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Pay For U.S. Doctors Is Tops

Do U.S. doctors make so much in the U.S. because we pay so much to hedge fund managers?

The competition for top intellectual talent is one possible explanation for a sure-to-be-controversial study published in the latest issue of the policy journal Health Affairs.

The analysis from researchers at Columbia University’s Mailman School of Public Health looked at why the U.S. spends so much more on physician care than Australia, Canada, France, Germany, and the U.K. do. And the differences are eye-popping.

In 2008, the U.S. spent roughly $1,600 per person on physician care; the rest of the combined nations that belong to the Organization for Economic Cooperation and Development, just over $300. That’s more than 80 percent less.

And, yes, that higher spending translates into higher incomes for doctors. U.S. primary care doctors, although frequently considered underpaid, nonetheless earned more on average ($186,582 a year, after practice expenses, but before taxes) than primary care doctors in any of the other countries studied. Orthopedic surgeons, the specialists examined in the study, also earned the most in the U.S., with an average salary of $442,450, well above second place U.K. orthopods, at $324,138.

One of the biggest reasons, concluded authors Miriam Laugesen and Sherry Glied, is that doctors in the U.S. get paid more for each service than doctors in those other countries. That’s not as obvious as it seems; it rules out the possibility that doctors in the U.S. perform more services (which they apparently do not) or differences in the supply of physicians.

And the main reason for the price differential, it turns out, is that doctors in the U.S.get more of their payments from private rather than public insurers. Private insurers in the U.S. aren’t the hardest bargainers around, it turns out.

Now before you point out that doctors in the U.S. have to pay for their own educations, while doctors in Europe and elsewhere generally don’t, the researchers took that into account. And while the educational debt close the gap somewhat, “it doesn’t seem to explain those differences,” Laugesen told Shots.

Nor does the cost of malpractice insurance, since the researchers’ calculations counted that as a practice expense, building it into the comparisons.

So what might? Let’s go back to the hedge fund manager concept for a moment. When it comes to human capital, the researchers found:

[T]he medical care delivery sector cannot be fully separated from the rest of the economy: Physicians everywhere are drawn from the peak of the educational distribution, and their earnings reflect the cost of drawing highly skilled people to the profession in an economy where the rewards for skilled individuals are higher than elsewhere.

So does that mean that the only way to pay doctors less is to lower salaries for the top-paid people in society? Laugesen said that question was outside the scope of this research.

But primary care doctors in particular may want to watch over their shoulders. The American Academy of Physician Assistants reported yesterday that their ranks surged to an all-time high in 2010 of 83,466. That’s a doubling over the past decade.

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Cost and Quality Health Industry