(L35) The United States: Healthcare and Antitrust

1.) What are some of the factors that have contributed to rising health-care costs in the United States?

The birth of the rise in health care costs can be pinpointed in WWII. It was during this time that businesses were desperate to attract labor, but they couldn’t raise wages because the government had frozen the price. So, to compensate for this, businesses began to offer employer-supplied medical insurance; it was not considered a wage increase and thus, could not be taxed. After the war, labor unions demanded employer financed medical insurance be a continuous part of their contracts. This forced the hand of nonunion businesses to also provide health insurance in hopes of avoiding unionization. The result of all of this was that medical care was barely paid for out of pocket by Americans, which in turn caused people to care much less about price comparing. Since the client was not the one paying, (their employer was), health care suppliers then developed an incentive to offer high cost treatments. Ultimately, this created an ongoing price increase in the healthcare business.

2.) How is the actual history of antitrust different from what the average person probably thinks it is?

Antitrust is generally presented to the public as program that would help people pay ‘fair’ prices, and favor consumers. In reality however, the antitrust acts (Sherman Antitrust Act, 1980 and Federal Trade Commission Act, 1914) did the opposite of favoring consumers, and created a history of attacking successful and efficient businesses. One example of this would be the US vs. American Tobacco, in which this ness had merged with other smaller companies, (but not created a monopoly); American Tobacco was able to raise product output all the while lowering prices. There was still easy entry into the tobacco industry for competitors, and no consumers were being harmed whatsoever. However the US government decided to step in to punish and limit them by law, for favoring consumers.

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