Why Health Care Is So Expensive in America, and What to Do About It | The American Spectator

America’s health care system consistently ranks as the most expensive in the developed world. It’s not, as some politicians claim, expensive because markets have failed. It’s expensive because the market has been repeatedly blocked from succeeding. Until we’re honest about that, any potential reforms will only address symptoms while ignoring the disease.
The health care market is hindered in many ways, but the core structural problem is simple: The person receiving care is almost never the person actually paying for it. Roughly 90 cents of every dollar is covered by a third party — an insurer or the government.
The arrangement severs the give-and-take relationship between provider and customer that disciplines every other sector of the economy. When someone else pays, no one shops around, no one compares prices, and no one asks whether a service is worth it. When someone else is paying, there is no reason to restrict one’s consumption. The result is predictable: opaque pricing, resistance to competition and no discipline to keep costs aligned with benefits.
Thus, this is not a debate about who should have coverage. It’s about whether the architecture of American health care creates any living, breathing incentive for affordability.
This fiasco didn’t happen naturally. It was built by the tax code — specifically, the exclusion of employer-sponsored health insurance from taxable income. As Michael Cannon of the Cato Institute has documented, the exclusion is roughly as old as the income tax itself, rooted in early Treasury rulings that predated modern health insurance.
In the early 1940s, wartime wage controls gave the concept practical force. Employers who couldn’t compete to hire workers with wages started using health benefits, which were exempt from the controls, as a workaround. But employer-purchased health insurance did not see robust growth until after wage ceilings were lifted in 1953. Congress then codified the exclusion in 1954, cementing employer-based i…