A Bet on Medical Inflation

DANIEL S. GREENBERG

April 30, 1991|By DANIEL S. GREENBERG

WASINGTON — Washington -- As college students approach graduation, they sniff the economic breezes with a sensitivity based in self-interest. So, get ready for alarming news: Applications for medical school are going up, reversing the trend of recent years. This, in turn, suggests youthful expectations that the boom in health spending has a long way to run.

Hopeful folks will attribute the change to a surge of humanitarian impulse. No doubt there's some of that, in combination with more women pursuing medical careers. But realism also calls for recognizing that doctoring remains a financially rewarding line of work in a period of hard times for other professions. And what that suggests is that youth isn't impressed by the many schemes, planned or in force, for braking the nation's runaway medical spending. With median doctor's pay now running at about $160,000 a year, they're counting on incomes that can comfortably handle the heavy costs of acquiring a medical degree.

According to the Association of American Medical Colleges, official scorekeeper of medical-school statistics, applications for admission next fall are up by 15 percent, following an 8.6 percent increase last year, thus reversing a downward trend that stretched over nearly 15 years. The drop was generally attributed to the lure of quick returns on business and law degrees, as well as dire, but unfulfilled, forecasts about a doctor glut, restrictive payment regulations, and an ensuing decline in medical incomes.

The glory of health care, to the despair of public and private budget minders, is that it is one of the last growth sectors on the American economic landscape. While other industries have been slashing payrolls, the health industry added 600,000 jobs last year, thus achieving a remarkable growth of 7.7 percent in employment.

It's a rare year in which the rise in health-care prices does not exceed the inflation rate by a wide margin. As a share of gross national product, health care has soared from 6 percent in 1960 to 12 percent at present. The pace of growth is so torrid that the White House budget chief, Richard C. Darman, recently warned Congress that health costs are on the way to 17 percent of GNP by the year 2000, and that by the year 2030, they will consume 37 percent of GNP.

Though no other country comes close to the U.S. in per-capita spending or share of GNP devoted to health, the irony in America's torrent of spending for health care is that millions of citizens are left out for lack of money. No one knows just how many, but about 30 million people lack any kind of health insurance and a similar number are skimpily insured. While many of these millions receive medical care through charity or public programs of one sort or another, many others receive little or no care. A recently published study reported that uninsured patients tend to be sicker upon admission to hospitals and to remain for shorter stays, and are more likely to die. So much for the myth of egalitarianism in health care.

The main federal role in health finance, under Medicare for the elderly and the federal-state Medicaid program for the poor, has been repeatedly subjected to cost-shaving designs. While some have succeeded, most have failed, leading to horrendous forecasts of future financial liabilities. Meanwhile, business and industry are loudly complaining of the rising costs of employees' health insurance, citing it as a major burden on competitive pricing and profitability.

With all else having failed, Washington increasingly resounds with talk of some sort of a national system for financing health care. The silent assumption is that economies can be achieved only if there is a central paymaster setting prices and establishing limits on utilization of services. Though consensus appears to be far off, big firms that once recoiled at that idea are increasingly receptive to discussing it. The Bush administration has been cagey about health policy, but as the present system spawns greater discontent and alarm, the White House is hinting that a pre-election policy pronouncement may be in the works.

If so, it is doubtful that anything could be done quickly to revamp the economics of the sprawling American health-care system. A lot of political muscle will be required to turn down the boom in health spending. Watch the students. Like canaries in the mines, they are very sensitive.

Daniel S. Greenberg publishes the newsletter Science & Government Report.

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