Okay, so how DID health care become so expensive?

I am happy to see that a leading publication such as Reuters has mentioned a rarely-discussed turning point in the cost of health care.  The article discusses the effects of folks being "tied" to their employee health plans.  The turning point I mention is that during World War II the federal government instituted a cap on wages which meant that employers could not pay more than a predetermined amount (I think this was done in an attempt to stifle inflation and was possibly considered by some as a way to support high production of war time industry).  When employers wanted to attract workers and couldn't do so by raising wages, they came up with the idea of offering health insurance which was not considered "wage" and was therefore permissible.

This was a turning point because it marked the large scale shift towards a society with a third-party payer for health care.  Today, in fact, the majority of people with health coverage are covered by an employer-provided plan.  Under the "old system" well before World War II folks usually paid for physician and hospital services out-of-pocket.  This meant that they had a great deal of incentive to reduce their use of services.  This low-demand situation was necessarily met with lower prices by physicians and hospitals who had to attract consumers.

The big change came on a large scale during World War II when the third party payer system began en masse and lifted the burden on the consumer.  The patient could then obtain more services which in turn enabled physicians, hospitals, and the like to both perform those services and gradually raise prices knowing that they would get paid by the third party.

This is just a simple explanation of the beginnings of the third-party payer system and, as such, yields the opportunity for many future posts discussing the costs of health care today.