Some Physicians Plagued by Student Debt, Bad Investments

Troy Brown, RN

May 19, 2015

A survey of physician debt and net worth — part of Medscape's Physician Compensation Report 2015 — shows that rising medical student debt is taking a long time to pay off for many doctors, and bad investments are also taking a toll on some physicians.

As part of the debt-to-net worth ratio, patient-care compensation for employed physicians in the survey included salary, bonus, and profit-sharing contributions. For physicians who are partners, patient-care compensation includes after-tax earnings and deductible business expenses before income taxes.

Orthopedists made the most ($421,000) in 2015 when net worth, debt, spending habits, expenses, and investments are figured in; family physicians ($195,000) and pediatricians ($189,000) made the least, according to the survey.

And once again, orthopedists topped the list when it came to net worth — meaning money in the bank, investment, retirement accounts, home equity, value of cars, jewelry, etc, minus liabilities such as mortgages, car loans, credit card debt, school loans, home equity loans, etc. — with almost 3% being worth over $5 million. Again, family medicine was at the bottom, with about 2% having a net worth of between $2 and $5 million.

Net worth tended to increase with the age of respondents. More than 90% of those aged younger than 28 years had a net worth of less than $500,000. By age 50 more than half (55%) had a net worth of at least $1 million; by age 65, 49% of physicians had accumulated more than $2 million.

The 2015 Medscape physician compensation survey included 19,657 physicians in 26 specialties. Recruitment took place from December 30, 2014, to March 11, 2015, and participants completed the survey on a third-party online survey collection site. The sampling margin of error for the survey was ± 0.69%.

The Wage Gap

A 2013 study found that in general fewer than half (49%) of American women had more savings than debt when compared with 60% of American men. Female physicians also make, on average, 24% less than male physicians, but their net worth is also much lower, according to this year's report.

One third (34%) of male physicians had a net worth of less than $500,000 compared with almost half (48%) of their female counterparts. Almost half (48%) of male physicians had a net worth of at least $1 million compared with one third (30%) of women.

Women tend to choose lower-paid specialities; a 2012 report from the Association of American Medical Colleges (AAMC) found that the highest percentage of female physicians (58.1%) selected pediatrics (the lowest-paid specialty) as their calling, and the lowest percentage (4.0%) chose orthopedic surgery (the highest-paid specialty).

When it comes to income disparities between husbands and wives, differences also exist. In 2010, a Pew report examined the income disparities between husbands and wives during 1970. At that time, only 4% of husbands had lower salaries than their wives; this rose to 22% in 2007. The current Medscape survey reports that 62% of female physicians bring home as much or more than their significant others. More than half of female physicians earn more than their partners.

Some 63% of male physicians report that their partners earn much less than they do compared with 37% of women who reported the same about their partners.

Student Debt Rising

Male and female physicians were similar in terms of categories of debt and expenses, except that a higher percentage of women (35%) are still paying off college debts compared with about 25% of men. This could be explained in part by the fact that 66% of women physicians are aged 50 years or younger compared with 44% of male physicians. Women and men borrow similar amounts of money in school loans.

More than a third (37%) of emergency physicians, intensivists (35%), and family physicians and dermatologists (both at 34%) are still paying off student loans. Physicians with the least student loan debt are pulmonologists (16%) and gastroenterologists (17%). It is not clear why some specialists have more difficulty paying student debts than others. Even though orthopedists have both the highest earnings and net worth, more than a quarter (26%) still owe student debts, similar to internists and psychiatrists, who are nearer the bottom for earnings and net worth.

The AAMC reports that medical school debt has risen by 6.3% since 1992 compared with a 2.5% increase in the Consumer Price Index during that time. According to the AAMC, the median 4-year cost to attend medical school for the class of 2013 was $278,455 for private schools and $207,868 for public medical schools. This is a much more rapid rise than inflation or resident compensation.

The Medscape survey reports that 20% of physicians aged 50 years or older are still paying student debt. This situation may worsen as the current group of younger physicians ages and carries the rising college debt into later life.

Most Live Within Their Means, Some Face Losses

Many (61%) of physicians say that they live within their means, but 24% report that they live below their means and that others would be surprised to know how much money they really make. Only 11% of physicians say they spend their money extravagantly, and, for the most part, physicians don't feel that they are "rich."

Male and female physicians spend about the same amount of money; however, 22% of the women live below their means compared with 25% of the men.

Most (77%) physicians — both male and female — reported that they had not faced any significant losses during the past year, but 11% said they had lost large amounts of money because of problems or changes in their practice.

Answers about financial losses due to practice issues varied somewhat among specialists. Hospital-based specialties (6% of intensivists and 7% of emergency medicine physicians) reported the least loss. Few primary care physicians (11% of family physicians, 9% of internists, and 8% of pediatricians) experienced recent financial losses. The specialists who experienced the most costly practice issues were urologists (21%), allergists and plastic surgeons (both 18%), and orthopedists and ophthalmologists (both 17%).

Investment Mistakes Cost Some

Approximately 15,000 physicians wrote in responses to a question specifically about investment mistakes. Major mistakes included bad stocks, real estate disasters, buying houses at the top of the market, receiving bad advice, and the fallout from the 2008 crash.

Many (55%) physicians reported that they had never made an investment mistake, but others were not so fortunate. Real estate (14%), stocks of businesses (28%), and other investments (14%) topped the list of investment errors. The most commonly reported write-in responses were errors related to the technology bubble in the 1990s and the real estate crash in 2008.

Physicians with lower earnings and net worth were most likely to report that they had never made any investment mistakes: 67% of endocrinologists, 65% of infectious disease physicians, 64% of pediatricians, 62% of neurologists, 61% of internists, and 60% of family physicians. These physicians may have been more conservative with their money than their higher-earning colleagues.

Anesthesiologists (40%) reported making the highest percentage of bad choices in stock or business investments among all medical specialties. Urologists and ophthalmologists (both 39%) and orthopedists and radiologists (37%) were next in line. Orthopedists (22%) reported the highest percentage of bad real estate investments, followed by anesthesiologists (19%), and plastic surgeons and urologists (both 18%).

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