How Much Should Doctors Really Make?

Harris Meyer

September 25, 2012

Introduction

The question of how much money physicians should make has long been a provocative topic. Even about 250 years ago, pioneering economist Adam Smith summarized the prevailing tone when he wrote, "We trust our health to the physician... Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires." (An Inquiry Into the Nature and Causes of the Wealth of Nations; 1776)

With today's focus on the need to control US healthcare costs and boost the number of primary care physicians, physician payment again is in the limelight.

Physicians are clearly fighting to maintain the incomes they -- often justifiably -- feel they deserve and for which they have paid their dues. But it's obvious that just about no one else in society is weeping over any potential decline in physician salaries.

Few experts think that US physicians overall are paid too little, especially compared with most American workers. Some say that US physician fees, income, and services overall are excessive, contributing to US medical spending that's by far the highest per capita in the world. Others argue that certain types of specialists, such as radiologists and orthopedic surgeons, are paid too much, while others, such as family practice physicians, pediatricians, and geriatricians, are paid too little.

A growing number of experts argue that the prices that physicians and other providers charge need to be curbed, along with wasteful and inappropriate care. That could lead to reduced physician incomes -- though no one wants to see the draconian Medicare sustainable growth rate cuts take effect.

However, many consider high physician incomes to be perfectly justified.

Another view is that the US free market more or less accurately determines how much money it takes to attract and keep talented people in medicine. In a country where the top 1% have an average pretax income of $380,000, not counting capital gains,^[1] while the median household income is about $50,000, these observers say that it takes the promise of high and secure earnings to convince the brightest young people to choose a career in medicine rather than the potentially more lucrative fields of finance, management, law, and lobbying.

Shouldn't Doctors Be Happy With Their Incomes?

There's sharp disagreement among medical leaders, researchers, and policymakers about whether doctors, especially those in certain fields, should earn less, more, or about the same; how to implement such changes; and whether changes to physician pay would have any impact on total US healthcare spending. Physician services account for only about 20% of total costs -- much less than hospital services.

Still, no physicians earn as much from the practice of medicine as some hedge fund managers and other fantastically rich occupants of the 1% circle, who can make tens of millions a year. On the other hand, doctors earn a handsome return on their educational investment compared with people in most other occupations, says William Weeks, MD, a psychiatry professor at Dartmouth University who has studied physician incomes vs those of other professions.

"No doctor is making $250 million doing clinical work," says Dr. Weeks, citing corporate CEOs' giant stock option payouts. "But doctors have more job security and a confirmed high level of income, though they also have a ceiling. Compared with business, medicine attracts less entrepreneurial, more scientific people who want a stable, predictable life."