College and healthcare

The problem with college and health care costs is the same. We focus on tuition and premiums, not on the cost drivers and with so many variables and subsidies we don’t know what the true cost is. Throwing more subsides at users just makes mitigating the basic problem worse.

The government takes pride in the increased enrollment in Obamacare and the fact many new enrollees are pay only $10.00 per month in premiums due to enhanced government subsidies. HHS says more people will receive quality health care. Quality being a meaningless buzzword in this case. But the real point is that still nothing has been done to actually manage the cost of health care, just a false sense of premium relief. No different than free collage tuition.

According to the U.S. Bureau of Labor Statistics, prices for medical care were 2,074.62% higher in 2021 versus 1963 (a $207.46 difference in value).

Between 1963 and 2021: Medical care experienced an average inflation rate of 5.45% per year. This rate of change indicates significant inflation. In other words, medical care costing $10 in the year 1963 would cost $217.46 in 2021 for an equivalent purchase. Compared to the overall inflation rate of 3.79% during this same period, inflation for medical care was higher.

A physician office visit costing $10.00 in 1963 should cost $85.52 in 2021 applying the CPI-U. The reality is the cost is several times higher, but with so many variables in what an office visit is today and so many insurances and Medicare paying different amounts, it is impossible to know the true or fair price. An office visit is among the least costly health care expenses.

Keep in mind that the price of a health care service is not only what effects premiums. Premiums reflect the price, the amount of health care provided and the intensity of care (use of expensive technology, etc.)

Sen Warren, an advocate for free college tuition and student loan forgiveness says her tuition at the University of Houston in 1963 was $50.00 per semester. If you apply the CPI to that number it would be $422.52 in 2020. Even if you applied the medical CPI, it would be $1,075.79. In fact, tuition and mandatory fees are about $10,000 per semester today.

In 1963, the maximum professor salary at Harvard was $21,000. In 2021 dollars that would be $179,586.44, but in 2021 the overall average for instructors as all levels is $187,051 and the average for professors is $245,067. Warren was reported to earn $400,000 as does her husband today.

Of course salaries are only part of the story.

Populist rhetoric finds it most beneficial to focus on the result and rarely the cause. It’s like taking aspirin and thinking it cured your arthritis.

4 comments

  1. “A physician office visit costing $10.00 in 1963 should cost $85.52 in 2021 applying the CPI-U”

    The true cost of medical care has always baffled me. Earlier this year I went to my PCP. My insurance was billed $140.00 for the office visit. My insurance plan allowed an amount of $76.79 of which I had to pay $15.00 co-pay. The allowed amount is inline with the $85. It is even a little cheap considering all the modern day requirements that didn’t exist in 1963 (computer records, required PPE, larger staffs for billing, offices not in the doctor’s home).

    If I didn’t have insurance, would I be charged $140 or only $77, which they will obviously will accept. Does a different insurance company allow more expenses or less? So what is the true costs?

    At the same time, I look around the office and wonder how they stay in business at $77 a patient. Commercial real estate is not cheap. Office supplies and IT services are not cheap. Cleaning services, billing services, malpractice insurance, etc.. Medical school is not cheap either.

    I noticed that practices were being bought out buy large medical groups. So, somewhere there are some lawyers and MBAs who have figured out what the true cost of medical care is and how to make money. Why can’t the government figure it out so that they can save money?

    Like

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