As Americans respond to President-elect Obama's call for town hall meetings on reform of the American health care system, an understanding of how that system came to be the way it is can be crucial for figuring out how to fix it. The American health care system is unique because, for most of us, it is tied to our jobs rather than to our government. For many Americans, the system seems natural, but few know that it originated not as a well-thought-out plan to provide for Americans' health, but as a way to circumvent a quirk in wartime wage regulations that had nothing to do with health.
As far back as the 1920's, a few big employers had offered health insurance plans to some of their workers. But only a few: By 1935, only about two million people were covered by private health insurance, and on the eve of World War II, there were only 48 job-based health plans in the entire country.
The rise of unions in the 1930's and 1940's led to the first great expansion of health care for Americans. But ironically, it did not produce a national plan providing health care to all, like those in virtually all other developed countries. Instead, the special conditions of World War II produced the system of job-based health benefits we know today.
In 1942, the US set up a National War Labor Board. It had the power to set a cap on all wage increases. But it let employers circumvent the cap by offering "fringe benefits" - notably, health insurance. The fringe benefits created a huge tax subsidy; they were treated as tax-deductible expenses for corporations, but not as taxable income for workers.
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