Stagnant doctor pay unhealthy for us, too

August 27, 2006|By Jay Hancock | Jay Hancock,Sun Columnist

It is well known that raises for high-income Americans have far surpassed gains for the rest of the country in recent years. Let's spare a thought for an important minority of well-off Americans for which this is not true: physicians.

Medical doctors have taken big pay cuts, after inflation is factored in, even as overall health care costs have gone off the top of the chart.

"Compared to what you can make as a lawyer or a business person, they're not very well paid anymore," says Gerard F. Anderson, director of the Johns Hopkins Center for Hospital Finance and Management.

This is probably not good. If anybody should be well paid - in absolute terms and compared with people of similar talent and education - it is those who keep us alive and well.

Median compensation for family-practice doctors in 2004 was $156,000, according to the Medical Group Management Association. (Median means half made more and half made less.) This may sound like a lot, but it's probably less than what some junior bank vice presidents and industrial-supply salesmen pocket.

Median pay was $161,000 for pediatricians, $211,000 for neurologists and $222,000 for emergency docs. To earn these amounts, doctors invest years of education and ridiculous working hours when they finally get a license.

In the medical school class of 2005, the average graduate had education debt of $120,000, according to the Association of American Medical Colleges. Eighty-five percent owed money.

Anderson's medical students at Hopkins often look wistfully after former classmates who already earn $80,000 or more in Wall Street or law firms while the med students are years from any income, he says.

From 1995 to 2003, average income for all physicians fell 7 percent after inflation, according to a new study from the Center for Studying Health System Change in Washington. Family-practice doctors and other primary-care physicians did even worse, losing 10 percent.

Paradoxically, this came when health care expenses went crazy. But the medical inflation that threatens to eat the economy is, by and large, not benefiting doctors. Physician salaries make up only 6 percent or 7 percent of health care spending, Anderson says.

Doctors fare relatively poorly because, unlike those in other big-money occupations, they are low on the pyramid that represents the "winner-take-all," networked economy.

Corporate CEOs, movie stars, investment bankers and class action lawyers get rich by camping near the top of the pyramid and working for millions of customers they never meet. Their pay has soared as technology fueled efficiencies and revenue gains with relatively little effort on their part.

A medical checkup or operation, by contrast, is still handmade and personally delivered. One doc. One patient. And not much room for the productivity improvements that have transformed manufacturing and other parts of the economy.

True, by the most important measure doctors have continued being very productive. American life expectancy rose from 76 years in 1994 to 78 years in 2004, the most recent figure available from the National Center for Health Statistics.

But that's not how doctors get paid. They basically get compensated per procedure, and Medicare and insurance companies have hammered procedure pay down compared with other costs.

Because antitrust laws make it difficult to form medical cartels that could create negotiating power, docs have little choice but to acquiesce.

Not a crisis

This is not a crisis. Some specialists - neurosurgeons and heart surgeons - are doing great. U.S. physicians in general still make much more than their counterparts in Britain, Canada and Australia, Anderson says.

The pay seems to attract enough foreign doctors to fill whatever gaps might be created by native potential surgeons who choose law school.

But it's not a healthy trend.

Doctors seem to be doing less charity work. Some physicians try to make up for stagnant pay per procedure by jamming more people through their offices and operating rooms. Some become capitalists, building surgery or radiology centers and referring patients there. That could be a conflict of interest (it might induce referrals that aren't needed) and diverts money from hospitals.

Incentives would help

And lagging pay may dissuade the best and brightest from going into medicine. Better federal med-school loans, tax incentives for entering general practice and, of course, malpractice litigation reform would help.

When I visit my doctor, I'd feel better knowing he makes more than, say, an insurance agent.

jay.hancock@baltsun.com

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