The fees of physicians are unjustifiably high and continue to rise at a rate greater than their expenses and faster than other consumer prices, according to a study issued yesterday by the White House Council on Wage and Price Stability.
Physician fees went up 9.3 percent last year, half again as much as other consumer prices, an increase the council called "disturbing." According to the council's report, physician incomes from 1939 to the present are higher and have "risen faster than that of any other major occupational group for which historical data are available."
The report warns that if something is not done to check the causes of escalating physician fees, consumers may find "even more rapid rates of growth in . . . outlays for medical services than are currently being experienced."
The study specifically rejects the suggestion that the rising cost of malpractice insurance premiums explains the rise in physician fees, since those premiums "were not a major cost element" prior to 1975, when their percentage increase began rising steeply.
In the early 1950s, anti-competitive practices by organized medicine - such as limiting the number of physicians - helped to boost physician fees, the study says.
The growing reliance on private and public health insurance and changes in the way insurers pay doctors "exempted" the physicians' fees from economic forces that restrain other consumer products and services, the report added.
In the 1960s and 1970s, health insurers gradually shifted to a payment system based on the "usual, customary and reasonable," with payment based on what all physicians were charging for particular services. As a result, by raising their fees, doctors could increase the maximum amount insurance compaines would pay since the definition of "usual, customary and reasonable" would also go up. With 60 percent of doctor's services currently reimbursed by insurance, the report said, "a payment mechanism based on a physician determining his own fee can be expected to result in high rates of fee inflation."
Physicians whose specialities rely on insurance as the primary source of payment have earnings "substantially greater than earnings of physicians in other specialties," the report said.
As a result of the way physicians are paid, the report found no evidence to support the classical economic theory that increasing the supply of physicians would lower fees. Rather, the report found evidence - not conclusive on the point - that increasing the supply of physicians may increase fees as physicians attempt to adjust their prices to the "target" income they have determined for themselves.
The report notes that the number of physicians practicing is expected to grow from 177 per 100,000 population in 1975 to 222 per 100,000 in 1985.
The report suggests that consumers be given an incentive to hold down expenditures by sharing in the cost of more inexpensive services that alternative pay mechanisms be used for physicians, and that limits be put on the supply of physicians practicing.