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A Health Care Plan for Colleges

Author: Peter R. Orszag, Adjunct Senior Fellow
September 18, 2010
New York Times

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Over the past few weeks, millions of parents sent their children off to college. But amid the packing and unpacking (and in some cases, the tears), most probably didn't realize how increasing health care costs are harming their kids' education.

Consider this: In 1980, a new associate professor at the University of Illinois at Urbana-Champaign, a leading public school, earned about the same amount as one at the University of Chicago, a nearby leading private school; ditto for the University of Texas at Austin and Rice University.

By 2000, new associate professors at the University of Illinois and the University of Texas were earning about 15 percent less than their counterparts at Chicago and Rice. And by this year, the differential had widened to 20 percent.

Money may not be the only thing motivating professors, but over time this growing salary gap will undoubtedly pull the talented ones away from public higher education — the colleges and universities that three-quarters of our students attend.

What does health care have to do with any of this? Research I've done with Tom Kane of Harvard and the Gates Foundation finds a surprisingly strong connection: over recent decades, as state governments have devoted a larger share of resources to rising costs of Medicaid, the health care program for the poor, they have cut support for higher education.

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