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Mother of InventionHow the Government Created "Free-Market" Health Care$
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Robert I. Field

Print publication date: 2013

Print ISBN-13: 9780199746750

Published to Oxford Scholarship Online: January 2014

DOI: 10.1093/acprof:oso/9780199746750.001.0001

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How the Government Created Private Health Insurance

How the Government Created Private Health Insurance

(p.157) 6 How the Government Created Private Health Insurance
Mother of Invention

Robert I. Field

Oxford University Press

Private health insurance emerged from the efforts of hospitals and physicians to devise alternative payment arrangements during the Great Depression. Two federal policiesfostered its spread during and just after World War II. One forgeda link with employment by permitting companies to add health coverage under a wage freeze. The other enshrined the link by permitting workers to receive this benefit tax-free. The resulting tax subsidy today costs $250 billion a year. Federal policies nurtured further industry growth through Medicare and Medicaid, which include large administrative roles for private insurers, and the Affordable Care Act, which subsidizes the market for individual policies. Another federal initiative transformed the industry’s operational paradigm bylaunching managed care. Without government support, private health insurance would look quite different. Its link with employment would be weaker, it would include few, if any,managed care plans, and itwould generate much less in profits.

Keywords:   Health insurance, Health coverage, Health benefits, Medicare, Medicaid, Managed care, Health maintenance organization, Affordable Care Act, Prepaid health plan, Tax subsidy

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