The underlying cause of our health care spending problems is the unit cost of services and products, not utilization, although there are areas in which utilization could be reduced without impacting quality. We pay our physicians a lot of money, and I have less of a problem with that than with high hospital spending and excessive executive compensation at nominally non-profit hospital systems. But there are specialist physicians who are so highly compensated that it could probably be scaled back. A new National Bureau of Economic Research paper looks at international comparisons of physician compensation, using Sweden, the Netherlands and Canada. (NBER Paper)
The authors’ method is to compare where physicians rank among all occupations in compensation. In the US, 84% of doctors are in the top ten percent of income, compared to about 60% in the other three countries. And 26% of US physicians are in the top one percent, with much smaller percents in the other countries. US doctors in that top 1% earn an average of one million dollars a year, compared to about $500,000 in Canada and under $400,000 in Sweden and the Netherlands. Lower down in the top decile of income, US doctors are earning about twice as much as their counterparts.
The authors make some truly bizarre point about relative position in the overall income distribution across professions being important and then we don’t look like our physicians are “overpaid”. But this is irrelevant to the question of why US health spending is so high. It is high in some part because we pay our doctors, particularly specialists, a very, very high salary. They might deserve it and be worth it, but it is a lot of money. The authors further suggest that while we might save some money by reducing physician pay, fewer people might then choose to become doctors. That indicates that money is what motivates doctors, and I am not sure that is either true or good.
