Table 1.-Medical Care Price Index: Annual Percent Changes by Type of Source: U.S. Department of Labor, Bureau of Labor Statistics, The Consumer Price Index. fees index is available). Hospital daily charges, which had been The rise in hospital daily charges was especially sharp in the second Medical care prices have been rising faster than other prices Table 2.-Consumer Price Index: Quarterly Percent Increases Table 3.-Consumer Price Index: Percent Increases by Type of Component III. Physicians' Fees About 27 percent of the consumer's health dollar, on the average, This section will attempt to answer three questions: (1) What ex- Supply, Demand, and Doctors' Fees A doctor is not an ordinary businessman and one might question Moreover, there are strong traditions in medicine which affect phy- Nevertheless, it is clear that a substantial and sustained increase in more expensive care is better care; (4) the patient is often referred from one physician to another without being given a choice. The Rapid Growth of Demand In the period 1950 to 1965, population grew by 28 percent. Had there been no changes in medical technology, in education, in the incomes of patients, in the age distribution of the population, in urbanization or in residential patterns, the sheer impact of population growth would have added a substantial demand for physician care. But other things did not remain the same. In the period 1950 to 1965, disposable personal income per capita (in 1958 prices) increased by almost 34 percent. Based on the spending habits of Americans, an estimated 10-percent increase in consumer income results in at least a 3.3-percent increase in the demand for physicians' services. Therefore, this income increase would have added a minimum of 11.2 percent to the per capita demand for physicians' services. The increase in the number of persons in the United States and the increase in income per person would, in the period 1950 to 1965, have added about 41 percent to the demand for physicians' services. Moreover, at least three additional factors increased even further the demand for physicians' services in this period : 1. The public's faith in doctors and desire for physicians' care 3. Insurance coverage has expanded greatly.-The total number patient has insurance, he tends to use more medical services. In emergency situations, of course, the patient has little choice about the amount of care he receives. But most situations are not emergencies; many medical procedures are optional or postponable. There is evidence that insured persons use more medical services than noninsured persons. One study, for example, showed that persons with health insurance were hospitalized for surgery 25 percent more often than persons without insurance. The growth of insurance covering physicians' fees seems likely to have added appreciably to the demand for physicians' services. The Slower Growth of the Supply of Physicians During the period 1950–65, the total number of active physicians increased by 33 percent. During this same period, however, there was a marked downward shift-from 72 percent in 1950 to 62 percent in 1965-in the proportion of all active physicians who were engaged in private practice. Increases occurred in the proportion of physicians employed as full-time staff in hospitals, full-time medical school faculty, and physicians whose primary activity is administration, laboratory medicine, public health, or research. The proportion of physicians in postgraduate training also increased. Between 1950 and 1965, the number of physicians in private practice increased only 14.3 percent, and there was an actual decline in the total number of family physicians (pediatricians, internists, and general practioners) as more physicians went into other specialties. The effective supply of physicians' services, however, rose faster than their numbers because physicians' productivity also rose. Estimates of Physician Productivity Some rough indicators of physicians' productivity can be found. Between 1947 and 1964, the median gross income of physicians in private practice rose at an annual rate of over 6.7 percent compared with an average annual increase in physicians' fees of 3.0 percent, as reported by the Bureau of Labor Statistics. Since the median gross income of physicians rose faster than the average fee per visit or procedure, physicians must either have been putting in more hours or their "productivity" (number of patients seen and quantity of care given) must have increased, or both. Since there is no evidence that the average physician worked longer hours over this period, the difference between the rate of increase in 1 1 Source: "Medical Economics." traction of professional expenses. lection rates over time. Median gross income is income before sub- |