October 27, 2017
Earlier this week I had a column in Politico pointing out that doctors in the United States get paid roughly twice as much as their counterparts in other wealthy countries and that we could save almost $100 billion a year ($700 per family) if we got doctors pay in line with their pay elsewhere by opening up the market. This made many folks (most identifying themselves as doctors) angry, as they let me know with e-mails, tweets, facebook comments and various other outlets. My response to these criticisms is below.
Folks also may be interested in picking up the discussion with a segment next Monday (10-30) on Wisconsin Public Radio at 7:00 A.M. EDT.
Response to Critics
The criticisms of my piece took a variety of directions but the vast majority noted the large debt that many doctors incur in med school. This is a serious issue, but I would raise a couple of points here. First, a debt burden of $250,000 comes to less than $9,000 a year over a 30-year career. That’s less than 4 percent of the average doctors’ pay. Even if you add in one-third for interest costs, it is still less than 5 percent of the average doctors’ pay and only around 10 percent of the difference between the average doctors’ pay in the U.S. and their pay in other wealthy countries.
I would agree that we should alter the way med school is financed and instead have it covered by the government, as is largely the story elsewhere. (The same applies to college.) However, it is interesting to note how when we talk about opening up the market for doctors to more international and domestic competition we get this huge outcry over the fate of doctors with high debt. I don’t recall similar outcries about the risk to the continued employment and pensions and retiree health care benefits of autoworkers and steelworkers when these sectors were opened to international competition. Nor do we hear these complaints expressed as vocally in reference to efforts to restrict Amazon and other internet retailers when it means the loss of hundreds of thousands or even millions of jobs in traditional retail stores.
Many complained that I had no evidence for what I argued in the piece. The links in the piece provide pretty solid evidence that U.S. doctors are paid substantially more than their counterparts in other wealthy countries. Here’s another source that readers may find useful.
As I said in the piece, part of the story is that matching up doctors by type, whether general practitioner or specific specialty, our doctors earn considerably more. But part is that two-thirds of our doctors are specialists, whereas two-thirds of the doctors in most other wealthy countries are primary care physicians. This means that many of the tasks performed by specialists here are performed by primary care physicians elsewhere. Since we do not enjoy systematically better outcomes, much of our spending on specialists is wasted.
We then had several readers insist that doctors’ pay is no big deal, so cutting it to the levels of other wealthy countries really would not matter. With more than 900,000 doctors getting an average pay of more than $250,000 a year, we are spending over $225 billion a year on doctors. If we could knock the average down by $100,000 a year (not overnight but through a period of time) then we would be saving more than $90 billion a year.
We just had a big fight over the repeal of the Affordable Care Act (ACA), where the amount at stake was roughly $60 billion a year. So we are talking about 50 percent more money being at stake in excessive doctors’ pay relative to other countries. If the money involved in the debate over the repeal of the ACA was a big deal, then the money involved with doctors’ pay must be a big deal.
As I said in the piece, doctors enjoy much higher pay in the U.S. than in other wealthy countries because they have an effective cartel. The beneficiaries of this cartel obviously want to preserve it and perhaps they will be able to do so. The vast majority of workers in the U.S. economy don’t have the same political power. As a result, the market is structured so that they see very little of the gains from economic growth over the last four decades. The political power enjoyed by doctors has led to a situation in which they are among the winners in this story. I suspect many on the other side would rather see the excess pay received by U.S. doctors in their own pockets rather than the doctors’.
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