Unformatted text preview: Physician Training, Incomes Physician Training, Incomes and Licensing
Class 30 Health Economics Loyola University Chicago April 8, 2011 Lecture Outline Lecture Outline Supply of Physicians
Med schools Incomes & ROI Labor supply Licensure Graduates of Foreign and U.S. Medical Schools Graduates of Foreign and U.S. Medical Schools in Residency Programs in the United States Applicants vs. Slots for Applicants vs. Slots for M.D.s Current financial incentives for becoming Current financial incentives for becoming a physician # med school applicants peaked at 47,000 for 1996–97, but fell to 33,625 by 2002–03, below the 1982–83 level of 35,720. 2.3 applicants for each medschool spot in 2010, down from 2.7 in 1996–1997 (and 3.4 per spot in 1950!) Rebounded to 42,742 in 2010 (for 18,665 spots) Factors influence # and quality of aspiring physicians Very low dropout rates (16,838 MD grads in 2010) Medical students now graduate with an average educational debt of $150,000 ($180k for private schools), up from $80,462 in 1997 (and large opportunity cost during med school) Number of college graduates Attractiveness of medicine as a career as compared with other opportunities (Law, business, etc.) Subsidized tuition: tuition and fees estimated to cover 14% of costs of medical education. Shifts demand to right but slots regulated. Over past 20 years, median tuition has increased by 165% in private schools and 312% in public schools. Growth in Med School Tuition Growth in Med School Tuition Median tuition now $47,000/year for private and $29,000 public Growing Real Debt for Med School Growing Real Debt for Med School # Positions 1,000 2,000 3,000 4,000 5,000 6,000 0 http://www.nrmp.org/data/advancedatatables2009.pdf Residency Matches for 2009 % of Matches from U.S. Med School Seniors Fa m il In y M te ed rn ici al M ne ed ic Pa ine th ol Ps ogy yc hi Ne atry ur ol o Pe gy di at ric s O B/ G Em YN er S ge nc urg er y y M An ed ici es n th es e P Ra las iolo t gy di ol ic S o ur Ne gy ge ur -Di ag ry ol og n O ica ost rth op l S ic ur ae ge di r c Su y rg er y 14,500 Seniors from U.S. Med Schools (1/2 of Applicants, 2/3 of Matches) 0 % of Matches from current U.S. grads 10 20 30 40 50 60 70 80 90 100 Physician Incomes In 2010, the average pretax income for a primary care physician income was $200,000. Surgeons, anesthesiologists, and radiologists made considerably more (perhaps double). General practitioners and pediatricians were at the lower end of the scale, with obstetricians earning slightly more. Discrepancy has more to do with how the services of a specialty are treated by insurance than with the work or training involved. Certain specialists have more “billable events,” so they receive greater payments. Percentage of Positions Filled With US Seniors vs Mean Overall Income By Specialty Ebell, M. H. JAMA 2008;300:1131-1132 Return on Investment For physicians entering "procedural specialties" such as gastroenterology, cardiology, and ophthalmology, ROI for medical education is similar to that for an investment in law school and somewhat greater than that for an MBA. For primary care physicians, the return on investment is often below the return for law, business, procedural medicine, or dentistry Makes sense in the light of the low share of MD grads entering primary care.
Market failure? Calculating Internal Rate of Return Consider four years of medical school (tuition of $35k), three year residency (pay of $25k) and then $150k for PCP job relative to job that pays $40k ($45k after 4 years, $50k after 7 years)
40 Cost = (35 + 40) + (35 + 40) (35 + 40) (35 + 40) (45 − 25) (45 − 25) (45 − 25) + + + + + 2 3 4 5 (1 + r ) (1 + r ) (1 + r ) (1 + r ) (1 + r ) (1 + r ) 6 (150 − 50) Benefit = ∑ (1 + r ) t t =8 Internal Rate of Return is r for Cost = Benefit For this example, r = 15.3% Ph.D.s? Negative return on investment likely Difficulty in Calculating IRR Relevant income for opportunity cost calculation? Selection bias (ability) in which M.D.’s become surgeons vs. primary care Nonmonetary attributes of job Hours worked (Quality of Life) J.D. vs. MBA vs. M.D.? Compare to those who enter labor market after college Two more years of residency to become specialist vs. primary care? Physician Income Incentives Physicians often face a unique situation with regard to the incentive to work extra hours. Normally, the higher a person’s pay is per hour, the more willing the person is to work more hours. For many physicians, however, the more lucrative each hour of practice is and the more hours the physician puts in, the more each hour of foregone leisure is worth. In this case, the supply curve is “backward bending,” meaning that with additional pay, the physician will choose to work fewer hours. Physicians’ Labor Supply Curve If the income effect dominates, a rise in the wage rate can actually cause the individual labor supply curve to slope downward!!! Barriers to Entry into M.D. Market Barriers to Entry into M.D. Market State license required to practice medicine Education Requirements Certification for certain types of care, incl. board certification Fees for license by endorsement (to practice in multiple states) range from $1,108 in California to $20 in Pennsylvania with an average of $339. Must attend accredited medical school (126 M.D. schools, 26 for D.O.) Emphasis on process rather than knowledge. Limited slots in med schools (1617k slots in U.S. MD programs annually) D.O. programs growing to substitute and serve primary care 4 years undergraduate, 4 years of Medical School Minimum 3 year residency in most cases (with many much longer, incl. fellowships) Why, if issue is quality? Should we reexamine competence? How to update knowledge base? Esp. where demand increased in rural areas Length of training time Older physicians often grandfathered in when new standards proposed Pattern of substitution toward Physician Assistants Licensing of Physicians Licensing of Physicians Quality control measure, preventing incompetent doctors from practicing medicine Serves as barrier to entry into field Signal of safety to patients But increases demand for licensed services Prevents other closely allied professions (chiropractors, nurses, midwives, etc.) from offering services and products to compete with medical doctors Strength determined by nature of care provided (risk, information asymmetry, consumer choice) Tied to physician, not group/hospital Benefits from quality control offset by monopoly rents due to entry barrier? Rarely have license revocation Why so rare compared to lawyers disbarred? ...
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This note was uploaded on 04/14/2011 for the course ECON 329 taught by Professor Classen during the Spring '11 term at Loyola Chicago.
- Spring '11