Wednesday, November 20, 2013

Why Are American Doctors Paid So Damn Much?

Kevin Drum has an interesting piece on Why Are American Doctors Paid So Damn Much?.

Blog physicians per capita 500

"That's damn peculiar, isn't it? If Econ 101 is to be believed, higher pay should produce more doctors. And yet, even though the United States pays doctors far more than any other country on the globe, we're in the bottom third. We have more doctors per capita than poorish countries like Mexico and Poland, but far fewer than Belgium and Britain and Germany—all of which pay doctors considerably less than we do here. So what's going on? As Matt says, the basic answer is that U.S. doctors operate as a cartel. They artificially limit their own ranks, which drives up their compensation."

"If the market were allowed to produce as many doctors as there's demand for, they'd already be getting paid less. Right now they're enjoying the substantial rents that come from squeezing their own supply, and they've fought like lemmings for decades to keep it that way."

Update: Kevin Drum has more today, It's Doctors Who Control the Number of Doctors in America, Not the Government.

2 comments:

karl said...

This is an interesting take, but I think it overlooks a few clear contributing factors. First doctors require a large upfront investment in time and money which will serve to dampen any market based movement. Second, there is certainly a sense that doctors get paid a lot, but I’m not sure I buy it. I know malpractice insurance can take a large chunk of their income. It would be nice to see some data on median net income including amortized educational expenses and deferred income. Finally, there is the issue quality. Letting the market sort out poor doctors means large numbers of people get poor care. It seems appropriate that high standards be in place to weed out these cases before they go into practice.

Howard said...

All true, though the chart compares the number of doctors to other countries, including other rich western countries where there's good quality and presumably good education (though probably socially funded).

We do have high malpractice insurance rates and the GOP does push for tort reform which I'm open to but there are two issues. One, the Dems usually pull out some story about how some patient suffered horribly and got only a few $10,000s in compensation for a lifelong debilitating condition. I don't know what the frequency of these are. Two, all studies I've seen show that tort reform would change overall costs just 1-2% so it's not a big overall issue in our healthcare costs, though it's certainly more in comparison to doctors' salaries.

Certification is supposed to sort out the bad doctors but it's not clear how well it works, particularly here vs other places.

I think the specifics of the article stand. That with more doctors, market forces would bring down salaries and that the industry does seem resistant to them. I know when MA started covering more people one issue we faced was a shortage of primary care physicians. There were waits of 6+ months for a checkup appointment, particularly in the western parts of the state. More insured people meant more people trying to get care. I suspect we'll hit that nationally too if the ACA is successful.