Up, Up, Up

At Boston's Peter Bent Brigham Hospital, the daily rate for semiprivate rooms is now $50--almost twice the rate ten years ago. At Manhattan's Mount Sinai Hospital, it costs $410 to have a baby, compared with $250 in 1957. At Houston's Methodist Hospital, patients are billed 25% more for anesthesia than in 1962. Everywhere, the story is the same (see graph). While the consumer price index rose 19% in the decade ending last year, U.S. medical costs shot up 42%. Just since 1966, hospital charges have jumped 18%.

In one sense, President Johnson's bright hopes for Medicare have been met: the system already pays 25% of the nation's hospital bills, and when Medicaid is fully utilized, within three years, the two Government-backed plans will pay more than 50%. Yet the relentless rise in medical costs has forced the Government to pay out $100 million more than federal planners expected. As a result, taxpayers may be squeezed again. Warns Chairman Wilbur Mills of the House Ways and Means Committee: "Some adjustment in the tax schedule supporting Medicare may be needed."

Third-Party Alibi. Enormous demand is pressing upon limited supply. While 156 million Americans now have some kind of private health insurance, poor planning is driving up prices. Though a sophisticated computer system may cut a hospital's labor force, such automation is not widely in use. Without good planning, improved care seems to require more employees. Since 1946, the number of hospital employees per patient has increased from 1 1/2 to 2 1/2. To hire more employees, hospitals must compete with industry; last year hospital wages rose 20%. And labor costs already make up 62% of hospital budgets.

Equally crucial is the lack of cost control. Hospital charges are now mainly the concern of third parties, such as insurance companies, that pay the patient's bill. Until now, insurance companies have met mounting costs by raising premiums--not by seeking more efficient hospitals. As Economist Victor Fuchs puts it: "Almost no one has any incentive to be interested in the efficiency of the hospital as a whole."

Perverse Insurance. Doctors are partly to blame, sometimes allowing patients to go to the hospital when they might be treated or operated on just as well in the doctor's office. Indeed, Administrator Martin Ulan of New Jersey's Hackensack Hospital goes so far as to estimate that 50% of the patients in his hospital might be treated at home. Under many private insurance plans, however, the policyholder gets no payment unless he has been hospitalized. According to Dr. Ray Brown of Duke University, "insurance actuaries have been the architects of the medical care system."

Quite apart from hospital costs is the rise in doctors' fees (up 5.8% last year), which now yield the U.S. doctor an average $28,000 a year. Again, the chief reason is more demand than supply. While the U.S. population has grown by 28% since 1950, the number of private physicians has risen by only 14.3%. Meanwhile, the advent of Medicare and Medicaid has largely freed doctors from the old tradition of under charging needy and elderly patients.

Progress & Prognosis. The prognosis is not wholly grim, however. For one thing, the administrators of Medicare and Medicaid have considerable lever age to speed reforms. Example: they might establish schedules of maximum hospital charges and length of stay for each ailment. Private insurance companies could also follow Medicare's lead in covering a nurse's visits to the patient's own home. The fact that Medicare covers costs in nursing homes has already prompted construction of new homes, which should take some of the pressure off hospitals and provide care at much lower cost, one-third of board-and-room charges at many hospitals.

Some hospital administrators are be ginning to pay heed. By sending nurses out to 90 patients in their own homes, Hackensack Hospital is currently able to charge them $18 a day v. the regular hospital fee of $54. The American Hospital Association runs a nationwide accounting service, issues monthly reports enabling hospitals to compare their performance against the national average. Some hospitals are installing complex labor-saving devices, from supersonic instrument cleaners to automated chemical analyzers. In what the Government hopes may be a growing trend, hospitals are sharing costly equipment, operating joint power plants, laundry and purchasing departments; a few hospitals have completely merged. In New York State, a central planning council must approve new hospital construction --all toward the goal of rational planning and more economical treatment.

Doctors' fees are being cut here and there by group medical practice, which often produces better care as well as lower costs for the doctor. In some cases group practice combined with prepaid insurance plans has cut patient time in hospitals by 50%. To encourage this approach, Congress last year enacted a law providing low-cost FHA loans to build clinics for group practice.

For all the talk and ideas, though, progress is still extremely slow. As HEW Secretary John Gardner summed up the situation at a national conference on runaway costs last month: "Everyone seems to agree that the existing system--or lack of system--has rather marked shortcomings. But there is not yet substantial agreement as to what a more perfect system would look like."

This file is automatically generated by a robot program, so reader's discretion is required.