Should we pay American doctors less money?

That’s a sensitive topic that progressive reformers often bring up as one way to control health spending.

Over at Slate, Christopher Beam takes a balanced look at the issue. He acknowledges that, yes, American physicians get paid proportionally more than the average employee when compared to other countries.

But that should always come with the caveat that other countries, like Great Britain and France, heavily subsidize medical education, while the average American medical student graduates with debt in excess of $150,000. Furthermore, the cost of medical malpractice insurance is significantly more fiscally burdensome for doctors Stateside.

Listen to Princeton’s Uwe Reinhardt, a favorite economist of health reformers, who says, “doctors’ take-home pay (that is, income minus expenses) amounts to only about 1 percent of overall health care spending, or about $26 billion. That’s a drop in the ocean compared with overhead for insurance companies, billing expenses for doctors’ offices, and advertising for drug companies. The real savings in health care will come from these expenses.”

Indeed.

By the way, thanks to Mr. Beam for including a quote and link from yours truly.

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  • http://www.fitnessrocks.org drmonte

    The standard response to calls for lower doctor salaries or incomes is to point out that physician incomes pale in comparison to those of insurance executives and drug company executives. Are those guys taking a pay cut for the good of the country?

    Another area of potential cost savings that seems obvious is the “profit margin” added onto every medical test or procedure a patient has when these services are provided by for-profit entities. And, of course, there is a huge profit margin added to the cost of drugs. If patients received care and diagnostic testing in nonprofit institutions, which would probably have to be operated by the government, the profit margin would be eliminated (or at least substantially reduced).

    This “socialized” view of medicine always causes emotions to flare and ultimately greed rules the day – but medicine as a business has not served us well.

    Monte Ladner, M.D.

  • Healthcare Observer

    The Slate has amended the article – doctor pay is 10% of costs not 1%.

    The inflated pay of doctors, administrators and others is undoubtedly a major factor in higher US healthcare costs.

  • http://www.gooznews.com Merrill Goozner

    You made a major error in quoting Uwe Reinhardt. He said doctor’s take home pay was $260 billion and if you cut 10 percent of that you’d save $26 billion. He didn’t say that doctors only make $26 billion.

    FYI, if you divide the $260 billion by the 750,000 or so practicing doctors in the U.S., you get an average salary of $350,000 a year. That is, of course, very unevenly distributed across specialties, which is a problem that should be addressed by reducing pay for overpriced specialists and boosting income for underpaid primary care doctors. Alas, the role of the RBVS and the RUC in setting physician pay is not being addressed by health care reform.

  • rose

    Maybe we should pay less for pharmaceuticals??
    I used to be able to buy Lisinopril 40 mg generic at my hospital pharmacy at their cost (I am an employee): $11 for 100 tabs (much better than using insurance and copay). They changed this policy once they began to take insurance from employees. Now to buy 100 tabs (without insurance/copay involved) is $50. So figure with pharmaceutical profits and drugstore mark-ups what you have. It’s truly obscene. And this is an example of a cheap common generic, not a newly marketed pill.

  • A Surgeon

    Lets pay the docs nothing and save 10%. Just joking! However, we are any easy target for cuts because we cannot collectively bargain with the payers.

  • HospiceDoc

    I left primary care because with over $200,000 in student loans I could not get by on $90,000 salary. Now I am salaried at $160,000 and I can honestly say if my salary is cut/limited below that I will leave medicine all together. I know a lot of people that feel the same way that fall on the lower end of the physician pay scale.

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  • docguy

    I noticed that we compared to france, because apparently we aren’t that much difference from docs in the NHS.

    Also figure out the number of hours worked over here versus over there. If I get paid less that’s fine, but I’m not going to work 75-80 hours a week.

    No one including nurses wants my job because yes I’m paid more than them but I basically work the equivalent of 2 jobs. Most docs would love to come to work at 8am, have a one hour lunch and then go home at 5pm.

    Partners in law firms make ridiculous money and don’t work ridiculous hours, basically the money is made on the back of people that are just out of school, we would call them residents.

    Get rid of my debt and let me be done at 5pm and no call and no weekends and 4 weeks of vacation a year and I’m on board with what you get paid at the NHS. The docs that make 500k+ a year work proportionately more because that’s how we are paid, if you change how we are paid you won’t get people working late or fitting people in.

    We can do like canada and when they are done doing work they just stop until the next year rolls around.

  • Medical Student

    The fact that health care costs are rising while physician salaries are stagnant seems to imply that cutting physician salaries won’t be an effective way to bring health care spending under control.

  • Medical Student #2

    Some scary sentiments expressed above… My tuition just got bumped to $44,000 this year. That doesn’t even touch my living expenses. I get to look forward to far more debt than the average $160,000. With that said, I’m not looking for sympathy. What I am looking for is a salary at the end of the road that is at least a tad bit gratifying for the endless hours and energy I put into my training. What does America want? Poorly motivated physicians that don’t give a hoot about the outcome of their patients because they’re so depressed about their decision to go into medicine when they could have very easily gotten an MBA and screwed over the entire country on Wall St? Fun times to be a med student with these things rolling through one’s mind :)

  • Nuclear Fire

    Why is it anyone’s business what physicians make? We’re not public servants or workers in a co-op. We’re individuals with skills to market not slaves. If you think I charge too much or don’t provide a good product then go to someone else, either another MD or homeopath or naturopath or chiropractor or witch doctor. Then I’ll ether go out of business or change to be competitive. If you like what I do and are willing to pay for it then you’ll be happy and I’ll be rewarded. Why is such a simple concept so hard to understand?

  • TrenchDoc

    I agree with Nuclear Fire. My value is what clinical value can I provide to patients. The current reimbursement system does not recognize this. An internist with 6 months of clinical experience gets paid the same per RVU as the one with 30 years of expwrience.

  • http://askanmd.blogspot.com/ Doctor D

    I have a small difference with Nuclear Fire, “We’re not public servants.”

    In a way we are public servants. Like police officers we have something that our community cannot do without. Doctors often provide our skills for free to those who cannot afford them because we believe the work matters in ways that the law of supply and demand cannot quantify.

    However, this is not an excuse to mistreat us. I would point out though that I am much more financially secure than police officers I know, who risk their lives daily in their profession.

  • Outrider

    Medical Student 2:

    Reality check: Average debt for veterinary students is about $130,000 now (average for medical students is about $140,000). Median starting salary for veterinarians completing a residency is about $60,000. (It’s lower for those who don’t, but I realize physicians don’t have that option.)

    Veterinary schools don’t seem to have any problem attracting high-quality, motivated applicants who obviously have much less expectation of a “gratifying” salary.

    Incidentally, you could have chosen to attend a school with lower tuition. That’s true for veterinary students as well, and I regularly tell hopefuls to consider the finances when applying to schools.

    So grow up.

  • Christopher George

    If specialist are overpaid, then certainly everyone else in the healthcare system paid more than them are also overpaid.

  • R Watkins

    The average salary for a GP in the UK is now 112,000 pounds, higher than the average income for a primary care doc in the US.

  • HospiceDoc

    I find it odd when people say medical students should go to “cheaper” schools. First off, 100% of all medical students cannot go to, for instance, the five cheapest schools. There are capped class sizes. Factor in that applicants can only enroll where there are accepted as well. Non-medical people speak as if medical school applicants can just pick any school they want and enroll. It doesn’t work that way.

    For instance, I was rejected by my state school which was only $10,000 cheaper per year! State schools get inundated with applications. I was accepted by several other schools (better ranked ones) and they were all priced about the same.

  • thirdparty

    I’ll bet that most people who say that physicians are paid too much wouldn’t be saying that if they made the same amount or more themselves. Just as many of us think that the professional ball player with the multimillion dollar contract is overpaid, how many people would have those same sentiments if they too had a multimillion dollar contract?

  • thirdparty

    Outrider,

    Many people who don’t make $60,000 a year, such as teachers, police officers and firemen would argue that veterinarians make too much money. How do you respond to that criticism?

  • Doc Stone

    Supply, demand, and price are the only real conveyors of valid economic information. All else is just prejudice and sentiment.

    Doctors incomes in the US are artificially supressed by price controls.

    An inadequate number of capable American students invest the necessary effort in medical training creating a shortage of supply. This is what happens when price controls are holding prices below values. If they were acting as price supports by holding prices above value, then you would see oversupply.

    We are filling the gap with imported foreign labor–just as with other underpaid occupations like lettuce picking and cab driving. If the income exceeded the value of the investment, then medical schools would be popping up and filling up everywhere and be immensely profitable because they could charge much more than they do. Even cartels couldn’t stop that as there is always offshore-even with that supply not enough capable Americans are willing to do it.

    You can’t compare dollar for dollar income when one party is supplying itself with benefits supplied by employers or the state to the other. As noted above, British docs make more than American docs in a great many cases now.

  • Michigan Man

    I do not agree with reducing medical doctor salaries. Most earn every dollar they charge. Something is wrong in a country that allows entertainment and sports figures to make multi-millions without anyone complaining. I am a retired medical technologist, retired military and have been involved in medical practice for over fifty years. I can guarantee the American public that reducing physician salaries will not improve medical care, nor will it reduce the cost. I also find it interesting that politicians rarely mention tort reform, which is a major factor in physicians salaries and medical care cost. Proponents of healthcare should adhere to the following: Prima non Nocere.

  • Travis

    I don’t think arbitrarily reducing doctor salaries is a great idea. I do think, however, that hospitals could solve a couple of problems creating a system that incentivizes quality care rather than the volume of services and tests a doctor performs:

    (1) It would remove the built-in conflict of interest our fee-for-service system creates. I want my doctor to order procedures or tests because it is in my best interest, not because doing so will line her pockets.

    (2) It might reduce cost by reducing over-use of medical procedures.

    (3) It would give hospitals a means of attracting the best doctors other than lavish facilities, the most expensive equipments, and (in one extreme case reported on Planet Money) helicopter rides to work.

    I think Cleveland Clinic doctors are on a salary system that does not reward volume of procedures. There is also a healthcare company in Texas that offers quality and (more) affordable care by – in part – paying salaries and bonuses that are not tied to volume of procedures. http://www.dallasnews.com/sharedcontent/dws/news/texassouthwest/stories/092709dnbuswhatworks.409eca4.html

    The downside is that these doctors make about 20% less. The upside is that they provide good quality care at a more reasonable cost and they aren’t tempted to order tests simply to make more money.

  • Travis

    One more thing:

    Michigan man makes a good point: fear of medical malpractice might motivate doctors to order unnecessary tests even if doctor pay is not fee-for-service. A good approach would address both tort reform and the conflict-of interest-built into our fee-for-service model. I don’t think tort reform will do much to reduce unneccessary procedures, however, as long as doctors receive a fee per service and a third party is picking up the patient’s bill.