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     Anyone who follows politics knows that healthcare is never far from voters’ (and politicians’) minds. Given the 47 million uninsured and the looming bankruptcy of Medicare, U.S. policymakers should be thinking long and hard about how to improve the national healthcare system, but what types of policies should they consider?

In a recent article entitled “Health Insurance: Market Failure or Government Failure?” David A. Hyman of the University of Illinois College of Law presents one angle on the problems with our current healthcare system and what policymakers can do to fix them. The U.S. healthcare system arrived at its current state due to a series of congressional acts that linked employment with health insurance. Due to tax incentives, wage controls implemented during World War II, and the power of labor unions in the middle of the twentieth century, employer-provided healthcare coverage increased significantly over the period. Additionally, a patchwork of state and federal regulations implemented since FDR’s day has created a system that is both bizarre and inefficient. It is clear to Hyman that “it is our…perverse regulation of health insurance that should be the focus of our ire”-not the problems allegedly caused by the markets.

The specific legislative culprits are the tax code, the McCarran-Ferguson Act and the Employee Retirement Income Security Act (ERISA). The tax code rewards individuals who receive employer-provided insurance with a significant tax benefit, one that is mostly enjoyed by the upper middle class at the expense of poorer individuals. McCarran-Ferguson and ERISA created a system where 71 million Americans obtain individual or employer-guaranteed coverage, while 87 million Americans obtain coverage through an employer’s self-funded plan. The federal government has engaged in little regulation, allowing those companies to create health insurance plans with as few benefits as they wish. In addition, the second group has had to deal with a variety of different state legislation, which mainly consists of mandated coverage of certain treatments. Mandates tend to spread the cost of that treatment out among the population at large. Healthcare providers push mandates so that they can cover those things that they most wish to cover- naturally, whatever they most profit from.             

Hyman proposes solutions to both problems. To address the inequitable tax code, he suggests that the government repeal its exemption of health insurance from taxation, allowing insurance to be treated as a form of income and taxed accordingly. As for the deficient regulatory system, Hyman proposes something a bit more creative: a system in which each insurer chooses a “home state” whose regulations it must abide by. In the proposed system, taxes on health insurance would be split evenly between the home state of the insurer and the home state of the insured. In theory, this system would create more competition between states, thus producing a more efficient set of health insurance regulations. With millions still uninsured and the presidential candidates both proposing a vast overhaul of the current system, it is important to think about what has caused the problems with our current system in order to figure out what should be done to correct it.