Debunking Myths: Physicians' Incomes Are Too High and They Are the Cause of Rising Health Care Costs

It seems that whenever there is a discussion of health care costs in America, at least one critic pops up – usually more than one – who carps about physician fees, income, earnings, etc., and how they greatly impact rising health care costs. They don’t and it is a false narrative to claim that they do, but critics continue to throw the charges out there in the expectation that some will stick. We hope that this blog will shed some light on the subject and that it will help put an end to the misinformation.

Economist Dean Baker, co-founder of the Center for Economic and Policy Research, is merely the latest critic to slam physicians for their role in rising health care costs. In a recent article in Politico, he is quoted as claiming that “Physicians are being paid twice as much on average as physicians in other wealthy countries,” and goes on further to say that “getting U.S. health care costs down is a Herculean task; getting doctors’ pay in line is a big part of the solution. It’s time,” he opines, “to break up the doctor cartel.” ‘Doctors’cartel?’ Is he joking? If his comments weren’t so absurd, they might be amusing. Let’s look at the facts.

Several years ago, Princeton Professor Uwe Reinhardt (who sadly passed away several weeks ago) wrote an article for the New York Times on the subject of rising health care costs in America. He was surprised when several readers criticized him for not even mentioning physician incomes as one of the salient factors. Reinhardt, also an economist who earned his health care bona fides long ago, responded to the critics with an extensive letter to the editor. His perspective is quite compelling. He began by suggesting that instead of comparing “the incomes of American physicians with those earned by doctors in other countries, a more relevant benchmark, however, would seem to be the earnings of the American talent pool from which American doctors must be recruited.” As he points out, “any college student bright enough to get into medical school surely will be able to land a high-paying job on Wall Street. The obverse is not necessarily true. Against that benchmark,” Professor Reinhardt went on to say, “every American doctor can be said to be sorely underpaid. Furthermore,” he continues, “cutting doctors’ take-home pay would not really solve the health care cost crisis.” What a ludicrous idea!

The total amount Americans pay their physicians, as Reinhardt reminds us, represents only about 20 percent of total national health spending. Of this total, close to half (editor’s note: higher now), is absorbed by physician practice expenses, including “malpractice premiums, but excluding the amortization of college and medical school debt. These debt figures become all that more important when one considers that in many countries – but not in the U.S. – medical education is free. And consider,” he adds, “that doctors in the U.S. train longer as well with four years of college, four years of medical school, three to seven years spent in residencies and even followed by an additional three years in fellowships.” Even if all physicians took a pay cut of 20 percent, the savings would amount to a minuscule two percent of our health bill. Mr. Baker and other critics are clearly barking up the wrong tree. Reinhardt finished his letter by saying that “such a policy (20 percent cut) would leave an understandably wholly demoralized medical profession to which we so often look to save our lives.”

There are also several other relevant issues to consider as well. Add in the challenge of practicing medicine in the most litigious country on the planet, as physician writer Carolyn McClanahan has noted previously in Forbes, and the resulting psychological angst and demands for perfection need also to be weighed when considering physician compensation.


Best-selling author Malcolm Gladwell’s recent comments in Forbes bear repeating. When interviewed by Robert Pearl, MD, Gladwell said the following: “I don’t understand, given the constraints physicians have in doing their jobs and the paperwork demanded of them, why people want to be physicians. I think we have made it very, very difficult for them to perform their job. I think that’s a shame. My principal concern is the amount of time and attention spent worrying about the business side. You don’t train someone for all those years of medical school and residency, particularly people who want to help others optimize their physical and psychological health, and then have them run a claims processing operation for insurance companies.”

But what about Dean Baker’s claim that U.S. physicians were being paid twice as much on average as their counterparts in other wealthy countries? As mentioned in health writer Peter Laakman’s interesting recent article in National Review, “a tremendous amount of misinformation permeates the debate over U.S. health care. U.S. physician pay is not particularly high when compared with that of those in other countries, nor is it particularly influential as a driver of national health care expenditures.”

Investor’s Business Daily had a somewhat different take on the health care costs issue. “Health spending in the U.S. accounts for more than 17 percent of GDP. Among industrialized nations, the next closest is Sweden, where health care spending is 12 percent of the economy. In Canada, health care spending is less than 11 percent of GDP. So what? The U.S. is a very rich country, and as a result, Americans spend more on just about everything than any other country in the world. The U.S.,” they conclude, “spends more per capita on advertising, more on national defense, more on information and communications and medical technology, and more on leisure activities. Furthermore, the country also gives far more on average to charity than any other nation in the world. Does that mean the U.S. spends too much on charity?”

We don’t know how many readers remember the deeply respected and revered Pulitzer Prize winning Chicago columnist, Mike Royko, who wrote for the Chicago Sun-Times and the Chicago Tribune back in the 1970s, 80s and 90s. Those who recall his name and work remember him as a no-nonsense, tough but fair and probing reporter. Politicians cringed at the very mention of his name, especially if he was doing a story on them. When asked about a poll critical of physician earnings in April of 1993, he did not mince any words-in typical Royko style. In a column entitled: “Doctors’ Pay Poll Reflects a Sick Society,” he addressed those who felt that physicians were being paid too much. “Maybe the poll questions should have been phrased this way,” he began: “How much should a person earn if he or she must, (a) get excellent grades and a fine educational foundation in high school in order to, (b) be accepted by a good college and spend four years taking courses heavy in math, physics, chemistry and other lab work and maintain a 3.5 average or better, and, (c) spend four more years in grinding study in medical school, with the 3rd and 4th years in clinical training, working 80 to 100 hours a week and, (d) put in another three to ten years of post-graduate training, depending on your specialty and, (e) maybe wind up $100,000 in debt (editor’s note: more than $166,000 today) and, (f) then work an average of 60 hours a week, with many family doctors putting in 70 hours or more until they retire or fall over?”

‘’As you have probably guessed by now,” the venerable Royko continued, “ I have considerably more respect for doctors than all of the lawyers and insurance executives called together to remake America’s health care system.” He closed with one other pertinent comment: “Of course doctors are well compensated. They should be. Americans live longer than ever. But who is responsible for our longevity-lawyers, Congress, or the guy flipping burgers?” His final words were vintage Royko. “Let us talk about medical care and one of the biggest problems we have. That problem is you, my fellow Americans. Yes, you, eating too much and eating the wrong foods; many of you guzzling too much hooch; still puffing away; getting your daily exercise by lumbering from the fridge to the microwave to the couch; doing dope; filling the big-city emergency rooms with gunshot victims; engaging in unsafe sex and catching a deadly disease while blaming the world for not finding a cure. You and your habits, not the doctors, are the single biggest health problem in the country. If anything,” he concluded, “it is amazing that the docs keep you alive as long as they do.” Harsh words perhaps, but he uttered them 24 years ago, and there is still some truth in them. We are only surprised that Mr. Royko didn’t include one of Ben Franklin’s favorite sayings when responding to those critics, one which would have been appropriate for the occasion: “We are all born ignorant, but one must work hard to remain stupid.”

With respect to the health of our citizens and the costs involved, Peter Laakman also said that “factors such as genetics, behaviors, lifestyle and social environment (disparities, etc.) explain far more about American health outcomes when compared to other countries than any other factors. And relative to other highly developed countries, the U.S. has higher rates of obesity and diabetes, car accidents, homicides, lack of exercise, drug abuse, poverty and more.” These unfortunate truths also greatly impact our overall health care costs.

Those are the facts. Can we finally put to rest the inherently false charges and accusations that physicians’ earnings are too high and responsible for rising health care costs and, along with them, the phony comparisons of countries and other bogus misinformation?

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