• Physician fees and salaries in the US and other countries

    There’s a new manuscript in Health Affairs on the higher fees paid to US physicians compared to other countries. Let’s work through the abstract:

    Higher health care prices in the United States are a key reason that the nation’s health spending is so much higher than that of other countries.

    Can’t argue with that!

    Our study compared physicians’ fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States. We also compared physicians’ incomes net of practice expenses, differences in financing the cost of medical education, and the relative contribution of payments per physician and of physician supply in the countries’ national spending on physician services.

    Fees are the amount paid to the doctor’s office for a visit or to surgeons for their services. This is different from salaries, of course, as overhead and infrastructure should be bundled in fees.

    Public and private payers paid somewhat higher fees to US primary care physicians for office visits (27 percent more for public, 70 percent more for private) and much higher fees to orthopedic physicians for hip replacements (70 percent more for public, 120 percent more for private) than public and private payers paid these physicians’ counterparts in other countries. US primary care and orthopedic physicians also earned higher incomes ($186,582 and $442,450, respectively) than their foreign counterparts. We conclude that the higher fees, rather than factors such as higher practice costs, volume of services, or tuition expenses, were the main drivers of higher US spending, particularly in orthopedics.

    So, not surprisingly, things cost more in the US.  Way more. This is when I say that this would be OK (potentially) if the outcomes or quality were so much better in the US. They’re not. It would also be explained if the US was doing more per visit, doing more services, or if costs were higher. They’re not. It’s just the fees. This has been shown before.

    I think most news, however, will focus on the salaries of physicians in the US. They’re higher than in other countries:

    A few interesting things here. First of all, while primary care docs in the US make more than all the other countries, the differences aren’t as huge as you might expect. There’s a much larger difference between the salaries of orthopedic surgeons, and between orthopedic surgeons and primary care docs in the US than in other countries. As the authors note, this may be due to the fact that the “share of income received by people in the top 1 percent of the US income distribution far exceeds the corresponding share in the comparison countries.”

    What I find more interesting, though, is the UK. Remember, when you want to panic physicians, tell them we might have something like the NHS in the UK. That’s not a single-payer system (like Medicare), it’s a government run system (like the VA). Yet, physicians make more money in the UK than in all the other countries, even Germany, which has a largely private system. Once again, fear trumps reality.

    I’d also like to caution those who will take these data and assume they can fix the costs of the health care system just with physician salaries. Yes, they’re high, and yes, they should be justified to remain so, but they’re still not the main cause of our health care spending:

    That’s 2006 data, but physician salaries accounted for 7% of spending. We’re not going to cut that to zero, obviously. Even if we make substantial reductions, our health care spending will be enormous, and it won’t “bend the curve”. Solutions need to be holistic. There’s a tendency to look for one bad culprit. That won’t work in health care.

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    • I’m curious, where did you get the data for the pie chart? Does it break down where the other 93% of spending goes?

    • I agree with Rob and would like to know more about the pie diagram. (I’ve read through the other posts and don’t see a clear breakdown).The pie chart above doesn’t seem to comport with Uwe Reinhardt’s *Alfred E. Neuman Cosmic Law of Health Care*: “Every dollar of health spending is someone else’s health-care income.”

      Is it really the case that of all healthcare spending, only 7% of ends up as physician salaries? It seems hard to believe that 93% goes to nurses, hospital administrators, employees at pharmaceutical companies, hospital architects, etc. (It may be the case but at any rate seeing the data would be really helpful. I’ve heard 7% before but have never seen a definitive data source.)

    • The salary estimates seem a bit off to me. I’m in Paris right now at a meeting of OECD workforce planners and can quickly look at some data. For France, general internists, on average, in 2007, made $155,000…there are no “primary care” doctors. But the “medecins generalistes” make about that much in total pay. See:http://santecarolina.blogspot.com/2009/11/how-much-money-do-french-doctors-make.html

    • If 21% of health care dollars are paid for physician services and the average medical office incurs a 60-70% overhead expense, then the 7% comes into focus a little better. Also factor in, that the more you see a physician, the more likely you are to incur non-physician reimbursed expenses. For instance, the average patient that I operate on incurs a tab of about $15K, for an in and out same morning, outpatient procedure. Of which I will generally get $500-$600 with a 90 day global{ meaning that I can charge for nothing but x-rays(about $27 reimbursement x 2-3 sets) for 90 days}. The only other physician expense is anesthesia which will usually see $300-$600. If you look at a bigger surgery with hospitalization and 2-6 months in a rehab center. The surgeon may make $500-$2,500, anesthesia might make $1000 and the rest of $100k worth of medical bills goes to hospital, home PT and rehab center(Nursing, PT admin etc). When patients get medications their physician will probably get about $120 for a complex office visit $65 for an uncomplicated visit and anywhere from $10 to thousands monthly on medications. If patients do not get better they will generally accrue ancillary products such as braces, wheelchairs etc.
      Now add the variability, that I might use 2 screws at $150 a piece or use more specialized hardware that can easily cost $2-4000 (external fixator or plate with 3-5 screws) and you can see your health care dollar is driven by doctors but ends up elsewhere. Convince the doctors to play with less fancy surgical toys and encourage home recovery and you have a better chance to save money, than cutting the surgeons/physicians reimbursement.

    • Just wanted to thank you for a nicely written article. We have relocated to the US recently and I am trying to get my head around the medical system.

      This is the third country we have lived in in the last 5 years (Belgium and South Africa being the other 2) and I can confirm that medical costs are just unbelievably high here, compared to other countries. And I certainly do not have the sense that the quality of medical care is better, or that more services are rendered in a visit, or that better ‘hardware’ is used.

      I simply do not understand where all that money is going to. How can taking a child in to the doctor for a standard check-up and 2 shots amount to $900 on my medical aid bill? (thankfully largely covered but still!). In South Africa, a developing country, I would have paid this out-of-pocket for (good quality) private care and it would have cost no more than $60. In Belgium it would have been about the same. I know all sorts of government subsidies come into play (eg vaccines are largely subsidized), but I doubt the subsidies would make up the gap between $60 and $900. It’s just really difficult to understand.

      Anyways, I’ll keep reading the rest of the articles. Thanks for the insight!

      • As a US doc, I’d take $60- cash for a simple office visit any day of the week. In the US, your healthcare dollar is paying for multimillion dollar insurance CEOs, shareholders, malpractice insurance and more. Doctor pay may be 2/3 what it is here US as it is in say, Canada… But guess what? In that system the doc doesn’t need to save 100k/ kid for college, pay is own healthcare, or save as much for retirement. I doubt there are toll collectors and policemen making 100 k/ year as here either…