Free Hostile Takeover: Resisting Centralized Government's Stranglehold on America by Matt Kibbe Page B

“inflationary” and could therefore be excluded. That fateful 1942 decision was followed the next year by an IRS ruling that employer-provided health insurance, already tax-deductible as a business expense, didn’t have to be declared as income by workers. Employers seized on this new tool for attracting workers in a competitive labor market, and workers readily accepted the tax-free fringe benefits in lieu of cash compensation. By 1946, enrollment in employer-sponsored group health benefit plans had more than tripled, from 7 million to 26 million members. 39 In 1954, Congress codified the new policy in the tax code.
    With the advent of Medicare and Medicaid in the Lyndon Johnson Great Society years, the entire system began to evolve into one of reliance on third-party payers. By the 1990s, national health spending, public as well as private, had almost tripled, to 13 percent of the economy. Today, two decades later, health spending represents about 17 percent of output, or more than one-sixth of our entire economy, and it’s still rising. 40 Now, by itself, that increase might not be a bad thing, if it simply means medicine provides more value than it did in the past. After all, who’s to say how much health care is “too much”? But while overall spending was going up, the share of health spending paid for by individuals out of pocket was falling dramatically, from close to half of all health spending in the early ’60s to only about one-quarter today. 41 Meanwhile, government’s share is growing; today, it represents nearly two-thirds of all health spending. 42
    Value has been rising, to be sure. Medicine can do all sorts of things it couldn’t in our grandparents’ time. But medical inflation has been rising too. Indeed, it’s plagued health care for half a century now, and has reached the point that it’s the single largest driver of federal debt and deficits. It’s not as if the government hasn’t been trying to fight rising costs. Bureaucrats have come up with every solution you can think of—from local restrictions on the number of hospital beds to repeated attempts to impose price controls. Nothing has worked. The one solution that hasn’t been tried is the only one that can actually work: abandoning the centralized model and returning power to patients.
    PROGRESSIVELY WORSE
    S O FAR, I’ VE BEEN TELLING ONLY THE DOLLARS-AND-CENTS PART OF the story. There’s also the political story, the long twilight struggle of ideas between top-down government and individual freedom.
    That struggle can be traced all the way back to Teddy Roosevelt’s Progressive Party platform of 1912, which—stealing an issue from the then-rising Socialists—included a promise of national health insurance. Democrats under Woodrow Wilson picked up the idea, and every Democratic president since has attempted to make it a reality. Franklin D. Roosevelt tried it in his Social Security plan in 1935, but had to back off under pressure from the medical community. John F. Kennedy and Lyndon Johnson tried again in the ’60s, falling back to a “seniors and poor people first” strategy, and succeeded with enactment of Medicare and Medicaid in 1965. Jimmy Carter tried for the whole kahuna again in the late ’70s, only to fail miserably. Bill Clinton picked up where Carter left off, and almost secured passage of Hillarycare in 1994, but was famously foiled by a united GOP and a handful of centrist Democrats. That plan, however, hadn’t smoldered on the ash heap of history for very long before a fallback plan known as Kids First was picked up in 1997 by a senatorial duo: Ted Kennedy, the famously progressive Massachusetts Democrat, and Orrin Hatch, the Utah Republican. It soon became law as the State Children’s Health Insurance Program, or S-CHIP.
    Essentially a big Medicaid expansion, S-CHIP revived the Left’s fortunes after their disastrous repudiation in the ’94 elections. Ever since, they’ve been on the offensive,