CHANGES IN THE COSTS OF TREATMENT OF SELECTED ILLNESSES, 1951-65.

The idea of a medical care price index based on the average costs of treatment of specific illnesses rather than on prices of selected items of medical care as is the Bureau of Labor Statistics medical care price index has been in the air for quite a while. This paper has a twofold purpose, first to explore if it was feasible to estimate average costs of treatment of specific illnesses and second if it was feasible, to estimate the average costs of treatment of a number of illnesses in two different periods and compare their cost changes with the price changes indicated by the medical care price index. Data on treatment and costs were collected from the medical histories and financial records of Palo Alto Medical Clinic and of Palo Alto-Stanford Hospital where patients of Palo Alto Medical Clinic physicians are treated when they need hospitalization. Many physicians have maintained that the medical care price index has overstated the increase in costs by not taking account of changes in treatment, citing the decline in the average length of hospitalization as their main evidence.