The bottom line is that compared to other rich countries—all of which pay Medicare rates or less for medical services—American doctors are pretty well paid. The report also shows compensation as a ratio of the average wage in each country, and the story is similar (though GPs look a little closer to the OECD average when you compare their pay to average wages).
1. Why isn’t the focus on this latter ratio? If you were to draw an international comparison chart of wages not adjusted for the average wage in a country, most occupations in America are “overpaid.” That is what having relatively high productivity will do for you.
2. Has anyone compared hours worked by doctors across countries? I bet that American doctors work more hours. I also bet that if you cut their rate of pay, they will not continue to work more hours. That is, I think that the substitution effect will dominate the income effect. (If nothing else, the lower the rates that government pays doctors, the fewer patients that doctors will accept for whom they are paid government rates.)
3. I think that if there is an issue at all, it is limited to specialists. And that is because specialists produce more billable services. That problem is as severe in Medicare as it is outside of Medicare.
Overall, I am skeptical that experts in Washington can “fix” the pay of doctors.
For (1), wouldn’t comparison to the median be better than average? One claim I hear often is that the 1% of americans make so much that it skews the average (but not the median).
My wife is a radiology resident.
Having seen first-hand the ridiculous hazing ritual that is American medical education (med school + residency + fellowship which is increasingly “required”), I can definitely say that I would never encourage my children to enter the field even with the current rates of pay. If earnings were to decrease without offsetting changes to the training system, I really don’t know who would enter.
We still have a lot of student loan debt to work through, so I hope that she is able to have at least a few years of high earnings after she finishes residency (more for her own sanity than anything), but in truth, I am less “worried” about reductions in Medicare’s rates than I am about Watson-type devices eliminating the market for human doctors (and radiologists in particular).
I strongly agree that the system of licensing is crazy. The gauntlet that doctors have to run seems like an anachronism and huge burden. I also agree with Arnold that US doctors may be getting similar relative pay as in other countries but I still think we should scrap the current licensing system making it to become much, much easier to get a license to practice medicine.
Maybe we could be the leaders in low paid doctors and cheap care. Maybe it would not work but it seems worth a try.
I think it was Megan McC who had a piece a while back that included data comparing ratios of docs pay to that of the average of the top 5% of earners, for the US, to the ratios in the usual bunch of OECD countries — and on this basis, the US ratios weren’t significantly different, as I recall.
Here’s another thing. The total healthcare bill in the US is commonly quoted as being something like $2.6 or 2.8 trillion. Docs’ pay can’t conceivably be more than 10% of that. You could knock the hell out of it, and you wouldn’t accomplish much cost reduction. So why all the fuss about it?
The really scary part about all this is not the pay of doctors but the current limitations of practicing medicine in general. It took three tries (two transfers) to get my mother in the hospital where the appropriate services could even be offered for what I thought would be a routine surgery: a process of musical chairs where supposedly “favors” were called in to make it happen, let alone the waiting game of unnecessary room costs. (For Medicare???) That’s no way to approach some of the most important product that humans consume.
NPR’s planet money did a great recap of the clownshow that has been government approaches to paying doctors since 1965. Though it’s no acknowledged as such, one with an appreciation of how prices emerge through the market process can’t help but come away from the report thinking: “man, what a terrific story of why government shouldn’t be setting the wages of doctors, or anyone else. That’s why we have markets!”
check it out:
http://www.npr.org/blogs/money/2009/11/podcast_paying_doctors.html
This addresses some of your questions:
http://www.oecd.org/health/health-systems/41925333.pdf
Annual salary is the wrong figure, anyway. To get a meaningful value, you’d want to compute something like a Net Present Value. As @Todd says, there is med school debt, there are years of mediocre wages, there is malpractice insurance and other expenses. Is the NPV of being a doctor that much higher than from being, say, a Government drone? Finally, as Dr. Kling says, US doctors work tremendous hours. Taking NPV and expressing it per hour, it is not at all clear they are overpaid.
The proproductivity difference here that largely explains how GPs here make closer to GPs there while the overall average is higher is that of specialist care. One of the factors behind our higher amount per capita spent on healthcare is the amount of specialist care received here. More people getting more visits to specialists equals more money spent. And it’s also an indicator of greater access to more specialized care.
With GPs we often talk about malpractice and premiums but we don’t often talk about the risk of losing your income full stop. I have no notion what the data is but I am guessing this is a larger risk than say if you are a CPA and a CPA requires a lesser investment.