Wednesday, August 08, 2007


This article is from last weeks New York Times' Week in Review: (insert here long http address instead of a simple link which i have added for my friend... he's hopeless, he works in a cave with dead bodies... you may also click the title of the post for the NYT link,911doc)...(Yes, I'm retarded and can't figure out how to put in a link without copying the entire address. So no blog-snob comments. And f#%k off.)

This article caught my eye because it was about health care, sure, but what really pulled me in was that the editor decided to 'tease' the article on the front of the Review by headlining: "Are doctors paid too much?" The assumption you may logically make from this teaser is that the NYT, in its infinite wisdom, thinks that we are, in fact, overpaid.

I know I will get no sympathy from the masses when it comes to money - when you make over 100,000$ per year, Joe-six-pack loses interest in your whining. You have also heard ad nauseam the arguments for why we should be well paid (years of training, high loans, importance of / life changing effects of professional decisions, bad hours, etc...). So, I want to forget all of this and ask an emotionally neutral question: as a pure economic decision are doctors, in fact, paid too much?

The way I approach this is in the context of two concepts: present value of future earnings and opportunity cost. You may now wake up.

Here's an actual example: My niece is 26 years old. She graduated from an elite university with good grades - a good comparison for your typical med student. She has been working as a consultant for 4 years. Without a graduate degree, she will likely increase her earnings to about 150,000$ / yr. within 3 years. If she works to age 60, her lifetime earnings will be about 500,000$ (appx. total earnings to age 30) + (150,000 x 30 = 4,500,000$) = 5 million dollars. This number actually approximates a discounted present value as I have assumed she will get no raise after age 30.

Here's another example: I graduated from an elite university at age 23 with good grades and decided to go to medical school. Let's assume my niece and I both had full scholarships and came out of college with no debt. I did two years of research for no money to increase my competitiveness and get into a good med school (pretty typical these days). Medical school was 4 years at a total cost of about 50,000$ / year = 200,000$. Residency was 6 years. My first year I earned 30,000$; my 6th year about 50,000$ (total ~ 240,000$). Discounting these dollars makes them about equal so here I am, age 35, at total lifetime earnings of ZERO (it's actually negative because of deferred loans but let's not go there). Let's say my salary from age 40 on is about 250,000$ (this is well above a typical primary care doc's salary and a bit above average for specialists). Let's do the math: (~1,000,000$ age 35-40) + (20 x 250,000$ age 40-60) = 6 million dollars. Of note, my salary has DECREASED in the past 5 years by 30%, so this number is likely very high when it comes to discounting to present value.

What would you choose? Go from age 23-35 with a good standard of living and by 35 have over 1 million $ in earnings or live on the edge financially to age 35 and have no earnings. Obviously an easy decision. Now if you are a primary care doc, your lifetime earnings will likely NEVER get to 5 million $. Again, an obviously easy financial decision. So, like in the above example, would a high earning specialist trade an extra 1 million in lifetime earnings for a more financially secure life while under 40? Maybe. But, guess what, this is a bad way to look at it. The consultant at age 35 probably has investments, a house with equity and other financial vehicles that have been appreciating in value over 12 years, while the doc has debt that is increasing over this time. So now, that extra million of lifetime earning discounted to the present plus the opportunity cost of 12 years of investment, roughly cancels out the extra earnings!!!

I hope this argument has been whine-free. The bottom line: for a person with the typical med-student type qualifications, upon graduation from college, medicine is likely a neutral (at best) financial decision, and likely a poor one for non-specialists.

As the New York Times asks: Do doctors make too much? As a purely economic decision, I would argue the answer is "no". Interestingly, they sort of answer their own question in a different way in the article, and I quote: "Primary care doctors and pediatricians, who rarely perform complex procedures, make less than specialists. They are attracting a declining percentage of medical students, and some states are facing a shortage of primary care doctors."

At some financial break point, which has clearly been reached in the primary care specialities, people will decide it's not worth it to go to med school. Substitute in the above quote the words "shortage of primary care doctors" with "shortage of all doctors" and you should get the idea.


  1. People who choose to become doctors are special people. Not special people as in they ride the short bus, but seriously, extremely special people in my heart. I believe good doctors should receive whatever they want in terms of compensation because without the team of awesome doctors that took care of me, I would be dead. I can't imagine what price I would say is too much for the skill you posess. Too bad I am not in charge, right?

    For the link insertion, if you are using blogger, there is a button you can press at the top when composing that inserts the link for you. It took me forever to find it, but it is there and you don't need to know anything about html to use it.

  2. RG: Always love to hear from you. Thanks for the vote of confidence in this profession.

    I agree with you completely. The argument I'm trying to make in this post, however, is that, taking away all of the emotional issues surrounding doctoring, as a purely economic decision, being a doctor is a self-sacrifice. When the NYTimes implies that we make too much money, I think a reasonable, dispassionate argument is that this assumption is wrong.

    As for the link thing, it's hopeless.

  3. Once again, GI Bill(and other kickers) + HPSP + 15 more years Active duty= full retirement, 0 medschool debt, completed residency (@ officers pay scale)

    I honestly dont think i could afford to do it any other way. Im 25 now, working on my undergrad, trying to sock away pennies and nickels for some sort of nest egg (not exactly happening, go figure) Sometime, id like to have a nice wedding, buy a house, raise some kids... sheesh.. No way i could afford it any other way.

    Doc H, USN

  4. a close friend of mine just finished paying of his medical school loans. that's ten years after his graduation. the most compelling point you make, ETOTHEIPI, is the devilish nature of compounding interest... when it's working for you it's great, when it's working against you it's horrible. one of my residency classmates had paid for undergraduate school with loans, and medical school with loans, after her four year residency at less than minimum wage she was thirty years old and $300,000 in debt. welcome to the real world, doctor.

    finally, when i need my quadruple bypass, or one of my family members needs a tricky neurosurgical procedure i want the best-trained, most well-rested, most well-payed, happiest surgeon in that OR weilding the scalpel. crazy huh? as for my financial advisor or insurance agent or veterinarian or lawyer or (fill in the blank here) they just have to be good.

  5. I left another comment earlier, but it seems not to be here. I said something about my emotions about doctors getting in the way for my previous comment, and that I completely agree that becoming a doctor is a huge financial sacrifice. I did understand your point, I just get so emotional about it all that I forgot to comment on that part.

    I wrote something about the fact that while you all are paying back all your debt or are still in school, I am putting probably the same amount away for each of my kids to use for college. We now have almost 4 years of paid tuition for each of our kids (I think we are still working on paying for our 4th surprise baby's eventual tuition, but I know the older 3 are set). So, in the long run, financially it is probably better sense to NOT become a doctor. I am extremely grateful that even though it doesn't make much financial sense, people still do it. I felt this way even before all my medical stuff came up, but am even more appreciative of it now. You are all still grossly underpaid for what you do, and the sacrifices you make. Maybe I'll steer my kids towards a career in professional sports.

  6. I'll never hit even 2 million, and I'm OK with that. 50K/year is plenty to keep me happy. My stress level is SO much lower than 911's. He's gonna have a stroke before too much longer. Of course, Shadowfax isn't helping....

  7. luv ya rad girl, and, as always you triggered another thought from me.

    you mention professional athletes. a lot of people get all upset about their salries but i don't. they are the best of the best and they make what they make because IT IS WHAT THEY ARE WORTH.

    i'm speaking from a business perspective. the owner's of teams, the sponsors of the athlete's, and the networks (both television and otherwise) collect huge revenues on their backs. therefore, the athletes themselves make what the market will bear. it may seem ridiculous to many that someone can make a few million a year for carrying a football through a forest of huge, freakishly strong, angry men, but what they do benefits a whole bunch of people whether it be financially or through the pleaseure they bring to millions of fans.

    what we do not have in medicine is anything approaching this. i did not go into medicine to get rich. you either believe this or not so if you don't you can quit reading here. however, i most certainly did not go into medicine to be brought under the thumb of various agencies of the government or ad-hoc committees whose job, it seems, is to see how hard they can squeeze me.

    call me crazy, but i believe that, for literally saving people's lives, probably to the tune of one or two people a week... people who would die if i wasn't there at that very moment, i deserve to make what the market will bear.

    dead horse time... we do not have a market. we have a huge shell game. when the game's rules can be changed by legislative fiat, ARE REGULARLY CHANGED just this way, and my paycheck suffers... well, i think i'll take my ball and go home. and if you think that just anyone can do this then you are living in a dream world.

    medical students and prospective medical students are voting with their feet. hugs and warm fuzzies may be enough motivation for some for the sacrifice that every single physician must make to acheive board certification, but it is not enough for most.

    the real crisis will come, and has already arrived where i work, when we can't find enought skilled surgeons or specialty physicians to do procedures that NO ONE ELSE CAN DO. to wit, vascular surgery fellowships filled 75% of their slots this year when ten years ago you had to walk on water to get one. cardio-thoracic surgery slots, also as rare as hen's teeth ten years ago, can be had by someone graduating at the bottom of their medical school or residency class now.

    so go ahead and keep cutting our pay, go ahead and demonize physicians as being money-grubbing assholes, just don't complain when you die on the operating table ten years from now with a hack surgeon cutting through your abdominal aorta in an otherwise "routine" procedure. meanwhile, my family and i will be fine as we know the good docs and can get to them. the public will get its free health care (dead horse again) and it will be worth exactly what they pay for it.

  8. If you want the mad cash without tons of debt, you need the business degree (MBA).

    End of story.


  9. don't care about mad cash, was actually in law school and made it almost halfway through... "you can do anything with a law degree" everone said. yeah, except practice medicine. it was in my gut. to hell with the money, it is merely a symptom of the larger problem which is a moronic tendency of our elected leaders AND the people who elect them to redistribute resources. as has been shown by the impressive line-up of failed communist and socialist economies, the people who do the hard work and the skilled work (you Monkey Girl, you Nurse K, and me and ETOTHEIPI and Schrodinger's Cat and, swallow hard, Shadowfax) have a finite amount of goodwill.

    and monkey girl, i'm glad you would be happy with the salary you describe. would you be happy with a thousand dollars a year less? two thousand? if so, can i have it?

  10. and, swallow hard, Shadowfax...

    Shadowfax said straight up that he didn't mind paying more taxes because he could afford it.

    Why wait for the democrats to be elected in 2008 and the inevitable higher taxes?

    Paypal button, baby. Hit that, Shadow. I'm waiting. Show your support for keeping less of your income right now. I'm totally all for voluntary redistribution of wealth.

    I'm not even interested in hearing about people who wish to spend their time bitching about how much doctors or executives or athletes make. It's all just an overall criticism on the capitalist system. If you make more than the middle class, someone is going to call you a money-grubbing asshole, whether you saved a life today or not.

    And yes, at some point if the pay isn't adequate, the ultra-smart will decide that medicine is a foolish choice and go to law school instead. If you haven't read it, The Tipping Point describes this concept in general at length. I have no attention span for books, and I was glued to that one.

  11. I'm enjoying the love-fest here and completely agree with just about everything written thus far. That's the problem - let's get some pinko hippies in on the discussion and make it interesting. Maybe they have abandoned this blog because we make Jean-Marie Le Pen look like Ségolène Royal.

    God I hate the french.

  12. Do doctors make too much money? For another blog on this subject check out Cliff notes version...NO WE DON'T.

  13. toni:
    I'm amazed you are from San Francisco. You sound way too reasonable.

    Also, I never EVER make generalizations.

  14. as a pure economic decision are doctors, in fact, paid too much?

    Absolutely not. Let the free market rule rather than allowing the insurance companies to create artificial baselines in which few docs can make a realistic living.

  15. My daughter just graduated from residency. She went to undergraduate school essentially for free because of scholorships. She attended an accelerated medical school for 4 years and came out with a loan or what I really call a "morgage" for about $140,000. She earned between $30 and $45K/year throughout her 3 years of residency which she paid her car, insurance, utilities and rent with, along with a few luxuries such as music CD's. She wasn't frivilous with her money and worried constantly how she would be able to pay rent or a mortgage loan along with her student loan which would be approximately $800 per month.

    Now, take into consideration that if she were to start her own practice, hire her own staff and offer them any sort of health care insurance, she's essentially back to square one.

    Heck, if medical school cost any more, my daughter would have to move back in with me and I'd have to support her for the first few years she started her practice.

    For the things they do, the knowledge they are forced to keep up with along with the threat of malpractice, I don't think they get paid nearly enough.

    But, that's just my opinion....

  16. I think doctors make too much money, so they need to spread it around. Yeah, that's right, and they can start by sending it all to me:-)

    Come on, doctors earn every penny that they make. They work their butts off in school, and they have HUGE student loans to pay off, and let's not forget about the cost of the freakin' malpractice insurance. That stuff doesn't come cheap.

  17. Well, that sucks. I'm an RN, not nearly as educated...but proud to say I now pay in taxes what I used to take home. I'm satisfied with my earnings. I think doc's need more pay because they put up with bull sh** from patients, us the RN's calling all night (our hands are tied at just takes a doc to do the ordering and to assess when a higher level of care is needed!). We depend on your BRAINS to do our JOBS. By the time you guys pay your bills, insurance, and the law suits from the jerks that think no body should ever die...even if they are 95 yrs old and have smoked for 75 years! well, I'm surpised you make anything at all.

  18. I'm surpised you make anything at all."
    It's not just the docs. Try being a publisher in California. They enjoy 60% of our salary. Sure wish they knew how to spend more wisely. Then again, I mutter, "Who is John Galt?" on a daily basis.

  19. Hmmm...a little late to the game, here, but did the NY Slimes print the salaries of their staff? I wonder who makes more(and earlier in life--good point, BTW), one of their editors or a doctor.

  20. I did a paper in a health economics class on the rate of return on medical education. The return on getting an MD and making 150K per year was about 25%, being an MBA, JD, or Dentist was 35%+. The schooling and lost income are very significant. Although, these days, those MBA's are not doing too well -- unless they got bailed out on wall street.