Will Higher Education Affordability be the Health-Care Issue of the Twenty-First Century?

There’s a strangeness—and, frankly, a sadness—to seeing the cover of the Fall 1994 issue of the College Board Review nearly 27 years later. Against a black background, a teetering Ionic column cradles the headline “Higher Education Affordability,” and at the bottom right is the teaser “Will it be the health-care issue of the twenty-first century?”

On its face, the question seems ridiculously obvious: of course higher education affordability would be a major issue in the 21st century because, as we know, it certainly is. But between the lines is an assumption that by the time the United States reached the 2000s it would have figured out healthcare affordability. Given that the Clinton administration in 1994 was pushing hard to reform health insurance, it’s reasonable that author Sandy Baum, then an associate professor and chair of Skidmore College’s Department of Economics, would think the nation and its patients would be in a better place a couple decades later. But as we know now, the Hillary Clinton-led effort was highly controversial and an opening salvo in the partisan demonization and culture wars that have become as much a part of our national identity as the “Star-Spangled Banner.” And even though the Affordable Care Act helped reduce the number of uninsured Americans, the pandemic eliminated millions of jobs, and with it millions of people’s access to health insurance, and revealed just how broken the system is—from patchwork access to doctors and hospitals, to inadequate treatments, to the botched deployment of the covid-19 vaccine.

The public pressure for reform and attention from policymakers in the ‘90s never evolved into sustained momentum to fundamentally overhaul the broken system. So higher ed affordability can’t be the healthcare issue of the 21st century because healthcare is the healthcare issue of the 21st century. (Cue the sadness.) But, as Baum lays out in the cover story, higher ed affordability is a similarly metastasizing problem.

The first line of the piece reads today as an uproarious understatement: “Public concern about the pricing and financing of a college education seems to be reaching a new intensity.” Like healthcare, college—previously one of this nation’s greatest tools of pulling generations into the middle class (and beyond)—has become a kind of luxury good. Annual average tuition at a public university has doubled, from $10,047 in 1995-96 to $20,050 in 2017-18, according to the National Center for Education Statistics. More high schools have pushed their students to apply for federal aid and grants, and there’s an arms race in merit-based aid. But inflating tuitions, stagnant wages, and increasingly severe economic downturns (the dot-com bubble, the Great Recession, the covid crash) have deprived generations of students with crushing debt loads any chance at pursuing their American Dream.

Reading Baum’s article now, with the benefit of hindsight and eyes open to the current realities, is to time travel back to a moment of optimism. In 1994, it seemed the government could work for its citizens—not only to keep them healthy, but to ensure quality higher education would be within reach of as many people as possible. That feels naïve now, especially three weeks removed from a hyper-partisan lie- and grievance-fueled insurrection at the U.S. Capitol. But perhaps we can reclaim that sense of possibility. Perhaps the pandemic has provided a chance to solve the healthcare crisis and the higher-ed affordability crisis and lay the foundation for a more beneficial relationship between the people and their elected representatives.

Public concern about the pricing and financing of a college education seems to be reaching a new intensity. Will higher education come on the heels of healthcare in generating public pressure for reform and capturing the attention of government policymakers? The question is not farfetched, and those of us in higher education would be well advised to be prepared. We might start by taking a systematic look at the parallels and contrasts between these two industries and their connections to public policy.

The rate of increase in health-care and higher education prices has far exceeded that of other prices and of family incomes. While the consumer price index rose by 70 percent between 1980 and 1992, the medical care component of the cost of living increased by a factor of 2.5 and college tuition tripled.1

This relative price increase is not as shocking as it appears at first glance. Industries with slow productivity growth inevitably experience more rapid price increases than those whose output per work hour can rise dramatically. Education, healthcare, and social services are bound to become more and more expensive relative to VCRs, washing machines, and calculators.2

The real problem is that median family income has grown only slightly more than general prices over the last 15 years. Healthcare and education could demand a much higher portion of family income without causing too much pain if incomes were growing rapidly enough to provide
a higher standard of living overall. But recent trends have made adequate healthcare and education appear out of reach for many American families.

As the price of healthcare has soared, health insurance has become inaccessible to millions of people. Nearly 15 percent of the population (and more of those under the age of 65) is without health insurance. The lack of affordable coverage for a significant segment of the population is the primary reason for increased intervention by the federal government in the healthcare industry.

Diminishing access to higher education is more difficult to document. New kinds of low-cost institutions are combined with older, four-year educational institutions in the college attendance statistics; in addition, more adults older than traditional college students are attending postsecondary institutions, causing college enrollments to grow more rapidly than the college-age population. Nonetheless, there is evidence that more high school students see their choices as limited. Despite two decades of federal effort, financial constraints are still widely perceived as barriers to access to higher education.

Similarities are also evident in the public's perceptions of the healthcare and higher education industries. People believe that part of the blame for skyrocketing health costs lie with the providers. Doctors and hospitals are viewed as ripping off the public. Colleges and universities and the faculty who teach in them are commonly perceived as guilty of similar offenses. In the field of healthcare, the government has responded by designing legislation to force providers into line. While plans for similar legislation governing higher education are still in the early stages of discussion, the threats can be heard with increasing clarity. A recent Justice Department investigation put the spotlight on college pricing and financial aid practices. The invasive process and the new restrictions that emerged sounded a warning signal.

The popular press is also sending warning messages:

"A 'Student of Value' Means a Student Who Can Pay the Rising Cost of College" (Wall Street Journal, January 5, 1994)

"Financial Aid System Needs Revamping" (Boston Globe, December 5, 1993)

"Tuition Trauma" (Wall Street Journal, October 20, 1993)

"Administration Considers Idea of Limiting U.S. Aid at Colleges Where It Finds Student Charges Too High" (Chronicle of Higher Education, September 15, 1993)

Some additional suggestions have been made. For example, a 1991 Forbes article, "College Without the Frills," argued that students and faculty spend too little time in classrooms and that campuses are starting to resemble country clubs. Similarly, Business Week carried an article headlined "Time to Prune the lvy."3

It is too soon to know where the ongoing federal discussions about the possibility of cost-containment policies for higher education will lead. But they certainly should be closely watched by the education community.

The Contrasts

Although the issues that have plagued healthcare price increases—access, and the public's perception of the industry—are paralleled in higher education, the two fields are not identical. Let us consider the contrasts between them.

Magnitude of Expenditures. Higher education expenditures are not on a scale anywhere near those of healthcare. Both the commitment of the federal government and personal expenditures are much smaller.

Healthcare consumes over 13 percent of gross domestic product, having increased from 5.3 percent in 1960 to 7.4 percent in 1970 and 9.2 percent in 1980.4 Medicare and Medicaid also account for an increasing portion of government expenditures. Healthcare accounted for 17 percent of federal outlays in 1993; in 1980 this figure was only 10 percent.5

The $166 billion in expenditures by institutions of higher education in 1991 pales beside the $752 billion the nation spent on healthcare that year.6 The average household spends about five and a half times more per year on healthcare than on higher education.7 The federal government spent about $50 billion on education, training, employment, and social services combined in 1993, compared to $255 billion on healthcare.8 Higher education is more significant in state budgets, where it accounted for about 10 percent of total expenditures in 1993.9

Impact on Private Business. Healthcare costs are a major issue for private businesses, which are struggling to continue to provide insurance for employees while remaining competitive in international markets. Expenditures for health services and supplies by private businesses nearly doubled in real terms during the 1980s.10 It is no wonder that the pressures to revamp the American healthcare system are intense. Higher education, by contrast, is not a direct cost for business, except in the limited cases where employees are reimbursed for tuition expenditures.

Social Values. Healthcare is a priority for the Clinton administration because of the effect of healthcare on the federal budget and the economy as a whole and because of the basic belief that healthcare is what economists call a merit good—that everyone in this society deserves access to the best available healthcare, regardless of the ability to pay. As a society, we do not agree that even the most expensive new medical treatments should be rationed according to the ability-to-pay. Everyone deserves to have everything. This principle is given lip service despite the reality that even basic healthcare is frequently rationed according to ability-to-pay.

Considerable efforts have been made during the last two decades to increase access to higher education, and the ideal of equal educational opportunity is frequently articulated. Still, as a society we have never worried much that the access we are providing is to a very heterogeneous set of educational opportunities. We are much more accepting of the notion that there should be a variety of goals for higher education institutions than that there should be a variety of healthcare goals or kinds of healthcare services for different groups of people.

Universal vs. Limited Demand. Unlike healthcare, higher education doesn't involve everyone. Only a fraction of Americans aspire to college degrees, and even fewer hope to earn four-year degrees. Yet everyone needs healthcare. And while we must pay for healthcare every year of our lives, with the fear of decreasing affordability in the later years, higher education is, relatively speaking, a short-term problem. However astronomical the price may be, no one has to pay it for more than a few years, and those years do not come at the time in our lives when we feel most vulnerable. Moreover, at any given point in time, the cost of higher education is an immediate issue for only a small fraction of the population.

Financing Strategies. The appropriateness of borrowing and saving for college creates another contrast to healthcare. Suggesting that people borrow to pay their healthcare costs wouldn't be very appealing, even if a high percentage of the costs weren't incurred in the last years of life. Saving is difficult because health insurance has to be purchased every year, since health expenditures occur throughout life. In addition, major health expenses are unpredictable. Higher education, on the other hand, has a very predictable pattern. It is possible to plan and save. And it is quite reasonable to borrow to pay for an investment that will have a significant positive effect on future earnings.

The Crisis of Confidence. The criticism leveled at healthcare providers does not extend to the commodity they provide. No one has begun to question the value of healthcare per se. Unfortunately, the same cannot be said for higher education. The fundamental mission, values, and performance of the academy have been challenged from many quarters. The titles of such recent books as Profscam (Charles Sykes), Illiberal Education (Dinesh D'Souza), and Tenured Radicals (Roger Kimball) capture the polemical flavor of some of the criticism. These writers question the ability of our institutions to broaden the intellectual horizons of students and raise doubts about the merits of spending any money at all to be exposed to the teaching offered at our institutions of higher education.

The attacks on higher education are not limited to the intellectually oriented press. The cover of the August 1993 issue of Mademoiselle proclaimed: "College Revisited: Class Fashion, Campus Lifestyle, Do You Really Need a Degree?" Inside, a pennant carrying the slogan "Useless U" was accompanied by the commentary, "It takes 4 years, costs $100,000, and doesn't guarantee you a job. Maybe it's time we stopped calling college a prerequisite for success." The author, a Yale University alumnus, suggested, "For those who are so intensely focused at age 18 that they know how they plan to make money, 4 or more years doing something other than making it is likely to be a waste of time."11

Such attacks on higher education are a symptom of the anti-intellectualism that seems to have intensified in our society during the 1980s. It is much more deep-rooted than negative attitudes toward the healthcare industry. While we can hope that general appreciation of intellectual endeavors and of education will increase, the reality is that the appeal of higher education will never be universal.
 
Willingness-to-Pay. In contrast to healthcare, part of the college affordability crisis is simply the willingness or unwillingness of consumers to reduce other expenditures in order to pay for education. Higher education is very expensive and has become less affordable in objective terms in recent years. But the problem has been exacerbated by our priorities. Among many parents, there is a growing unwillingness to pay for college, and this fact is as significant as any inability to pay.

One reflection of this attitude is the change that has occurred in who actually pays for college. An increasing share of the burden has been shifted to students. Student borrowing has increased not only because grant aid has failed to keep pace with costs of attendance but also because parents are less willing to make sacrifices to educate their children. Frequently we hear of court cases involving relatively affluent, divorced parents who are trying to escape responsibility for educating their children. Financial aid directors tell horror stories about affluent parents who go to great lengths to get subsidies. And if parents don't want to pay for their own children, they certainly do not want to pay higher taxes to subsidize other people's children.

It is not easy to separate ability-to-pay from willingness-to-pay. Families who can't imagine making the expected contribution prescribed by the need analysis system spend hundreds and probably thousands of dollars on video games and equipment for their children. The psychology of ability-to-pay is key. Many families who are absolutely unable to save for a new car make every payment once they purchase a car. And these payments take bigger annual bites out of their paychecks than saving ahead would.

While there are no easy public policy solutions for this situation, the relationship between priorities and affordability is one we must keep in mind and attempt to influence. The low priority placed on education has no parallel in the healthcare arena.

The Question Is Answered

Although there are similarities, I believe, college affordability will not be the healthcare issue of the twenty-first century. Higher education will probably never take center stage in public policy debates the way healthcare has. We spend much more on healthcare than we do on education, both as a society and as individuals. Everyone wants and needs healthcare, both for themselves and for others, but unfortunately many people place a low value on higher education.

Yet the lesson of the healthcare debate for all of us in higher education remains: Be prepared. We must work to cut our costs of operation and to realign priorities so that educators, potential students, and society at large will once again value higher education. We should be willing to make sacrifices to gain access to the intellectual development it is meant to foster—for ourselves, for our families, and for other people with inadequate means.

College affordability is a real problem, with or without the threat of government interference. Potential solutions demand more than simple cost-cutting. They demand our immediate attention.

References
1. Bureau of the Census, Statistical Abstract of the United States, 1994 (Washington, D.C.: U.S. Department of Commerce, 1993), 483-84.
2. William J. Baumol, "Health Care, Education and the Cost Disease: A Looming Crisis for Public Choice," Public Choice 77 (1993): 17-28.
3. Christopher Farrell, "Time to Prune the Ivy," Business Week (May 24, 1993): I 12–18.
4. Bureau of the Census, Statistical Abstract of the United States, 1994, 109.
5. Ibid., 334.
6. Ibid., 109, 151.
7. Bureau of Labor Statistics, Consumer Expenditures Survey, 1990–1991. (Washington, D.C.: U.S. Department of Labor, 1993): Table 1400, unpublished.
8. Statistical Abstracts, 1994, 334–35.
9. Statistical Abstracts, 1994, 298.
10. Statistical Abstracts, 1994, 113.
11. Jacob Weisberg, "Useless U?" Mademoiselle (August 1993): 148–51.