Economics: 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¢ of every medical-care dollar, now take in only 26¢. The dentists' share is down from about 12¢ to 10¢; drugs are holding steady around 20¢, and 16¢ 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¢ of the sick man's dollar. Now they take the biggest bite of all: more than 27¢.

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."