A Bitter Pill for US. Hospitals

American medicine has been able to compound all manner of miracles, ranging from the creation of powerful antibiotics that can dispatch a brash bacillus to the introduction of death-defying surgical procedures. Yet there is one illness that has baffled U.S. doctors: how to contain sharply rising medical costs, which have climbed from $42 billion to nearly $140 billion (almost twice the inflation rate) in a decade and now total more than the country spends on national defense. One reason for the soaring costs is more sophisticated care, but another is the "third party" problem --more than 90% of hospital bills are paid by various forms of insurance instead of by the patient or the hospital.

Now, in his first major health legislation, President Carter has decided to intervene on behalf of the impoverished medical consumer. In a program expected to be sent to Congress this week, the Administration is demanding tough restraints on the fastest growing U.S. medical bill, hospital costs, which last year totaled $55.4 billion. What is more, the proposal is only the first step toward Carter's long-range goal: comprehensive national health insurance.

Carter will try to put a lid on hospital costs in two ways. First, he would impose a complex formula, using living costs and the G.N.P., to hold hikes in total hospital revenue to no more than 9% next year. More important, if it takes effect by Carter's Oct. 1 target date, the legislation would establish a nationwide limit on total capital expenditures by the country's more than 7,000 hospitals of about $3 billion next year. This is roughly half what they had expected to spend on new buildings, equipment and other major purchases. The restrictions would apply to all public hospitals, except those run by the Federal Government.

Details of how this major surgery is to be accomplished will emerge when HEW Secretary, Joseph Califano, tries to sell the program to Congress. It is certain that state and regional health authorities will be called upon to cooperate with federal officials in deciding just who can spend how much on what. For example, if two nearby hospitals in the same town both want to buy computerized X ray scanners (cost: $500,000 to $750,000), only one of the institutions may be allowed to make the purchase. Carter also hopes to place an annual ceiling of no more than $100,000--a piddling amount in the hospital business --on what any single institution can spend on new equipment.

Talmadge Bill. Officials stress that the program is only temporary. In part, this is to avoid bruising the feelings of the President's fellow Georgian, Herman Talmadge, chairman of a Senate health subcommittee, who has been working on a more modest cost-containment plan: a bill that offers hospitals bonuses if they keep down Medicaid and Medicare billings. If unrestrained, total Medicaid and Medicare expenditures are expected to leap 18% in the next fiscal year, to $38 billion.

No matter how well it is sugarcoated, the medical Establishment and its supporters in Congress are not likely to swallow Carter's economy medicine easily. Warns John McMahon, president of the American Hospital Association: "I'm certain that any across-the-board ceiling will bring the total opposition of the hospital field." Predicting such a measure would reduce services, he adds: "The real losers will be the sick and injured." That is an understandable fear. But unless the hospitals agree on a sound alternative to the President's bill, the epidemic of rising hospital costs will continue, with ominous consequences for the entire U.S. health care system.

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