realistic health-care proposal would have to leave 85 percent of America alone — those on employer plans and those on Medicare or Medicaid. That leaves those on the Obamacare exchanges and the approximately 10 percent or so of America that is still uninsured. There are certainly plausible center-left proposals that involve this 15 percent of America, such as some sort of public option, and conservatives do have reason to fear an expansion of government’s role in health care. But a public option enrolling 20 million Americans, or a further expansion of Medicaid, would be a far cry from the enormous government intervention entailed by single-payer, and would preserve the crucial distinction between the American approach to health care and the approach favored in the Nordic democracies.
For all this, conservatives can thank FDR.
— Max Bloom is an editorial intern at National Review and a student of mathematics and English literature at the University of Chicago.