RSS Feed MenuHealthcare reform will lead to a greater demand for medical services. Rising practice costs for doctors though may lead to a shortage of physicians. To keep doctors in business, the government may have to consider new subsidies for physicians. The price tag: at least $38 billion.
Two forces could work to push doctors out of business. The first is the dramatic rise in the cost of maintaining a medical practice. Doctors begin their practice with large medical schools loans to pay back. According to the Association of American Medical Colleges (AAMC), the average educational debt of indebted graduates of the class of 2008 is $154,000 and 87% of graduates have debt. The average debt of graduating medical students increased in 2008 by 11 percent over the previous year. This equals an overall cost of some $240,000 over 20 years of loan payoff.
The second force which could push physicians out of business is the large cost of running a practice. For example, a general internist in Florida, can expect to pay a malpractice premium of $54,000. This is in addition to paying for heat, electricity, staff salaries and other costs at their practice. This means that a doctor could have a $74,000 per year bill even before they have seen a single patient as yet. Making the problem worse, physician incomes have not risen proportionately with the increase in costs. The AMA has documented that physician income is relatively flat in constant dollars.
One solution is to provide government subsidies to keep doctors in business. In France, for example, medical school is free, and students are actually paid a small stipend during their training. Thereafter, they are continue to be paid during their clinical training. Malpractice insurance is minimal and the French further subsidize physicians by giving them a 2/3rds rebate on the huge 40% tax rate the French pay for their social services including healthcare.
To do this in the United States though would require a large investment of at least $38 billion. Medical school tuition is about $20,000 per year in public medical schools and $40,000 per year in private schools. Since there are 67,000 medical students, free tuition would cost approximately $2 billion per year or $8 billion for every new class of medical students to become part of our physician complement. In addition, a malpractice bill of approximately $40,000 per year for each of the 900,000 physicians in the U.S. would add another $36 billion or so per year to the bill. And that’s before we factor in the cost of a nice tax rebate to match the French approach.
These expenditures though will be required if we expect young physicians to keep working as salaries drop. In France, for example, a primary care physician’s income is roughly 1/3rd that of a similar physician in the U.S. The Obama plan is supposed to control healthcare costs by reducing payments to providers. This will have to mean that doctors and hospitals have lower revenue since cutting back Medicare Advantage Plans alone will not achieve the $500 billion goal previously announced for Medicare reductions.
Subsidies will be necessary to convince medical students to pursue specialties like primary care and work in underserved regions of the country. Also, if tort reform and other malpractice reforms and unabated educational expenses are not addressed, we may have to add another $380 billion to the nation’s healthcare bill in the next decade to cover physicians for their education and malpractice costs. If these measures are not taken, physicians may no longer be able to afford to care for us.
hormelmeatco // Sep 21, 2009 at 3:10 pm
Why no mention of the extremely perverse incentives in billing systems and fee-for-service that reward procedure-heavy specialties more than primary care, whose work is not as easily quantifiable?
Even though $200,000+ in educational debt may be wiped out for medical students who pursue primary care, why would they take even that offer when they can make that much more money EVERY YEAR for the rest of their working lives as specialists instead of PCPs?
Right after employer-provided health insurance, fee-for-service is the next thing that needs to die in order for healthcare reform to really be successful.
liv&win // Sep 21, 2009 at 3:20 pm
I think you establish subsidies for only those people who go into primary care, and you subsidize the cost of the education only as long as (a) their is a cost to subsidize and (b) as long as the health care worker works in primary care settings. This is for not just doctors, but nurses, medical assistants, chiropracters, mental health (MFWs), pharmacists, etc.
The point is, we need to have a carrot and stick approach to getting more care providers in the primary care settings.
I think to further that, doctors should have the right to refuse service to anyone who doesn’t sign an arbitration agreement in case of medical malpractice where the outcomes are transparent to everyone (reverse malpractice reform).