By Suraj K. Bhatt
The rising and varying price of medical education remains a concerning source of perplexity. Why is the price of medical school soaring? Why are there considerable differences in this pricing?
In 2014, for example, the cheapest medical school charged in-state students around $12,000 per year for tuition and fees while the most expensive school asked nearly $80,000 from non-resident students. Differences in pricing emerge as an important issue when considering medical education as a good, which has led to increasing curiosity about criteria used for valuing and explaining these charges. Ballooning costs are practically universal in higher education, but the market for medical school in particular offers an exceptional example of this growth. Unwavering demand for medical school admission and relatively easy access to lending creates unavoidable price insensitivity, whereby medical education normally sells regardless of high or low prices and students’ increasing indebtedness is seemingly taken for granted.
This challenging scenario spurs regular reporting and discussion, creating calls for more loan forgiveness programs, shorter training pathways, and even novel financing options, such as income-share agreements. Such proposals around medical education financing, even if limited or unavailing, remain crucial for championing fairness and reasonability. However, practical paradigms for assessing this variable pricing are necessary and may offer an opportunity to track growth proactively, instead of merely acknowledging and absorbing rising tuition. This piece explores how the analysis of pricing may guide policies for advancing the national dialogue beyond a simple concern for current trends.
TOOLS FOR ANALYSIS
The Association of American Medical Colleges (AAMC) has made each medical school’s annual tuition and fee charges from 1996–2014 publicly available when reported. In applying index number theory to medical school prices, elementary indices were considered, which allow for price comparison between two periods and are useful for homogenous goods.
If there are M goods (medical education), year t price of a good m is given by pm1 for t = 0,1 and for goods m = 1,2,…M. Specifically, pm0 corresponds to a chosen base year of 1996, where the price index is arbitrarily assigned a value of 100. Employing this functional form, three common elementary price indices were calculated, including (1) Carli index, which is the arithmetic average of M price relatives, (2) harmonic average of M price relatives, and (3) Carruthers, Sellwood, Ward, and Dalén index, given by the geometric mean of arithmetic and harmonic means of M price relatives.
Table 1 shows how the mean annual price of medical education has increased every year from 1996-2014. For comparison, Figure 1 reveals how new home valuations in the U.S. consistently outpaced the broader Consumer Price Index (CPI) during this same period, with significant peaks in the mid-2000s (i.e., the U.S. housing bubble) as well as periods of recovery. Meanwhile, the overall Carli price index for medical education has done nothing but increase during the period of 1996-2014, but the growth in the average annual inflation rate for medical education has slowed, decreasing to an all-time low of 3.00% in 2014.
Table 1 also reflects how prices for residents (M=26,268, SD=12,341) were significantly lower than for non-residents (M=37,437, SD=12,337); t (4644) = -30.847, P < 0.001. Since 1999, however, a Carli price index for residents has increased more rapidly than one for non-residents.
Admission to medical school is competitive. If even the most qualified applicants are unable to reasonably predict acceptance, this may reduce options for more favorable tuition rates. An awareness of such scenarios and the relativity of price changes from one period to another could be of value for policymakers, education policy analysts, school leaders, and medical students. Applying index number theory to medical school prices would allow advocates and decision-makers to perform sound analyses of growth patterns to explore what buyers might tolerate or what a market can generally sustain. Indices or similar models could be used in discussions to ensure timely increases in federal loan limits, in estimating cost-of-attendance figures, or in evaluating proposed changes in interest rates on federal student loans. Index-based scores, by school or by geography, could be used to follow prices for medical education, while also bolstering accountability and financial forecasting in the academic arena. Indices are inherently imperfect interpretations, but incorporating them in tools to meaningfully engage the ongoing dialogue offers a next step in bringing change to this important challenge facing medical training.
Suraj K. Bhatt is a medical student at The George Washington University School of Medicine and Health Sciences in Washington, DC and is co-author of health services research published in Academic Pediatrics, Journal of Adolescent Health, and Maternal and Child Health Journal. He earned a bachelor’s degree in finance from the University of Pittsburgh and master’s degree in health policy from Carnegie Mellon University.
Photo Credit: Sheila Sund