Why doctors complain: A history of physician income

We’re not going for sympathy here. Doctors as a whole enjoy less sympathy than many other professional groups (members of Congress enjoy the least, I would think), and that’s probably appropriate. They have high incomes and many prerogatives and rank highly in esteem polls as individuals, if not as a group. It’s not where they are that is causing the grieving, it is where they are coming from.

Let’s deal with the elephant: money. We can begin there because it is so obvious.

While a comprehensive history of physician income is beyond the reach of this blog, it is fair to say that from the early to mid-twentieth century, being a doctor meant earning a solidly middle class income. There were disparities, then as now, between the uptown, high society specialist and the rural, payment-in-kind GP, but all were at least comfortable, and the more entrepreneurial built their own hospitals and/or manufactured their own patent medicines. Their fees were a matter of personal discretion and could vary without constraint, except for the patient’s ability to pay.

In the Roosevelt administration, wage and price controls were imposed, and employers were prohibited from or at least restrained in the raises and other incentives they could offer employees. Health care insurance benefits were somehow excluded from that restraint and, moreover, those benefits were not subject to taxation. This produced a sharp upsurge in employer-provided health insurance, and those benefits soon became very generous. For the first couple of decades, insurers paid doctors whatever they charged. This had a dramatic effect on the number of people who could seek physician services and the amount of money a doctor could make from each of those patients, a powerful multiplier.

In the mid-1960’s, Medicare began. It was modeled mainly on the contemporary private insurance plans, and the impact on physician income was enormous. For decades, physician income had tracked cost of living increases very closely. Employer provided insurance plans produced a significantly higher rate of growth, and Medicare blew the walls out. Private practice physicians experienced raw collection rates (without discount or fee schedule negotiation) of 98%. Doctors who were no more than ordinary in ability could, if sufficiently affable and available for their referring colleagues, realize incomes that vaulted them into the highest percentiles. Doctors suddenly had the wherewithal to invest heavily in the stock market and shopping centers, to buy airplanes and island retreats, and the health sector was mainly immune to cyclic contractions in the general economy. Just because “rich doctor” was a new phenomenon does not mean that it was not embraced as the just and proper standard and expectation.  It became a redundancy.

Then things changed. Spiraling costs prompted controls on physician reimbursement, and doctors have experienced income reductions in real, inflation-adjusted dollars, and all that preceded the Great Recession. A colleague joined his father’s surgical practice. He was disposing of some records after his father’s death around 2000, and he came across what Blue Cross paid his father for gallbladder surgery in the 1980’s. It was about 150% more that BC was paying my colleague in 2000, and that’s not even adjusting for inflation. Since inflation in the costs of running a medical practice is higher than the general inflation rate, that reduction in real income is substantial.

Do doctors still make a good living? Absolutely. But they are now lagging rather than leading their college classmates who chose finance, business, and other pursuits, and they have incurred six figure education debts in the process.

And that’s one of the reasons why doctors complain.

Richard Patterson is a surgeon who blogs at DailyDudley.

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