A Brief History

The modern U.S. healthcare system has its roots in World War II. To circumvent wartime wage controls implemented by President Franklin D. Roosevelt, employers boosted fringe benefits, notably health insurance. These benefits were later institutionalized by the Internal Revenue Service in the 1950s, when it excluded employer-sponsored health insurance from taxable income.

By 1965, significant legislative changes expanded health coverage with the establishment of Medicare and Medicaid under the Social Security Act amendment. Medicare provided healthcare to the elderly, while Medicaid expanded access to the impoverished. These programs, especially Medicare, were modeled on employer-sponsored plans which were prevalent at the time but lacked stringent cost controls. This led to a system in which healthcare providers were reimbursed based on the “usual, customary, and reasonable rate,” significantly influencing increased charges for services.

Until 1973, health care in the United States was considered a public health service provided by doctors and hospitals.   Payment for such services was paid by the user or through some type of insurance plan.   In 1973, President Nixon signed the Health Maintenance Organization Act (HMO) into law. The HMO model was developed in response to rising medical costs and aimed to provide a cost-effective alternative to traditional health insurance. By focusing on preventive care and establishing fixed reimbursement rates, HMOs were supposed to reduce overall health care expenditure while maintaining quality services. The Act encouraged private investment in HMOs and required employers with a certain number of employees to offer these plans alongside traditional insurance options. The definition of what an HMO is has morphed a bit over time. Today the HMO is essentially a company that blends insurance functions and health care functions.  After the 1973 act, HMOs became easier to form and operate. (Daniel Polsky, health economics professor at Johns Hopkins University) Many of the early HMOs (non-profit) were bought by for-profit insurers.  (Paul Starr, Pulitzer Prize author, Professor, Sociology, Princeton University)

Today, what we have is not what Nixon signed into law.  The U.S. healthcare system operates through a complex hybrid model. Private insurance, primarily employer-sponsored, is the main access mode for most Americans, complemented by public programs like Medicare and Medicaid. These public programs serve critical demographic segments, with Medicare covering over 60 million elderly and Medicaid providing for over 72 million low-income individuals as of 2023.

While most Americans believe that the United States has the most advanced and best health care in the world, this is not entirely true! The facts do not support this myth.  In fact, the data shows that the United States lags far behind a significant number of other nations.

The Data

A good comparative source for health care is the Office for Economic Cooperation and Development (OECD). It collects and analyzes data from each of the 100 member countries on a wide range of social, economic and health-related topics.  Its data gives insight into how the health of the U.S. population compares with the health of other countries.   The data compared the U.S. with other OECD member countries on three health measures: infant mortality, health spending, and life expectancy.

The results show that the United States has a higher infant mortality rate and lower life expectancy compared with most other OECD member countries. Even the top U.S. state ranked lower among member countries for the infant mortality and life expectancy measures. The United States also had the highest amount of health spending of all OECD countries.

Our Strong Points

Another good source for health statistics is the Foundation for Research on Equal Opportunity (FREOPP) Index. The Index evaluated the national healthcare systems of 32 high-income countries on four key dimensions: quality, choice, fiscal sustainability, and science and technology. Those categories were chosen to examine not only the quality of each healthcare system, but also the ability of that system to improve over time through scientific and medical advances.

The top four national healthcare systems — Switzerland, Ireland, Germany, and the Netherlands — have all achieved universal coverage in part by relying on private insurance. Those countries empower patient choice and allow private insurers to innovate without delays due to political or regulatory inaction. In addition, those systems tend to be more fiscally sustainable than the U. S.  because subsidies are phased out for wealthier patients.

Ultimately, the U. S. ranked 7^th overall, a result of excellent scientific advancement (1st), good quality medical coverage (14th), and moderate choice (6^th). Such rankings allude to the nation’s relative strength in research and development along with its struggle to control rising spending on healthcare.  At the same time, spending on healthcare in the United States has far outpaced other major healthcare systems without yielding better outcomes. The Index makes clear that pure scientific advancement is not enough to create a strong healthcare system; it is necessary to control rising costs and ensure that high-quality healthcare is accessible to every American

Congress and Fiscal Sustainability

The United States is positioned last (32nd) in Fiscal Sustainability, primarily due to its exceptionally high government health spending, which is the highest globally. Per capita spending reached $13,500 for this year’s Index, of which nearly $7,500 is public spending. For comparison, Switzerland, with the second-highest health spending, recorded a per capita expenditure of $9,200 but only $1,999 in public spending. The fiscal outlook for the United States is likely to worsen as healthcare inflation continues to escalate the costs associated with subsidies for Medicare, Medicaid, the employer tax exclusion, and the insurance exchanges under the Affordable Care Act.

Switzerland achieves universal coverage through a tightly regulated private insurance market, ensuring that everyone has access to essential care. By contrast, the U.S. relies on a fragmented mix of private and public systems, resulting in higher costs, uneven access, and significant administrative complexity.

Perhaps the biggest obstacle to an affordable universal health care policy is the insurance lobby (HMOs) The insurance lobby wields substantial influence over US health policy through massive financial investments, strategic lobbying, and close relationships with lawmakers. This influence shapes legislation, regulatory priorities, and public program funding—often prioritizing industry interests over consumer outcomes. The scale of spending and the number of lobbyists involved underscore the lobby’s power, while public opinion reflects widespread concern about its impact.

What role does the insurance lobby play in the failure of meaningful reform?  America’s Health Insurance Plans (AHIP), the industry’s main trade group, spent over $4.2 million on lobbying in just three months (July–September), marking its highest level on record for that period. This level of spending isn’t an outlier; it reflects a long-term strategy of saturating Congress with data, arguments, and pressure.

The industry is currently fighting hard to preserve enhanced Affordable Care Act subsidies, which are set to expire unless Congress acts. These subsidies directly affect millions of Americans and billions in insurer revenue. Insurers have made this extension a top legislative priority, coordinating with hospitals and other health‑sector players through coalitions like Keep Americans Covered.

Lobbyists emphasize that in today’s Washington, direct engagement (“the inside game”) is more likely to produce favorable outcomes. This means constant meetings, briefings, and relationship‑building with lawmakers and staff. The industry’s approach is sophisticated: they combine economic arguments, constituent‑impact data, and political pressure to shape legislative outcomes.

Bottom Line

The health insurance lobby wields significant, sustained influence over Congress. Their power comes from: enormous lobbying budgets, deep relationships with lawmakers, coalitions that amplify their message, and the economic stakes tied to federal health policy

They don’t win every fight, but they remain one of the most formidable players in federal policymaking. Other major lobbies which influence health policy include pharma, hospitals, and the health technology industry.