Don’t blame doctors for high health care costs

The Kaiser Family Foundation released recently its latest estimate of what health insurance will cost in the future. By 2021, average family premiums are set to double, to more than $32,000. This year alone the premium is $15,073, up 9% from 2010.

Who is responsible for these skyrocketing costs? According to a new study from two Columbia University researchers, one of whom is a top health care adviser to President Obama, the answer is simple — doctors.

Many doctors make a lot of money, but they’re hardly to blame for the high cost of care. Physicians’ salaries respond directly to the exorbitant sums they must spend on education, training and practicing their craft — not to mention the high value Americans assign to health care.

The Columbia study compared doctors’ pay in six developed countries and found that U.S. earnings surpassed the rest. “We conclude that the higher fees … were the main drivers of higher U.S. spending,” authors Miriam Laugesen and Sherry Glied stated. As Laugesen put it, “With the recession we have right now, there are a lot of questions about whether physician fees can continue to go up at the pace they have.”

Harvard professor Meredith Rosenthal’s commentary on the study was more blunt: “Physicians are making five times the median income. Is that what we really want?”

The costs of becoming a doctor

The numbers certainly raise some eyebrows. The average annual income for a primary-care doctor surpasses $186,000. U.S. orthopedic surgeons make $442,450 on average. Both figures are substantially higher than the median income in this country — and as much as double the salaries of their foreign counterparts. But U.S. doctors also must spend about 40,000 hours on their education. Loans accumulated through college and medical school can reach $300,527 and take more than 20 years to pay off — depriving a doctor of $788,880 in net income, according to the calculations of physician/author Ben Brown.

Even among their peers, American doctors have a tough row to hoe. Education costs in the other five countries examined by the Columbia study — Australia, Canada, France, Germany and the United Kingdom— are lower than in America. In the United Kingdom, for example, medical students pay about $5,000 a year. At American medical schools, tuition and fees run anywhere from four to 10 times as much.

Once U.S. doctors complete their education, the workload doesn’t ease. The average physician works 59.6 hours each week — the equivalent of one and a half full-time jobs.

Costly to run practice, too

What’s more, a doctor’s financial responsibilities don’t end with medical school payments. According to Princeton professor Uwe Reinhardt, close to half of a doctor’s income goes toward maintaining his practice. And that excludes payments on college and med-school debt. Doctors devote about 30% of their gross profit toward office overhead, and the required licenses and certifications cost about $5,000 annually to maintain. Then, there’s medical malpractice insurance, which can run tens of thousands of dollars each year. With yearly expenses such as these — before taxes — a doctor’s seemingly high income vanishes quickly.

If American physicians’ income fell — and practicing medicine became unprofitable — would anyone bother going into the profession at all?

Americans can’t afford to find out.

Primary-care physicians are in short supply. Only three of every 10 doctors practice general medicine. And that ratio is worsening. The American Academy of Family Physicians has warned that by 2020, the United States will be short 40,000 primary-care doctors.

Other countries are already dealing with these issues. Take Japan. On the surface, its health care system is impressive. The Japanese live longer than Americans, and health care costs account for a mere 8.3% of the country’s gross domestic product, compared with 17.5% in the U.S.

But the Japanese system is far from perfect. When medical complications arise, Japanese patients fare far worse than Americans. Japanese are twice as likely to die from heart attacks, even though heart attacks are one-quarter as common in Japan. One reason? Japan has one-third fewer doctors than the developed-world average. Doctors see as many as 100 patients a day and work up to 100 hours a week.

American doctors face unique financial burdens. Their earnings reflect these challenges as well as the value that Americans place on superior medical care. And with physicians’ take-home pay accounting for just 10% of national health care costs, reducing earnings will do little to drive down America’s health bill.

What it would do is much worse — demoralize the American medical corps, discourage bright young people from entering the profession and compromise Americans’ ability to access quality care.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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