America’s fragmented healthcare insurance system is rooted in its unique historical and political development, which diverged significantly from European democracies just after WWII.
After the war, most European nations began adopting centralized, government-funded healthcare systems driven by industrialization, labor movements, and the need to manage public health crises.
In contrast, the U.S. relied on a decentralized, market-driven approach, shaped by an emphasis on individualism and distrust of government. The absence of a strong labor party in the U.S. compared to Europe (which championed universal healthcare) also played a key role.
The modern American health insurance system appeared during and just after World War II. After the war American employers began offering health insurance as a fringe benefit to attract workers. In 1943, a tax exemption for employer-sponsored insurance locked in the employer-based health insurance – making it the dominant way Americans accessed healthcare coverage.
This tied healthcare access strictly to employment – handcuffing people to their jobs & limiting job mobility for decades (until the Patient Portability & Affordable Care was passed in 2010).
Efforts to create a universal system in the US during the 40s and 50s faced political roadblocks. President Truman proposed a national health insurance plan, but it was defeated because of opposition by the American Medical Association and other powerful interest groups.
Meanwhile in Europe, country after country was setting up universal care systems as post-war reconstruction and organized labor encouraged national solidarity and collective health solutions. While that was happening, the U.S. expanded its fragmented system in a patchwork fashion.
Public programs like Medicare and Medicaid were passed during the Johnson Administration (1965) to cover seniors, low-income individuals, and those with disabilities… but those laws only filled specific gaps.
Private insurance continued to dominate for the working-age population for decades, leading to inconsistent coverage, large health insurance middlemen, and with non-profit and for-profit bureaucracies tasked with rationing care for private health insurance plans offered by employers (while making a hefty profit). This resulted in rising costs and greater fragmentation when compared with our European peers.
In 2010 the Patient Portability and Affordable Care Act was passed that finally broke the bonds between employment and access to insurance, prohibited excluding people with pre-existing conditions, and provided a way for people to get health insurance outside their formal employment- finally allowing people to go out on their own as entrepreneurs without risking their family’s healthcare.
Even after the ACA, however, the US has a patchwork system when compared to Europe because of entrenched interests (US health plans that are quite profitable), cultural attitudes, and the difficulty of overhauling such a complex structure.
Meanwhile, European nations streamlined healthcare delivery through government-run or heavily regulated systems, ensuring universal access and cost controls.
The result? Healthcare costs in the U.S. are significantly higher than in European countries, with the U.S. spending over 16% of its GDP on healthcare, compared to 9-12% in the EU countries. Per capita, the U.S. spends approximately $12,000 annually, nearly double that of countries like Germany and France. Despite higher spending, U.S. life expectancy lags, averaging 76 years, compared to 80+ years in much of Europe.
The cost discrepancy stems from administrative overhead, higher drug and procedure prices, and fragmented care in the U.S., while Europe’s centralized systems provide more efficient, fair, and achieve better health outcomes for less money (although of course public health, behaviors and the social determinants of health also play a role in the US lower life expectancy).
