The Government Role in US Health Insurance

The U.S. government has had a role in health insurance since the eighteenth century, when it accepted the responsibility to provide medical care for the U.S. Merchant Marine. During the growth period of private health insurance in the United States prior to Medicare and Medicaid (1940-1965), the federal government let the private market work, limiting itself to indirect involvement through tax incentives for employers and employees who favored the purchase of health insurance as a fringe benefit. State and local governments were expected to provide care to the indigent and to the mentally ill. As a large employer, the federal government became a major purchaser of health insurance for its employees.

Finally, the federal government is a major supplier of social insurance for medical care for Native Americans, active-duty military personnel and their dependents, and veterans. The total public expenditure for medical care services in 2000 was $590 billion, 45 percent of the $1.3 trillion total national expenditure for health services and supplies during the year.

Government involvement in U.S. health insurance differs distinctly from paths followed by most other industrial nations. In Europe, several nations have made the direct delivery of healthcare a national government responsibility (e.g., the United Kingdom and the Scandinavian countries); others have taken up the role of coordination in mixed public-private systems (e.g., Germany, the Netherlands, Switzerland); others have assumed the role of providing health insurance to the citizenry, allowing hospitals and physicians to operate in a fee-for-service environment (France).

In the late 1960s, Canada adopted an approach similar to France's: Each province has a monopoly on health insurance for basic services, while the federal government plays a coordinating role. Canadian Medicare rests on five essential principles: universal entitlement, accessibility of services, comprehensive benefits, portability of benefits across provincial boundaries, and public administration of the system within each province.

Questions about the proper role of government in health insurance continue to be central issues in debates among U.S. health insurance reformers. Proposals put forward in the first decade of the twenty-first century will succeed or fail on the basis of their ability to make the case that they have found an acceptable balance point on the public-private continuum where private markets (insurance carriers, providers, suppliers) come together under public policy constraints to produce an acknowledged common good.

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