WHILE PRICES of most other goods and services have leveled off recently, medical prices have continued their seemingly inexorable march toward the stratosphere. A recent survey suggests, however, that consumer resistance to the ever higher cost of health care may be growing.
The health industry has long been regarded as the one area in which supply-side economics actually works. Given strong financial incentives, physicians and other health-care providers have rapidly increased the quality and quantity of the services they provide. Selling those services was no problem, since patients are usually not in a position to argue with the doctor when he tells them that further diagnosis or treatment is needed. Any disposition to resist was further dampened by the fact that most patients have health insurance coverage that reduces the immediate cost of care.
With a more or less assured source of demand, health-care providers -- unlike other businessmen -- could both raise their prices and increase their sales. Last year, however, as unemployment and lagging wages took their toll on consumer incomes, people apparently began to cut back on medical services along with everything else they buy. So says Medical Economics, a magazine that specializes in telling doctors how to collect their bills promptly and invest the returns profitably. In a survey of practicing doctors, the magazine found that, for the first time in many years, the average doctor's income -- now at $86,000 -- failed to keep pace with inflation.
Not all doctors lost out. Highly paid specialists and surgeons, who generally earn twice as much as general practitioners and pediatricians, were still able to post income increases well above inflation.
And the profession as a whole made every effort to keep its income up--fees rose almost 12 percent, well above the general rate of inflation. But this time, consumers balked. Patients simply decided to see their doctors less -- so much less that, despite their hefty fee rises, the doctors made less money. Thus work the laws of supply and demand.
In a competitive market, the proper response for a doctor would be to cut back prices and so re-attract customers. This would be especially appropriate since the supply of doctors is growing very rapidly and those new doctors are shopping for customers, too. But don't hold your breath waiting for medical prices to drop.
Competition is not an accustomed way of life for the medical profession -- witness the frenzied activity now in progress on the Hill, where the medical lobbies are fighting for exemption from Federal Trade Commission anticompetition regulations. And health is simply too important -- and medical care too complex -- for most people to worry too much about costs when they need help. But it's reassuring to know that the medical market is not totally exempt from the laws of economics, and it might be wise for the medical profession to give that fact some thought.