Is a Future Look Predicated on the Past?
By Dr. Brian J. Knabe; CFP® CMP™
By Dr. David Edward Marcinko; MBA CMP™
By Prof. Hope Rachel Hetico; RN, MHA CPHQ CMP™
www.BusinessofMedicalPractice.com
With the passage of healthcare reform legislation, officially known as the Patient Protection and Affordable Care Act of 2010, many questions remain regarding its effect upon physicians’ livelihood.
Undoubtedly this bill moves the healthcare system several steps closer to a socialized model, but the effects on physicians’ salaries and compensation models are far from clear.
Other Countries
One way to see the effect that this shift may have on compensation is to look to other countries, many of which already have a more socialized system in place.
According to the CRS Report for Congress, US Health Care Spending: Comparison with Other OECD Countries http://assets.opencrs.com/rpts/RL34175_20070917.pdf) US specialists rank near the top in compensation compared to these other countries, trailing the Netherlands and Australia. The average specialist in the US made $230,000 in this survey. The comparable salary in Canada is $161,000, $150,000 in the UK, and $253,000 in the Netherlands. Generalists in the US are at the top in terms of compensation with an average of $161,000. This compares to $107,000 in Canada, $118,000 in the UK, and $117,000 in the Netherlands.
Inflation Adjustments
Another indicator of physician salary trends is the change in compensation adjusted for inflation. According to the American Medical Association, the inflation-adjusted income for the average patient care physician declined from $180,930 to $168,122 from 1995 to 2003, a 7% decrease. And, the inflation adjusted decrease is more substantial given the low interest rate environment thru 2010, and going forward.
Physician Net Income Chart
| |
Average net income |
| |
1995 |
2003 |
Decrease |
| All patient care physicians |
$180,930 |
$168,122 |
7% |
| Primary care physicians |
$135,036 |
$121,262 |
10% |
| Medical specialists |
$178,840 |
$175,011 |
2% |
| Surgical specialists |
$245,162 |
$224,998 |
8% |
Source: http://www.ama-assn.org/amednews/site/free/prsc0724.htm
Given these trends, as well as the fact that an increasing percentage of healthcare payments are coming from dwindling government sources, it is likely that physician salaries will decline as “healthcare reform” legislation is implemented. In fact, it is likely that this trend will accelerate. A 15% to 25% inflation-adjusted decline in salaries over the next decade is a reasonable prediction.
Assessment
It is also important to note that the level of student debt in the US continues to rise, while college and medical education are usually subsidized in other countries. Many foreign physicians graduate with no student loan debt. The ratio of debt level to salary in the US continues to become more onerous for new physicians.
Conclusion
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Filed under: "Doctors Only", Health Economics | Tagged: Brian J. Knabe, Business of Medical Practice, David Edward Marcinko, doctor income, Hope Rachel Hetico, physician compensation, physician net income, physician salary, US Health Care Spending, www.BusinessofMedicalPractice.com | 8 Comments »
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