10 August 2007

Paying doctors less

There was an article in the New York Times recently arguing that the best and fastest way to decrease the cost of health care in the short term was to pay doctors less. I think the best way to decrease health care costs is to pay lawyers less. After all, less pay means fewer lawyers, fewer lawyers means fewer lawsuits, fewer lawsuits means lower malpractice insurance, lower malpractice costs leads to lower patient care costs. And honestly, what part of society, health care or otherwise, wouldn't be better served with fewer lawsuits?

Regardless of my lawyer pay scheme, there are several important reasons not to lower the pay of doctors and arguably, to increase it.

First, becoming a doctor incurs more debt than any other profession so salaries are needed that can cover the cost of living and the cost of paying back loans. In 2006, the average medical student graduated medical school with $130, 571 in educational loans (that does not include loans to cover the cost of living, which average another $16,689) with 72% of graduates carrying a debt load greater than $100,000. That's an 8.5% increase over the previous year (1). Assuming a 5% interest rate, a graduate needs to budget $7,363 per year just to cover the interest on the loan.

Which brings me to the second point. Doctors make almost no money until after their residency. For example, the pay schedule for residents at UT Southwestern in Texas is listed below (2). That's a 3-4% increase annually, which barely tracks the current inflation rates (3). So a medical resident is carrying a six figure debt load and earning roughly the same salary as the maintenance workers (4) (who I assume have less school debt and little specialized training). Now lets consider that residents work at least 80 hours per week, while the maintenance worker pulls only 40. Hourly, a resident makes less than a babysitter. Compare that to a law school graduate who gets a job at a large law firm and receives an average starting salary of $99,000 (5).

Third, there is the effect on lifetime salary. While most twenty-somethings are paying nice sums into their401K and reaping the benefits of matching funds and compounding interest, medical graduates are paying all their money to their creditors. Considering the average entrance age into medical school is 24 (6) and most residencies are at least 3 years, a medical graduate will be 31 before they have a chance of receiving a salary that would allow them to save for retirement or pay off the principal on their loans.

Lastly, let's look at who in the medical field is getting particularly high salaries and why. Your GP is probably barely covering the cost of his/her practice, not making millions per year. At the hospital I work in, there are some doctors pulling seven figure salaries, but they are highly specialized: pediatric cardio-thoracic surgeons for example. That surgeon did 13-14 years of post-medical school training so he was in his forties before he made any money. If you paid doctors like him less, no one would go through the incredibly lengthy training, take on that level of risk, or be able to retire before 80.

There are a few rock star dermatologists or plastic surgeons who command high salaries, but there are a few people like that in every profession. Their wages are not indicative of the thousands of doctors practicing every day and those are the doctors that will be put out of business if salaries are lowered. Not to mention how many fewer bright young people will aspire to become physicians instead of bankers or lawyers. Paying doctors less is not the answer; the result from reduced pay is fewer doctors and therefore longer waits and a lowered standard of care.

(1) http://www.ama-assn.org/ama/pub/category/5349.html
(2) http://www8.utsouthwestern.edu/utsw/cda/dept200270/files/214265.html
(3) http://inflationdata.com/inflation/inflation_rate/CurrentInflation.asp
(4) http://www.co.monterey.ca.us/personnel/SalaryPost.asp?jt=72C19
(5) http://www.collegejournal.com/salarydata/law/
(6) http://www.vault.com/articles/The-History-of-Medical-Schools-in-the-U.S.-27653519.html

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