Doctors’ Incomes and Universal Coverage: Another Inconvenient Truth

July 25, 2007


(courtesy Wall Street Journal)

Here’s an inconvenient truth that some health reformers would rather not discuss:

Although the United States now has relatively fewer physicians per 1,000 population than the OECD median, its total national spending on physicians as a percentage of GDP is double the OECD median …

Physicians’ incomes are much higher in the United States than they are in other OECD countries. In 1996, the most recent year for which data are available for multiple countries, the average U.S. physician income was $199,000.27 The comparable OECD median physician income was $70,324.

Even more disturbing is the fact that primary care physicians who already earn far less than some of their peers are falling even further behind. Doctors can earn far more in the U.S. if they specialize in areas that lean heavily on costly interventions. That means that new doctors are deterting primary care, the specialty that’s arguably most critical to universal coverage plans.

The shortage of primary care doctors in Massachusetts, for example, is becoming a crisis just as the state attempts to expand coverage. Adding to the problem is the fact that doctors don’t only face disincentives to become primary care practitioners, but are also financially discouraged from serving the poor.

The Massachusetts program can’t fix those problems in a vacuum. As a result, the poor are still facing trouble getting primary care when they need it. And lower-income working people are now being “mandated” to pay for insurance coverage that they sometimes find they can’t even use.

“Doctors aren’t the problem,” Michael Moore said. Doctors may not be “the problem,” but there are certainly grave problems with their economic incentives – and with the choices they make as a result.

There are two serious issues that need to be faced in order to create universal coverage.  One is the fact that doctors in certain specialties make a great deal of money by any standard, which places a cost strain on the system.  The second is that fact that there will be incentives for entering these specialties – and for performing these costly interventions, independent of medical need – as long as our physician reimbursement system remains unchanged.

Moore and other reformers will have to overcome their reluctance to address the economic incentives of physicians, and other aspects of physician behavior, if we are to have an effective approach to creating universal coverage. This is just as true of single-payer as it is for any other kind of health reform.


14 Responses to “Doctors’ Incomes and Universal Coverage: Another Inconvenient Truth”

  1. […] And a good one to check out is from The Sentinel Effect comparing the average U.S. physician income with a comparable OECD median physician income, read it here. […]

  2. Anonymous Says:

    Of course docs in the USA make more. Tell me one profession where thats not the case. Accountants in teh USA make more, lawyers in the USA make more, engineers in the USA make more, teachers in the USA make more.

    So that point is really irrelevant. The key point is, have payments to doctors increased as a % over the years?

    Doctor payments have gone up overall in aggregate, but in terms of percentages they have been unchanged since the 1960s.

    Doctors incomes account for only about 20% of overall healthcare costs and its been that way since at least 1964 when Medicare came around.

    If you want to look at the reason for increasing costs, take a look at medical technology, pharmaceuticals, and healthcare administration costs. Admin costs have SKYROCKETED in both aggregate and percentage terms since the 1960s.

  3. Anonymous Says:

    BTW, your numbers are inaccurate.

    According to the US Labor Dept, the average physician in the US makes 160k before taxes. Its still a great income, but its still a bit different than the 200k number you cited.

    I think its very interesting that in Europle/Canada they dont have nearly the same administrative personnel that have infiltrated the US system.

    We have a bunch of middle men including insurance carriers, “consultants” and “practice management” people who provide no value ot the system and simply siphon costs off the top.

  4. Anonymous 2 Says:

    Ayn Rand called those siphoning middlemen “moochers”. The CEO’s of the insurance companies would be called “looters”.

  5. Rick Says:

    It’s tough to do an apples-to-apples comparison of US doctor salaries to those overseas. Anonymous is correct that all professions enjoy higher wages here, but also note that our physicians spend a lot of money, or accumulate a lot of debt as the price of entry into the profession. In France, med school is free, so if a new French doc makes somewhat less than his American counterpart, he is, however, likely keeping more of it to spend.

  6. […] articles have appeared this week highlighting the primary care shortage. I will focus on this one – Doctors’ Incomes and Universal Coverage: Another Inconvenient Truth Even more disturbing is the fact that primary care physicians who already earn far less than some […]

  7. spike Says:

    Studies show that doctor salaries in America are 5 times the median income whereas in other OECD countries the ratio is 3:1. So even when compared to other professions within America, doctors make way more in America than they do elsewhere.

  8. JB MD Says:

    You can’t evaluate this issue in a vacuum. I am a general surgeon in practice for 5yrs. I pay $1500 a month on a 30yr repayment plan on my loans. Pre- tax that is about $33K+ a year to repay my loans. That doesn’t happen in Europe where med school is free and much less competitive to enter. Healthcare is a broken system that needs repair, but I’m becoming increasingly concerned that Universal care will have punitive effect on our income. If that comes without loan forebearnace, which it probalby will, I see financial ruin.
    Also, if you could do 10yrs of post high school education, 5yrs of every 3rd night and 80+hr weeks of residency, and then practice 60+hr work weeks on call 10 days a month and every 3rd weekend for $70K/ yr, would you be interested? In Europe, they have many more physcians than we do working many fewer hrs. Its not the same.

  9. landsquid Says:

    As a point of reference, my sister-in-law recently retired as a California school teacher and is receiving $7,000 per month retirement and can name a child or grandchild as her survivor and they will then receive $2,800 per month for the rest of their lives. The net package is worth over $100,000 per year which is approximately 50% higher than that doctor overseas earns per year. When you look at a doctor working 60 hours per week under stressful conditions and a retired school teacher sitting on her butt getting $100,000 per year, you must conclude that doctor’s salaries are way too low.

  10. Nathan Says:

    I would also point out that physician incomes are only 6% of total health care expenditure in the US, not the 20% that someone quoted above. This is easily calculated from available data:
    We have 2.2 physicians per 1000 people in the US. The US population is around 300 million. That means about 660,000 physicians in the US. Multiply 660,000 by $190,000 average income and we get $125 Billion total physician income each year. We know that per capita health spending in the US is about $7,100 per year times 300 million people which comes to about $2.1 Trillion. $125 Billion divided by $2.1 Trillion equal 5.95% of total expenditure. My point is that cutting physician incomes won’t solve anything and will only cause less people to go into medicine because of the large student loan burden. It will also prevent us from attracting the best doctors from other countries to practice here as we do now.

  11. David Says:

    Very interesting data. I have no doubt doctors’ incomes are very high. All I have to do is look at their houses in my community.

    Too bad the statistics in the article are so dated. I notice the doctors’ income data dates from 1999.

    Doctors incomes were much lower in the 1950’s. They skyrocketed when doctors used their control of the number of medical school pupils to increase their compensation.

    This is a supply and demand issue. Unlike lawyers, doctors control how many people enter their line of work. This allows them to control supply. Unlike other services, when you are sick, you must have a doctor. It can be a life or death issue. This means demand is fixed while doctors control the supply. There is no “free” market in medical care.

    The doctor who complains about his hours should remember that the long hours doctors sometimes work are a direct result of decisions made by the profession.

    A great tragedy in all this is how we import many of our doctors from countries that have desperate need for better medical care.

    A mark of how powerful doctors have become is the utter lack of discussion of this issue. Congratulations to this website for even mentioning the issue.


    I want to be a medical doctor

  13. Galen Says:

    While it is universally accepted that “something is broken” regarding medical services in the USA, I doubt seriously that we could look at only one aspect and find a solution. The problem will right itself, although to the dismay of the poor. As I see it, the following have wreaked havoc with the medical availability in the USA:
    The increasing migration of america’s buying power into a smaller and smaller percentage has assured the medical advancements for cosmetic surgery will outpace those that actually heal ailments.
    Specializing results in greater compensation, causing the number of primary care providers to shrink.
    The profession itself is controlling supply rather than the market. This is done to maintain a lifestyle.
    The lifestyle expected of doctors pushes them to demand ever increasing salaries.
    The beauracracy built into hospital staff models, including the need for parallel management (doctor, staff, facility) has run rampant.
    Abuse of medical insurance plans, including those federally funded, have spawned HMO and similar organizations instead of leaning on federal government criminal prosecution for fraud,illegal practices, or price gouging.

    The problem is that if you don’t have the necessary money to pay ever increasing care costs, you will die in the USA from an otherwise treatable or preventable malady. While this might be great for population control and desirable by people who are young (that will change), it hardly speaks well of the USA to be the ONLY first world nation without universal health care.

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