My Hospital Bill

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I am over 65 years old. I am ending my career as a professor. My association with the state is not ending, however. Although I will no longer be employed by New York, I am applying for Social Security. It seems I also have to enroll in something called Medicare.

A helpful official of the Social Security administration called me the other day. For irrational or maybe sentimental reasons, I didn’t want to mail in my official birth certificate for fear it might get lost. I like the way it looks, footprints, an old picture of a hospital that is no longer there, my time of birth written in ink (6:10 p.m.), and an official blue seal. But she told me if I brought it in by hand, which I had planned to do, I’d have to "take a number and sit around waiting to be called." This could take an indeterminate time, like an hour. Inefficiency, I thought. I decided to mail in the certificate. She reassured me that this was routine.

A few days ago I went through only 2 shoe boxes before finding the birth certificate, and I knew it wasn’t in the first one when I began. I simply had to straighten out a clutter of bills. A short prayer usually leads to a result like this. Not always, but quite often.

I found some other old papers in there too. One of them is my hospital bill, that is, my mother’s hospital bill when she gave birth to me. Since I just wrote a verbose article on the medical system, I thought this bill would tell the same story more efficiently and more effectively. This article will be very short, I think, unless memories start to come back and they are.

The bill is on a preprinted form filled in with handwriting in ink. The writing is very legible. As I look at the script, not printing mind you, but script, the memory comes back to me of my having learned to write in exactly the same style when I was in grammar school. It’s the Palmer Cursive method. Through years of stripping it down for blackboard writing, I’ve lost the facility. But it comes back fast. At least this handwriting had style.

Up to 30 years ago, one of my shoe boxes had some pen points in it and even ink. I used the ink with a series of fountain pens, usually Parker pens, sometimes Shaeffer. All I see around the house now are pencils and ball point pens. The ink was a ritual. It had to be either blue-black or black to satisfy me. Shaeffer made the ink. With a nod to the LRC web site, I will tell you that the free market is a most amazing, amazing institution! The ink bottle had a side well inside so that you did not dip the pen directly into the bottle. You filled the well by tipping the closed bottle, and then you conveniently filled the pen from the mini-well near the top of the lip of the bottle. Having to fill a pen by dipping it into the recesses of a bottle created a variety of problems. Apart from being messy and exposing fingers to ink, which for a few days was a pretty good substitute for a tattoo, the filling mechanism of a pen might be below the lip of the bottle. I noticed at the gas station recently a clip with disposable gloves near the self-serve nozzle — another example of American ingenuity and service. A foreign student of mine tells me of an American jackknife dating from World War II that his father still uses in preference to any newer model. Of course, the tradition has spread. Being able to pop open my trunk and my gas tank from inside my Toyota is a big improvement over my former Chevy Caprice Classic which is probably now serving someone well in the Middle East. I wish I could say the same of the transmission which to me seems rather sluggish. End of digression.

Now, here’s what this hospital bill says on it. I will surrender some privacy, but it’s worth it. It’s written to my father For Wife. After the name of the hospital, the city, and the hospital administrator’s name come the financial details. These I vouch for because otherwise you will not believe me:

To Room and Service from 6/5/41 to 6/16/41

1 week 4 days at $31.50 a week
$49.50

Delivery Room
10.00

Drugs
1.75

Laboratory Work
1.00

Anæsthetist
5.00

Formula for Baby from 6/5 on
1.50

Use of Delivery Room for Circumcision
5.00

Total
73.75

All right, the cost of living has changed. The CPI (Consumer Price Index) was 14.7 in June, 1941, and it is 203.9 today. That’s up by a factor of 13.87 (=203.9/14.7) So we can adjust the $73.75 cost by multiplying it by 13.87. That gives $1,023.

My mother stayed in the hospital 11 days to bring me into this world and the hospital cost came to about $1,023 in today’s dollars.

How much would this cost today? A Minneapolis tv station reported in 2005 that the cost of delivering a baby ranged from $4,800 to $11,000 for a normal delivery, like my mother’s. (A C-section cost from $8,000 to $17,000.) Hospital stays are much shorter these days, maybe 1—2 days.

The charges for a private room ranged between $800 and $1,600 a day. This is confirmed by data from a Tucson survey. I am reasonably sure my mother had a semi-private room. We may assume that its cost is no less than half the cost of a private room and probably more. Let’s say it costs one half of $1,200 (the average of $800 and $1,600) or $600 a day.

So, let’s estimate that a normal delivery costs $7,900 (the average of $4,800 and $11,000) for 2 days, and let’s add on 9 x $600 = $5,400 for the other 9 days. My mother’s hospital stay would today cost something like $13,300 (= $7,900 + $5,400).

We’ve already adjusted the actual cost of $73.75 upwards to $1,023 to account for the drop in the value of the dollar since 1941. But we find that the actual comparable cost of the same services is now 13 times as much, or $13,300.

Beyond the CPI inflation factor of 13.87, we have an additional medical inflation factor of 13,300/1,023 = 13. See how good such back-of-the-envelope calculations can be when done carefully. The press routinely reports that medical care costs are rising at twice the rate of the CPI. My calculations say almost exactly the same.

What is the cause of this wild, wild inflation in hospital care cost? Medicare and Medicaid and more, such as incentives to have third party payments. In short, medical markets have systematically been manipulated, regulated, and wrecked.

My niece and nephew have used a midwife several times and not just for reasons of economy, but the fact is that they are both self-employed and do not have access to reasonably priced medical insurance. They could not afford paying many thousands of dollars to have a baby.

The wreck that Americans and in particular Congress have made of medical and health markets is absolutely unconscionable. It amounts to the grossest stupidity imaginable. I don’t believe any of the usual stories for why we have such socialism with its wildly inflated costs, at least not with respect to the older generation of my parents or even my generation. The common family in 1941 could afford health care and there was no crying need for "equality." Medicare didn’t pass because Americans in general demanded equality or felt sorry for poor people who couldn’t get medical care. I don’t believe that for one second. I don’t believe for one second that LBJ or any other politicians who fed Americans a line about poverty or equality in health care or who intoned about the dirt poor people in their regions sincerely meant what they said. If they did believe their own baloney and thought they were helping people, they were awfully dumb because they haven’t helped Americans as a group at all. The evidence is that we’re paying a huge amount more without getting more.

The politicians needed a cover story; they cried crocodile tears. Medicare was pushed through by determined lobby groups and determined politicians out for themselves. Once it was passed, the inflation in medical costs took off and rose even faster than it already had been. Then when the evils of the system started to crop up, it became possible to sell more and more controls. The younger generation, having been brought up in the system and indoctrinated with ideas of equality and fairness, have more of an ideological commitment to it than earlier generations. They won’t root it out. Unwinding this mess in an orderly way looks impossible. Everyone needs a shock to wake them up and bankruptcy is just what the doctor ordered.

Michael S. Rozeff [send him mail] is the Louis M. Jacobs Professor of Finance at University at Buffalo.

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