BOOKS OF RtfiDIfGS - PAHO/WHO

I Klannan
- 365 -
again if the new scientific knowledge raises the benefits of expensive care by relativly
more than the benefits of inexpensive care. In addition, if patients' real preferencs do
not prevail but hospitals persist in producing services with the most expensdv techniques
for which benefits are not less than cost, scientific progres cannot lower cot per patient
day.
In a monograph on physician expenditures, Fuchs and Kramer (76) draw a dhrp
distinction between the effects of demand factors and those of technology. Their
arguments concerning technology reflect an historical perspective, and may be
paraphrased as follows. The late 1940s and early 1950s were marked by the introduction
and widespread diffusion of many new drugs, particularly the antibiotica, which had a
pronounced effect on the length and severity of infectious diseases. Since the mid-1950s,
advances in medical technology have not brought about a similar improvement in the
ability of physicians to improve health. Renal dialysis, cancer chemotherapy, and open
heart surgery may achieve dramatic effects in particular cases, but bring about only
marginal improvement in general indexes of health. Moreover, the early advances tended
to be physician-saving, while the later ones were characteristically physician-using. The
improvement in health resulting from the early advances was so great, that it turned the
anticipated slight rise in demand for physician services into a slight decline. The reason is,
according to Grossman (77), that healthier people have less objective need for physicians'
services. By contrast, Fuchs and Kramer conclude that changes in demand factors had
little effect on expenditures for physician services before the advent of Medicare and
Medicaid in the mid- 1960s.
In effect, whereas Fuchs and Kramer view technology and the conventional demand
forces as being independent of one another, Feldstein holds that the effects of technology
may also be exerted through a shift in demand. Both positions are stated ably and
forcefully. As often happens, each raises more questions than it can answer. It would be
premature, therefore, to attempt to pass judgment on the validity of the respective
findings concerning the effects of technology in the postwar era.
In a study focusing on the marked acceleration in the upward trends of costs and
expenditures for hospital and physician services in 1966 (78), I have argued, though by
no means-conclusively, that the large expansion in cost reimbursement to hospitals and
the adoption of a new, previously untried method of paying physicians at reasonable and
customary fees, subject to the prevailing distribution of fees in a local area, must have
exerted strong effects of their own. In the case of hospitals, cost reimbursement for most
patients leads to an impairment of financial self-discipline, since a dollar need only be
spent in order to be gotten back. In my judgment, this proposition holds true for any
institution, whether it be under voluntary nonprofit, governmental, or proprietary
auspices. So far I am not persuaded by the empirical studies that have reached
conclusions to the contrary (79, 80).
A number of works have appeared that attempt to explain the behavior of the
nonprofit hospital (81-85). They are, for the most part, far.-ranging and enlightening. One
is also entertaining, positing a theory of conspicuous production, with the hospital's
objective taken to be the closing of a status gap (85). None really attempts to deal with
the sharp discontinuity in hospital cost and price behavior beginning in 1966.
A rise in personal income may lead to greater reliance on technology for still another
reason. For example, many persons are unable to stop smoking. A higher income enables
them to pay more for cigarettes with a filter and reduced tar and nicotine contents.