> But I imagine the majority of externalities could be accounted for if we tried.
The irony is if you actually came close to achieving that (e.g. accounting for all externalities in the market price), you'd have something like central planning. That's why externalities are usually managed through other mechanisms.
Also, externalities are only one kind of market failure.
Employer-based healthcare was won by an alliance of corporate and healthcare industry lobbies against a state healthcare plan in the 1950s when the so-called “free market” healthcare system was failing the public. Prices were increasing and the New Deal corporate powers pacified the public with social security and employer-based healthcare.
In the US healthcare was intentionally tied to employment as a means of controlling wage inflation during the 1950s by Eisenhower. He had pushed for the "middle way" of private nonprofit health insurance that could be purchased individually or by employers. As inflation began to spike, the administration added new tax benefits to encourage employers to compete on providing benefits rather than higher base salaries.
Roosevelt also tried to institute a national scheme in the 30s but labor unions were split on notional vs. employer provided and it became a wedge issue that scuttled the plan. Truman's push for that same national health insurance plan was shot down in ~1949, partially killed by AMA lobbying.
It's not Eisenhower's administration that's to blame, it's FDR's. Employer based healthcare is a result of the stabilization act of 1942. Health benefits were offered as incentives to workers because employers could not raise wages.
> Employer based healthcare is a result of the stabilization act of 1942. Health benefits were offered as incentives to workers because employers could not raise wages.
Employers can raise wages, and have been able to for some time, so that's not why we still have it.
We still have it because of tax and other incentives, and because government keeps making policy decisions to protect, and even extend it (e.g., the ACA employer mandate), not because of the employers need to offer health benefits to compete because they can't offer more wages because of WWII-era wage controls.
Employers love employer-based healthcare because it gives them insane amounts of control over their employees’ livelihoods. And as a result, wage competition is far less influential.
The fear of losing healthcare coverage a severe fear that people in other countries don’t have to worry about.
I think a lot of employers find it to be a giant headache. It’s expensive and tricky to administer and has nothing to do with your core competency as a business.
I did not state that this is why we currently have employer based health insurance, just why it came into existence. Many consider this to be the "original sin" of US healthcare policy.
You’re right. It was earlier than I thought. I updated my comment per your reply.
Heaven forbid “wage inflation!”
Was the AFL pushing for employer-based and the CIO pushing for national? I don’t even know where to find history like this. It’s virtually impossible for an average person to learn about the history of the American labor movement.
I realized after double checking that it was actually a 1942 Roosevelt bill, and they were trying to figure out how to keep a lid on rising prices during the war. It's also not uniformly good if prices also rise quickly. Inflationary spirals are real, and very bad for regular people.
> Was the AFL pushing for employer-based and the CIO pushing for national?
I'd have to double check.
> It’s virtually impossible for an average person to learn about the history of the American labor movement.
A bunch of this stuff is available in more popular history and online now. "The Devil Is Here in These Hills" is supposed to be good, but I haven't read it.
> I suspect the argument is "Healthcare has never been allowed to be a market" Given how many legal restrictions are placed on it, I tend to agree.
Emergency services aren't a good fit for markets. For markets to work, people really need the luxury to shop around with some leisure.
Wasn't there some Roman oligarch that ran a private fire department, and basically just used it to extort property owners when they had a fire? Truly market based emergency medical care without legal restrictions would likely frequently resemble that with some frequency.
> The first ever Roman fire brigade was created by Marcus Licinius Crassus. He took advantage of the fact that Rome had no fire department, by creating his own brigade—500 men strong—which rushed to burning buildings at the first cry of alarm. Upon arriving at the scene, however, the firefighters did nothing while Crassus offered to buy the burning building from the distressed property owner, at a miserable price. If the owner agreed to sell the property, his men would put out the fire, if the owner refused, then they would simply let the structure burn to the ground.
I will also comment that when we talk about "healthcare being a market", we need to separate out providers of healthcare, with insurers of healthcare. Insurers of healthcare are much closer to a market (in that I can generally find out what the cost of the insurance is, and what it covers), but providers aren't (in that prices lists are hidden, it's not clear what is covered vs what isn't, etc). We talk about the cost of the insurance, but that's artificially high because of the practices of the providers (themselves incentivized to behave that way because of the insurers).
And that's the open market; it gets even more cloudy when we talk about employers being involved, so we have an agency problem as well.
It's a system unlike any other, and I don't think general theories really apply very well as such.
Here's a theory: Insurance companies argue and refuse to pay out to hospitals because it's an adversarial relationship.
Hospitals increase rates to cover the overhead of dealing with hostile insurance companies. Insurance companies raise rates to match increased hospital billing. Ironically both industries are incentivized to raise rates on customers while trying to gouge each other.
But that never actually happened. Externalities were never part of the market.