Thursday, July 26, 2012

Medical Expenses and Doctor Compensation

In the Weekly Standard, Eli Lehrer looks at doctor compensation:
In discussions of America’s high health care costs, surprisingly little attention is paid to salaries and wages. Yet the fact that medical jobs simply pay more than those in other sectors is beyond dispute. A physician practicing in a primary care setting, according to the Bureau of Labor Statistics, earned an average of just over $200,000 in 2010, while specialists averaged over $355,000 (the highest of any professional category tracked). By comparison, lawyers average just over $110,000, airline pilots about $92,000, and chartered actuaries (who calculate risk for insurance companies and must pass complex exams longer and arguably more difficult than the medical boards) about $150,000.

The wage disparities, however, don’t stop with physicians, who do, after all, need to complete an academic curriculum that’s beyond most people’s abilities. Registered nurses and dental hygienists, who need only associate’s degrees, earn about $70,000 a year. This is about as much as degreed computer programmers. And it’s significantly more than high school teachers and forensic scientists, who need master’s degrees but earn a little less than $60,000 on average. And wage disparities exist at all levels of the health care industry: Even nonmedical professionals like janitors tend to earn more in health care settings than those working elsewhere....

And nothing about the training costs of the people who provide medical care explains their high wages, either. Because medical school takes four years of full-time study—as compared with three years for law school and two for business school (tuition is comparable)—doctors do, indeed, graduate with more debt than people pursuing other professional training. But the wages they earn afterward more than make up for this: An average year in medical school costs about $25,000 at most public schools, while doctors make, on average, $80,000 more than lawyers but spend only one year more in school. And while many students capable of doing the work can’t find an accredited medical school willing to admit them, that’s not true for all medical professions. Anyone with a high school degree can train to become a nurse, lab tech, or other health care worker.
Malpractice insurance can also be very expensive, but this isn’t so everywhere—internists in states that cap malpractice awards can get it for only a few thousand dollars a year—and, in any case, the overwhelming majority of health care professionals don’t need malpractice insurance. Even in states like Florida where insurance costs over $50,000, doctors still take home very comfortable six-figure incomes in almost all cases.
If this happy confluence of factors for medical professionals—high wages, excellent job security, below-world-average workloads, and extremely high returns on educational efforts—resulted from a free market, it could rightly be considered a triumph of capitalism. But it does not. Government provides a little less than half of the total medical spending in the United States (about 46 percent by most estimates; more if tax expenditures are included), oversees the licensing of almost everyone who comes near patients, and limits where and when hospitals get built. The system that produces these high wages is shot through with government subsidies and regulations.

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