Medical price inflation seems to be easing a bit, stirring
hopes that the health-care monster may yet be tamed. But the
price numbers can be misleading and even irrelevant, economists
say, because the amount spent on health care is still rising by
10 percent a year, swallowing more of the economy.
The Labor Department said that after climbing steadily since
1987, medical price inflation slid to a 6.7 percent annual rate
for the first 11 months of 1992, down from 7.9 percent in 1991
and 9.6 percent in 1990. But the slide probably will not be much
help to President-elect Bill Clinton as he seeks a formula for
affordable health care.
"Health spending is still escalating at the same rate as over
the past couple of years," said Walt Bottiny, a health economist
in Washington with DRI McGraw-Hill, a consulting firm that
forecasts trends for the Federal Medicare program. "Medical
inflation is moderating, but not any more than overall inflation
Sylvester Schieber, benefits research director at Wyatt Co., a
consulting firm, said medical price rises caused only about a
third of the increase in health spending in the 1980s. He said 42
percent was general inflation and 22 percent was from increased
volume of services.
And economists caution that the medical component of the
consumer price index no longer reflects actual spending patterns
for some major items like hospital charges. The index is still
based on list prices for hospital rooms, for example, although
most large insurers get discounts, noted Joseph P. Newhouse, a
professor of health policy and management at Harvard University.
Henry J. Aaron, economic studies director of the Brookings
Institution, the Washington research center, said that even as
hospital rates rise, patients spend fewer days there, on average,
and the quality of service is up. He added, "We can't measure the
restoration of health. We don't know if it lines up with the
number of hospital days."
Newhouse lamented that "we don't have a measure of medical
care price increases. We badly need one," he adds. "The public
believes much of the problem is in prices."
On the positive side, most experts agree that the quality of
health care has been rising markedly, at least for those who can
afford the expensive new tests and surgical procedures that spur
much of the growth.
Another plus factor: The expansion has generated jobs. Even
while the economy hemorrhaged 1. …