In the ongoing drama over health care costs in the United States, the frequent scapegoats are all those damn money-grubbing doctors. Their high salaries are the reason health care spending is so high in America! Right?
Well, I would agree that the money spent on physician salary and reimbursements is obviously a part of the total spending on health care, and thus a part of the problem. But how big of a part?
Out of the total yearly expenditure on health care in the US, about 20% is payments to physicians for services performed (i.e. seeing patients, doing procedures, interpreting tests, etc). On average, 50% of that money goes to overhead costs (rent, staff salaries, equipment, etc). So, we end up with 10% of total US health care spending as a rough estimate of physicians’ take home salaries.
That’s not such a big piece of the pie. Even draconian cuts to physician reimbursement would only shave a percent or two off total health spending. And as physicians, our overhead costs won’t change just because we get paid less for our services.
For example, let’s say that physician reimbursements were cut by 25%. Our hypothetical Doctor X is a solo practitioner who typically receives about $500,000 per year in reimbursements with $250,000 in overhead costs to run his practice and pay his staff and the other $250,000 as his salary (before taxes, of course!)
All of a sudden, Dr. X’s reimbursements are cut by 25% to $375,000 per year, but his overhead costs stay the same (or more likely increase at the rate of inflation). Now his take-home pay is cut by at least 50% to $125,000 per year. Do you really want the person wielding the knife for your surgery to have just gotten a 50% pay cut?
But, hey, you might say that $125,000 per year is still pretty good! Doctors in Europe make even less than that, right?
The problem with this comparison is that medical school in Europe is heavily subsidized and is essentially free. Currently in the US, the average cost for 4 years of private medical school is $286,000. If that medical school cost is taken out as loans and paid back at 8% interest over a 30 year loan period, that amounts to $2098 per month with about $469,000 paid in interest and $755,000 paid in total. After taxes, a newly graduating doctor making $125,000/year could conceivably pay 6-7 years of his salary just paying back his loans.
Fortunately, the majority of graduates have less debt, but the average debt for medical school graduates has been between $150,000 and $200,000 in recent years.
In addition, doctors in Europe and most other first-world countries do not face the same malpractice litigation climate as American doctors. The costs we pay for malpractice insurance (even if we never get sued) can be tens of thousands of dollars per year (and even hundreds of thousands for some high-risk specialties).
Finally, I do believe that anyone should be paid a salary that is in line with the value they provide. Physicians sacrifice almost a decade of their lives to learning their art, and they have arguably the greatest positive impact on their patients’ lives of anyone. I believe they should be well compensated for their services.
That being said, physicians who actively defraud the system or perform unnecessary procedures to make more money should be investigated and dealt with appropriately.