Rising Health Costs Limit Other Programs

IN 1990, the United States spent $666.2 billion on health care. In the year starting at midnight, Americans are expected to pay out $982 billion.

Are people getting better health for the additional $315.8 billion?

``Not much,'' says Victor Fuchs, a Stanford University economist and a pioneer in the area of health-care economics. The medical community's methods for assessing the benefits and risks of various diagnostic and therapeutic measures are generally regarded as inadequate. But Dr. Fuchs sees some progress in reducing infant mortality, especially of low-weight babies; some improvement in ``trauma'' - the care of victims of car accidents, bullet wounds, etc.; and some prolonging of the life of people over 80, sometimes through ``full press'' medical procedures.

Health depends mostly on ``other things,'' such as lifestyles, he says.

Eugene Steuerle, another health-care economist, sounds somewhat more positive on the benefits of the higher spending. ``I don't think there is any doubt we are getting additional health care,'' he says. ``Whether or not we are paying too much is another matter.''

If health-care costs do reach $982 billion next year, they will be up 47 percent from 1990. In that time period, overall consumer prices will have risen, depending on inflation next year, about 14 percent. The jump in health-care costs is seen as resulting from a combination of greater inflation in that area and additional care.

In 1993, health-care costs probably rose around 5.5 percent. That's the lowest rate of increase in years. But it is still twice the overall rate of inflation.

The Clinton health-care plan is intended to get a handle on these health-care costs, yet broaden health insurance coverage for many, and provide coverage for the 38.9 million now without.

This year, health care will consume about 14.6 percent of total national output, far more than in any other country. The Congressional Budget Office projects that health spending under current law will rise to 17.3 percent of gross domestic product (GDP) by 1998. If this rise does really occur, Mr. Steuerle calculates that the nation will have almost nothing left over from normal growth in national output for any nonhealth social projects, such as education, training, and youth development programs.

``Without substantial, unexpected growth in the economy, the nonhealth sectors could be committed to a decade-long growth rate among the lowest in US history, barring the Great Depression,'' he states.

The rise in health-care costs in 1993 was about equal to the increase in nominal GDP. If that trend continues - and economists don't know whether it will - health-care costs would remain at about 14.6 percent of GDP.

Steuerle notes that the Clinton plan anticipates health-care costs rising over the next five years from about one-seventh of economic output to about one-sixth, as reform embraces the uninsured. Real annual health-care expenditures would be $320 billion higher in 1998 than in 1993. Since federal, state, and local governments cover about half these costs through direct expenditures or tax subsidies, by 1998 taxpayers would need to provide an additional $160 billion a year to pay health costs.

Only at the end of these five years would efforts to restrain health-care costs possibly hold their share of GDP constant.

Under this scenario, the growth of nonhealth-care spending would amount to a meager 0.3 percent a year until 1998. ``If per capita growth in nonhealth spending remains stagnant for almost a decade, is the public going to accept more knee operations and bypass surgeries as their just and sufficient reward from economic growth?'' Steuerle asks.

Contrariwise, if health-care costs have already come under better control, will this forward the Clinton plan in Congress? Henry Aaron, a Brookings Institution economist, figures that ``on balance it would be bad political news for health reform.'' The administration will probably claim that its threat of reform has trimmed the inflation in health-care costs. But Mr. Aaron suspects that many in congress may use any progress on health-care costs as an excuse to duck the controversial issue of reform.

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