Like many government messes, I think the H-1B situation is one of multiple policies, each of which seemed like a good idea at the time (even if it wasn't), colliding with each other to create bizarre and often terrible incentives. Health care is like that, too. And truly, these are government messes; they have zero to do with capitalism or free markets. Government never fixes problems it causes by reversing bad policy; it just creates new ones in the vain hope of compensating for the previous ones.