The Patient's Purse

The U.S. will spend an estimated $33 billion for medical care in 1964. Government agencies, from federal to local, will put up somewhat more than $8 billion; the balance of almost $25 billion will come more directly out of the pockets of ailing individuals and their families. Who gets the money? And is the patient's purse being well treated?

The answers are usually lost in a statistical jungle. Now Seymour E. Harris, a Harvard professor emeritus of political economy, has tracked them down in a fact-packed book of 508 pages, The Economics of American Medicine (Macmillan; $8.50). In general, he concludes that the price of health is reasonable, except for a few items on the bill.

Best-Paid Profession. The price is rising fast: that $33 billion annual charge is up from a mere $14 billion in 1950. Doctors, whose fees used to amount to about 31-c- of every medical-care dollar, now take in only 26-c-. The dentists' share is down from about 12-c- to 10-c-; drugs are holding steady around 20-c-, and 16-c- still pays for a miscellaneous category that includes eyeglasses and other appliances, nursing-home care, and insurance premiums. Where do the rest of the pennies go? Almost entirely to the hospitals. Around 1950, hospitals were taking only 22-c- of the sick man's dollar. Now they take the biggest bite of all: more than 27-c-.

Though doctors collectively get proportionately less of the patient's dollar, Harris reports that they have become the highest paid professionals in the U.S. Before the 1929 crash, those in private practice averaged $5,300 a year; they took a cut to $4,000 during the Depression. They had won back most of this loss by the time of Pearl Harbor, and have climbed steadily ever since then to a current national average of $25,000 or more (far more than such other professionals as dentists and lawyers).

Doctors' fees have doubled since 1940, but this is less than the average price increase for consumer goods and services in general. The boost in doctors' incomes is mainly a result of the fact that they are seeing many more patients. They still work long hours (60 a week is common), and they crowd more patients' visits into each hour. But they are practicing more efficiently. Doctors, says Harris, are generally better educated than they used to be, have whole batteries of new laboratory tests and technicians' services to help them decide on the right diagnosis and treatment while spending less time palpating the patient. Doctors now commonly charge for items that used to be free, such as a bit of supplementary advice given by telephone. And they have cut down time-consuming house calls from about 40% of their practice, before World War II, to a mere 7% in 1964. Says Harris: They have "put the burden of travel on the patient."

The Big Increase. Hospital charges for each day of a patient's stay are suffering from what Harris calls galloping inflation. Experts differ on how severe the increase is statistically. But Harris argues that since 1948, however they are computed, hospital daily costs have gone up 2 1/2 times as much as income after direct taxes, which is the best measure of the patient's ability to pay. By far the biggest factor in hospitals' rising costs has been salaries and wages --and, most surprisingly, it is the professional and nursing staffs that have taken most of the increase, and not the notoriously underpaid housekeeping and kitchen employees.

A hospital's daily charge is not a good index to what a hospital stay actually costs the patient. On the debit side are many additional services for which the patient is billed separately --some hospitals are running six times as many lab tests on patients as they did in 1950. On the credit side is the fact that the average stay in a hospital has been cut from 15 days to ten. This is partly because improved surgery and medical care are sending patients home sooner, even after serious illnesses, and partly because patients now go into a hospital for less serious conditions--either because they can afford to or because their doctors think they can. Insurance helps to pay the bills. By now, 73% of all Americans have some insurance against part of the costs of illness in a hospital, and insurance pays 56% of private hospital bills. But Harris says this is not enough. However horrendous hospital costs are now, Harris expects a further 50% increase in daily rates by 1970, raising them to $45 or $50. By then, auxiliary services may well add another $50, which will bring hospital bills to $100 a day for a short stay, with the surgeon's fee still to pay.

Too Much for Drugs. Price rises in drugs and prescriptions are a source of endless and usually fruitless argument because of the medical revolution since the sulfas appeared in 1937. The average price of a prescription before Pearl Harbor was 93-c-; by 1956 it was up to $2.62, and it is now $3.10. Prescription items used to be less than 10% of all drug sales; now they are more than 30%, and they add up to a big business of more than $1.5 billion a year. With bulk buying of drugs by hospitals and government agencies, and massive sales of non-prescription items, the U.S. drug bill for 1964 is approaching $5 billion.

Harris readily grants that the "lives saved, suffering averted, and acceleration of recoveries" are worth more than the billions spent on drugs. But as an economist he cannot resist the conclusion: "The cost of drugs is too high. It could be substantially less."

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