LMS President’s Message: Average Physician Salary in the U.S. – a Misleading Metric
By Lee Dossett, MD
Earlier this month an article in the Washington Post created a lot of commentary and controversy in the physician world online. The title alone “The average doctor in the U.S. makes $350,000 a year. Why?” seems to imply physicians are over compensated and is meant to make readers and medical professionals alike click to read. I think it is worthwhile to examine the article because it touches on so much of what makes up our world day to day. Things like student loan debt, grueling residencies, bloat in the US healthcare system, and physician burnout all come into play as we think about if we truly earn our salaries. I will avoid giving my opinion, but I encourage everyone to read the article and form your own as a thought exercise.
The author references data from an economics paper that analyzed physician tax returns from nearly 1 million doctors over 13 years. First and foremost, the figure of the average physician salary of $350,000 is certainly attention-grabbing. However, it’s essential to recognize that this number doesn’t encompass the full range of salaries across various medical specialties, practice settings, and regions. I would be interested in knowing what the median compensation is, as the average may be skewed by higher paying specialties. It does include data on the relative earnings of different specialties, and my biggest takeaway on that data is that primary care does not get paid enough.
The article prompts us to consider the factors contributing to these salaries. Physicians undergo extensive education, training, and often accrue significant debt along the way. The years spent in medical school and residency are not only physically and mentally demanding but also financially burdensome. It quotes 2017 data that says doctors graduate with $246,000 in debt. By adding years and years of education and training, earnings are often delayed until doctors are in their early to mid-thirties. As a result, higher salaries serve to compensate for these sacrifices, significant investments, and the inherent challenges of the medical profession. I think the most relevant piece of data in the whole article is that physician compensation only makes up 8.6% of US healthcare spending. The rest is made up drugs, insurance costs, administrative costs, nursing home care, etc. Healthcare spending could be much less by addressing waste and inefficiency without ever touching doctors’ pay.
Supply and demand appears to play a significant role in salaries as well. The author references an influential 1980 report that suggested the US was on the path towards a physician surplus. As a result, federal spending was cut. Between 1980 to 2004 the number of medical grads was unchanged while the US population rose 29%. Since then, medical school enrollment expanded, and slowly additional residency slots were added. In fact, when in Washington DC earlier this year with the AMA, we advocated for additional federal dollars to expand residency positions. As these students graduate and enter the workforce, it is possible that compensation stagnates or even declines.
However, the article also alludes to potential downsides for society. Physicians from the top schools tend to gravitate to the higher paying specialties. This produces an economic incentive that explains the lack of primary care in the US. This is a good example of the economist term of “homo economincus”, which is the person who behaves in accordance with their own self-interest. Many doctors start down their path with a focus on altruism and sacrifice for the good of public health, but it would be economically irrational to not maximize their earnings. I do think both principles can be held by the same physician and that a high salary bears little correlation to their commitment to society. You can be motivated by both giving high quality care and financial gain.
In conclusion, the article by The Washington Post provides an opportunity for us to engage in meaningful conversations about physician salaries, their underlying complexities, and their implications for healthcare at large. Let us continue to prioritize patient-centered care, ethical principles, and the broader mission of medicine, even as we recognize the importance of fair compensation for the dedication and expertise that our profession demands.