Price Behavior and Productivity in the Medical Market

Abstract

During the past five years, the price of medical services as measured by the relevant components of the Consumer Price Index has risen twice as fast as the cost of living generally. Because the financing of medical care is a key factor in the development of private as well as public plans and proposals for health insurance, the movement of medical care prices is of widespread concern. This article analyzes mainly the behavior of physicians' and surgeons' fees over the past two decades, in an effort to determine the relative importance of the factors responsible for their upward movement. As a result of this analysis, the author finds that the growth of health insurance has not been as important in the rise of medical care prices as is commonly believed, and that the most important factor has been the failure of the supply of medical services to grow with the demand for more medical care. (Author's abstract courtesy EBSCO.)