The United States is known for having some of the highest-paid doctors in the world;
however, it’s also known for having some of the highest healthcare costs in the world.
This has led many to wonder, “are American doctors overpaid?”
And are those costs being passed onto patients?
Let’s find out.
Dr. Jubbal, MedSchoolInsiders.com.
As with any question, it’s important to look at both sides of the debate.
We’ll start by exploring the arguments in favor of American doctors being overpaid followed
by the arguments against it.
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Let’s start with the salary for U.S. physicians compared to other countries.
According to Medscape’s 2022 Physician Compensation Report, the average physician in the United
States earns approximately $339,000 per year.
If we break this down further, the average primary care physician earns approximately
$260,000 and the average specialist earns $368,000.
This puts physicians in the top 2-5% of U.S. earners.
It should be noted that physician compensation in the U.S. varies widely both within and
between specialties.
For instance, doctors working in private practice can often earn significantly more than physicians
working in community or academic centers.
In addition, more lucrative specialties such as plastic surgery, orthopedic surgery, and
cardiology can easily earn upwards of $500,000 per year whereas less lucrative specialties
such as family medicine and pediatrics may earn significantly less than that.
Now let’s compare these numbers to doctors in other countries.
In Canada, the average physician earns approximately $354,000 CAD per year.
If we convert this to U.S. currency, this is approximately $255,000–which is roughly
$84,000 less per year than the average U.S. physician.
In the United Kingdom, the average physician earns £103,000 per year which equates to
approximately $115,000 per year.
And in Germany, the average physician earns roughly 93,000 EURwhich currently equates
to about $90,000.
As we can see from these numbers, U.S. physicians are paid substantially more than physicians
in many other wealthy countries.
Another argument in favor of American doctors being overpaid is that the physician shortage
has been artificially inflated.
There is no shortage of people who want to become doctors.
Rather, there are systems in place that have limited the number of physicians that can
be trained each year–the most notable of which is the “residency bottleneck.”
This, in turn, has inflated physician salaries.
Each year, thousands of medical students who apply for residency don’t get into a single
program.
During the most recent 2022 NRMP Match, approximately 6,400 students went unmatched.
These are individuals who have completed medical school, passed their board exams, and demonstrated
that they have what it takes to be a doctor–and yet, they are unable to continue their training.
Instead, they must take a gap year to strengthen their application and reapply in hopes of
getting in next year.
This lack of residency positions then trickles down and limits our ability to expand medical
school spots as well.
The reason that there aren’t enough residency spots is due to the lack of Medicare Graduate
Medical Education, or GME, funding.
Caps on funding imposed in 1997 have severely limited the number of facilities eligible
to receive federal funding making it much harder to open new residency programs.
This is slowly changing with the recent 2021 Consolidated Appropriations Act which will
have Medicare provide an additional 1,000 funded slots over 5 years starting in 2023;
however, there will still be thousands of students who go unmatched each year.
By limiting the number of physicians that can be trained each year, the United States
has artificially inflated the demand for physicians giving doctors more leverage in salary negotiations.
This has subsequently driven up salaries.
It’s simple supply and demand: if there are fewer people offering a service, they
can often charge more for that service.
For this reason, as the U.S. takes steps toward addressing the physician shortage, we may
very well see physician salaries begin to decrease.
To learn more about the issue of physician shortages in the United States, be sure to
check out Why Does America Have So Few Doctors?–link in the description.
Lastly, some people argue that many of the responsibilities of a physician can be accomplished
by mid-level providers, such as physician assistants and nurse practitioners, at a much
lower cost.
Traditionally, mid-level providers work in a collaborative fashion with doctors–similar
to the relationship between an attending physician and a resident physician.
That being said, there has been an increased push for independent practice for PAs and
NPs in recent years, allowing some mid-levels to practice autonomously and without a supervising
physician.
The average physician in the United States earns approximately $339,000 per year, whereas
the average PA earns $122,000 per year and the average NP $118,000 per year.
This large gap in pay has led many to question if healthcare costs can be decreased by using
mid-level providers in place of physicians in some clinical settings.
That being said, there are significant differences in the training, experience, and level of
knowledge between physicians and mid-level providers.
As such, there are many concerns regarding independent practice beyond finances.
That discussion, however, is beyond the scope of this video.
For a comprehensive overview of the independent practice debate, be sure to check out our
NP & PA vs MD & DOcomparison video – link in the description.
Now let’s get into the arguments against American doctors being overpaid.
To start, becoming a doctor in the United States is incredibly expensive.
Before starting medical school, you must first complete a four-year bachelor’s degree.
According to a U.S. News annual survey, the average cost of college tuition per year in
2022 was $40,000 for private colleges, $23,000 for out-of-state students at public schools,
and $10,000 for in-state residents at public colleges.
This means that it costs students anywhere from $40,000 to $160,000 to earn their bachelor’s
degree.
And these numbers don’t take into account the various other fees associated with applying
to medical school including the costs of taking (and sometimes re-taking) the MCAT, application
fees, and attending interviews.
In contrast, many other countries allow students to matriculate into medical school straight
out of high school with some even offering free college tuition.
Once U.S. students gain admission to medical school, however, the costs escalate even further.
As of 2022, the average cost of medical school tuition in the United States is approximately
$55,000 per year with some schools charging more than $70,000 per year.
In addition, many schools explicitly prohibit students, and for good reason, from working
during medical school making it practically impossible to earn a livable income during
these four years.
As a result, the majority of students are forced to rely on loans to pay for school
and other living expenses.
It should come as no surprise then that the average medical student graduates with around
$242,000 of student loan debt with some students owing over $400,000 by the time they graduate.
It’s only getting more expensive too as the average cost of medical school rises by
approximately $1,500 each year.
During residency, U.S. doctors will begin earning a salary; however, it is not as much
as you might expect for someone with over 8 years of post-secondary education.
According to Medscape’s 2022 Resident Salary & Debt Report, the average salary for residents
in 2022 was approximately $64,000.
This may sound like a comfortable salary; however, more than two-thirds of residents
work greater than 50 hours per week, and nearly a quarter work greater than 70 hours per week.
This varies widely based on specialty, however, with some specialties averaging closer to
40 hours each week and others more than 80 hours per week.
Although duty hour restrictions exist that limit residents to working no more than 80
hours per week, many programs violate these restrictions.
If we use a modest estimate of a 60-hour workweek, the average resident physician earns approximately
$21 per hour after nearly a decade of training and accruing between a quarter to half a million
dollars of debt.
Although salaries increase significantly once a resident becomes an attending physician,
they are often well into their 30s by this point and will then have to start the long
road of debt repayment.
This brings us to the next point which is the significant opportunity cost associated
with becoming a physician in the U.S. Opportunity cost can be defined as the potential loss
from a missed opportunity resulting from choosing one alternative over another.
To start, it takes a minimum of 11 years after high school to become a doctor in the United
States.
That’s 4 years of college, followed by 4 years of medical school and 3 years of residency.
Although there are some pathways that can shorten the length of training slightly, such
as BS/MD programs, these are not the norm.
In addition, many specialties have residencies lasting longer than three years–and that’s
not even getting into the various fellowships available.
Physicians spend over a decade of their lives in training before they start their careers.
In comparison, many of their college peers will complete their 4-year degree, start working
in their desired field, and begin climbing the career ladder.
As such, they will have nearly a decade’s head start in terms of investing and building
their wealth.
This is why I have said many times on this channel that medicine is not a great career
if you’re optimizing for money.
If you do want to optimize for money, however, I have an entire video discussing the highest-paying
careers over on the Kevin Jubbal, M.D.
channel – link in the description.
The last argument against American doctors being overpaid is that they aren’t actually
the highest earners within medicine.
The real money in medicine is not in the delivery of care, but rather in overseeing the business
of medicine.
According to a New York Times survey, the average insurance chief executive officer
earns approximately $584,000 per year, the average hospital CEO earns $386,000 per year,
and the average hospital administrator earns $237,000 per year.
Although these numbers may not sound much different from physician salaries, they are
likely a vast underestimate of administrators’ actual compensation.
Top executives generally earn the bulk of their income through non-salary compensation
such as bonuses and other benefits.
For example, the CEO of Aetna earned a salary of about $977,000 in 2012; however, when you
factor in non-salary compensation such as stocks and options, his total compensation
package that year was valued at over $36 million.
Hospitals and insurers argue that these large salaries are necessary to attract top executives
who have the knowledge and expertise necessary to navigate the complexities of American health
care; however, many feel that these salaries are unnecessarily high.
According to studies, administrative expenses account for approximately 15-25% of total
national healthcare expenditures which equates to roughly $600 billion to $1 trillion per
year.
In contrast, doctors’ salaries are estimated to make up only about 8% of healthcare spending.
As such, many argue that physician salaries are not the primary drivers of the exorbitant
healthcare costs we are experiencing in the United States, and lowering administrative
costs may do a better job of moving the needle.
As we can see, the question of whether American doctors are overpaid is not so black and white.
It is a complex question with strong arguments on both sides.
But what do you guys think?
Do you think American doctors overpaid?
Are there any points I missed?
Let me know with a comment below.
Thank you all so much for watching.
If you enjoyed this video, be sure to check out Why America Has So Few Doctorsor NP & PA
vs MD & DO | The Scope Creep Controversy.
Much love, and I’ll see you guys there.