THE U.S. HEALTH-CARE system is going through a rough shakedown. Governments and businesses, the major payers of medical bills, are pressing doctors and hospitals to keep costs down, while consumers are demanding, and technology is providing, more and better medical services. In the resulting scramble to improve efficiency, cut costs and raise needed capital, the most vulnerable people and institutions are likely to come out losers.
Four articles in this month's New England Journal of Medicine describe the shift of functions and resources that is currently going on in the hospital sector. From a purely economic point of view, most of these changes are desirable. The eclectic structure of the U.S. health system -- a mixture of municipal, philanthropic, profit-seeking and educational instutions -- has encouraged a certain sloppiness in accounting which, in turn, promotes inefficient operations. Part of the costs of medical education, for example, or care for the indigent may be shifted to the bills of insured patients.
The government, through Medicare and Medicaid, and private employers, through their insurance intermediaries, are now refusing to absorb these shifted costs by putting caps on payments for services. The most vulnerable institutions, the studies find, are the "flagship" teaching hospitals that tend to deal with the most complex cases and most innovative technology. Especially threatened are municipal hospitals to which private hospitals increasingly send nonpaying patients.
Worried about their ability to raise needed capital and cover future costs, teaching hospital trustees are starting to sell out to large for-profit chains. The chains are anxious to acquire the teaching hospitals because of their prestige, technical capability and large gross revenues. In the long run, however, the chains are likely to be far less willing to absorb costs of medical research and indigent care. And since evidence thus far does not show that for-profit hospitals provide lower-cost services -- in fact, the opposite now seems to be true -- these burdens will not be any smaller.
To blunt criticisms that the poor will suffer from these acquisitions, some of the deals have involved establishing trust funds from sale proceeds to pay for indigent care -- but only for part of it and only until the trust funds run out. Sooner or later the country will have to face up to the fact that the efficiency gains to be realized in the health sector, while important, are small relative to the costs of providing good quality medical care to everyone who needs it. Someone still has to pay the bill.