THE EXTREMELY high inflation in hospital costs is the direct result, you might say, of a triumphant success in social policy. Hospital insurance now covers nine of every 10 Americans. Nearly every employed person is paying hospital bills, continuously but, in most cases, invisibly. They are paying through taxes, paycheck deductions or, most commonly, insurance contributions that their employers make in their behalf as a fringe benefit. Unlike the businesses that sell cars or groceries, the businesses that sell health care usually deal with customers who never have to ask the price. It all gets passed on to somebody else. That's why it's so easy for hospitals to keep raising prices. That's why hospital costs keep rising faster than almost anything else in the economy.
President Carter has now sent to Congress, once again, a bill to contain hospital costs. This time the bill acknowledges that controlling hospital costs by law is difficult, and ought to be regarded as a last resort. It gives the hospital industry another year's grace, and would impose mandatory federal controls only if the increase over the coming year is, once again, more than reasonable.
But what's reasonable? Hospital costs last year rose 12.8 percent, compared with 9 percent for all consumer prices. The hospitals argue that they are doing a fine job, since they pulled the rate down from a soaring 15.8 percent the year before. A reasonable goal for 1979, they say, is to hold costs to a further rise of 11.6 percent. The administration says that 11.6 percent is much too high, and if the rise is anything like that, it will be necessary next year to call the police and enforce federal limits.
The hospitals object that the prices of the things that they buy may rise faster than the administration expects. The administration replies that it is prepared to be flexible on that point. It has set up an index of the items for which hospitals have to pay. On top of that figure, the president's bill would allow a small increase for population growth and 1 percent for new services.
It's that allowance for new services that is at the center of the controversy. The administration has correctly identified new services as the category in which the waste is greatest. The rapid expansion of a hospital's equipment and services does not always mean better health care for the patient. On the contrary, it can frequently mean worse care. The installation of esoteric equipment at many competing hospitals is likely to result in too little use at some of them to develop any very high level of competence.
Last year the president simply asked Congress to put the hospitals under controls. The hospitals protested vehemently, and Congress began working toward a compromise giving the hospital industry an opportunity to establish its own system of self-discipline -- if it can. Mr. Carter's new bill preserves the principle of that compromise. It goes a long way to be fair to the hospitals. But it also promises a measure of protection, at last, to the people who pay the hospitals' bills.