• Maybe loan debt isn’t the problem docs complain it is

    I’ve discussed physician salaries many times on this blog. No topic brings me hate mail faster. I don’t bring it up because I believe that docs make too much, or should have their salaries cut. I bring it up because I think there are few professions that seem to do as well financially, which also complain about pay so vocally.

    Regardless, the number one response to any discussion of high physician salaries always centers around educational debt. It costs a ton to become a doctor, and that’s why physicians need to make so much.

    Well, we also face a physician shortage in parts of this country. So some areas have come up with novel solutions to attack both these problems at once:

    When the taxpayer-funded Peninsula Health Care District established a loan program to attract new physicians in 2003, officials promoted it as a way to address doctor shortages in parts of San Mateo County.

    The program was designed to help primary care physicians cover the costs of setting up private practices or relocating to the district, which includes Burlingame and Hillsborough, two cities with some of the highest real estate prices in the nation. Doctors who practiced in the district for four or five years would have their loans forgiven.

    There’s just one problem. In a decade, not one single physician has taken them up on this offer. In 2006, they expanded the program to more specialties. Still no takers. Some did consider it, I suppose:

    The closest the Peninsula Health Care District came to having a doctor complete the program was a recruit who enrolled in 2005. She received a $50,000 loan to open a private practice in San Mateo. But she left two and a half years later for a job outside the district. She has since repaid most of the $25,000 that remained of the loan, with interest, Fama said.

    Let me be clear once again. I don’t want to minimize educational debt, nor am I saying that I think physician salaries are objectively too high. I am saying, however, that I think we do have a knee jerk response to protect those salaries without allowing debate, and we often cite educational debt as the reason they must be maintained. Some have offered the removal of this debt as a way to tackle the problem of high physician salary. I have responded in the past that I don’t think that will work. The above shows why. We may complain about educational debt, but really we care about the freedom to pursue our economic livelihood more. That’s perfectly fine; we should just be honest about it.


    • The question I have about this job offer is whether the salary she would have made there was more than what she would make elsewhere minus the loan payments she had – if I was a primary care doc and was offered $150k + loan but I could make enough to cover my loan payments PLUS still clear $150k elsewhere, it would be a hard sell. Especially if you’re working 80 hours a week as a solo GP in an isolated location. Might be rewarding but might also be incredibly hard.

      Other reasons:

      1) there are an awful lot of people who go to med school who don’t want to live in rural areas. The explosion of new medical schools now is not helping this – the new schools are not attracting candidates who might go into primary care, they are attracting the marginal med school candidates from upper middle class homes who wanted to go to med school to become specialists but before these schools open would have had to go the Caribbean route. And these new schools have high tuitions.

      2) A lot of doctors are married to doctors. Those who aren’t are married to professionals who are not going to be able to find jobs in rural america. When you try to recruit a doctor to the rural area, you also have to recruit their family.

      3) This article you linked to says the loans were mostly for home purchase and such, not necessarily loan forgiveness. That’s not going to be a huge draw unless you have a clear reason to want to live in that community. Giving this doctor a $150k loan towards a house isn’t really doing anything for her debt. It just encourages purchasing a bigger house with all the requisite expenses that go along with it. Those with financial sense should be wary of such things. Of course, many doctors have little financial sense!

      • The loan didn’t have to be for a house. It could also be to start a practice. It could be for lots of things. That, of course, would free up money to pay back loans. Money is fungible.

        And I don’t dispute that there could be other factors. I think this just illustrates that educational debt is not the number one factor in career choices. Doctors would rather have the debt than give up other things.

        • Don’t forget that many physicians are going into employed situations and do not want to purchase a business.

          Matt makes very good points. I practiced in a rural area for 13 years. It does get professionaly lonely there.

          • This is the correct answer, which people who dont practice medicine (including 99% of ivory tower academic MDs) dont understand.

            Even if its a risk-free loan, starting up your own practice in a foreign area is INCREDIBLY stressful and there are hurdles all over the place to making it work. Much easier to join an already existing group practice that is well established and doenst require you to spend a small fortune to get started. Lets not remember that 90% of all small businesses fail. That applies to healthcare too, just because it is a “hot field” does not provide you immunity from failing in that business model.

            Also, 50k is very small amount to cover startup costs. According to Health Affairs, the average small clinic costs anywhere from 200k-1.5 million to start up. So even if you take the free 50k you’ve still got a long way to go to starting up your clinic.

            When you really understand the practive of private clinic medicine and dont write about it from the sidelines, you quickly understand why there are no takers on this deal.

            Here’s an interesting thought — what if we offered this program to nurse practitioners instead of MDs. Would they be willing to take the money and move there to start up their own practice? I seriously doubt it.

        • This is a poor example to use. A much better one is the NHSC program, that has loan repayment program for hundreds of doctors to practice in rural areas. Its much more representative of what happens nationwide with these kind of incentives.

          So, how is the NHSC doing? Well if you look at their stats, they only approve 10-20% of all MD applications. That sounds like pretty strong interest to me.

          The problem with NHSC is that they cover EVERYBODY — doctors, nurses, social workers, optometrists, psychologists, physical therapists, etc. That makes it where they dont have enough money to fund everybody who is interested in the program.

          The NHSC is a much better area to study in order to generalize about physician interest in loan repayment programs, not this “peninsula healthcare system” plan which nobody has ever heard of before.

      • Agree with the poster’s response to Aaron. Most loan forgiveness programs I investigated are not really that generous for the reasons above and completely ignore the fact that the key economic unit is the household (i.e., the benefits need to compensate for two incomes, opportunity costs, social costs, etc.) which at present, most do not.

        Thus, I would question the premise that there is any program out there right now that actually deals with the full impact of the debt on optionality.

        Also, I think the concept of ROI (return on investment) is ignored here. If you have smart, dedicated people going to devote a large part of their most productive years to training, there will have to be a significant return. Maybe not to the level of a CEO but definitely one that is in the same league as careers like BigLaw or I-banking. Otherwise, the quality of people medicine will attract will understandably decline*…

        *Critics often bring up other countries in response to this but the ROI analysis is actually relatively robust due to in many cases, significantly lower training times, less inequality in salaries, high marginal tax rates for other competitor high earning professions, etc.

      • Matt
        Cant speak for all the new medical schools, but Hofstra (and its my understanding others are embracing the same concepts) is accepting an ethnically, and financially diverse pool of students. Its far from your description. Also, future success aside, the training is antithetical to current standards with a major emphasis on primary and holistic care. We’ll see.

        Additionally, our program in NY, DANY, has failed by all accounts:

        “While the program has been well-intentioned, administrative hurdles have hampered the program’s success. In the current funding cycle, 90% ($11,950,000) of state funds currently sit idle in government and healthcare facility coffers. A similar amount of funds went undisbursed in 2010.”

        Upstate NY is not where folks want to be.


    • I have to relate an anecdote: I know, not evidence, but still interesting.

      When my brother was in med school many years ago, he seriously considered signing up for a federal program that would forgive his loans if he practiced for five years in under-served areas like indian reservations.

      One of his profs took him aside, and told him not to worry about it, his loans would be paid off in a couple of years after entering private practice.

      My brother declined the federal program, and found that his professor was right.

      I have no idea if this kind of scenario applies in 2012 I do know that my brother makes 3-4 times more than my Swiss internist.

      • The federal health loan repayment programs are EXTREMELY competitive to get into regardless. They are opened up to dentists, nurses, optometrists, and every other kind of “health care professional” out there and as a result they dont have enough money to fund everyone.

        Thousands of MDs apply for it, only about 10% get approved because of the limited funding.

    • I offer a second perspective: We have met many young Americans who are pursuing medical careers by attending med schools on Caribbean islands like Dominica or Grenada. The tuition at these schools is higher than in most US med schools, though the barriers to admission are lower. They end up with US accreditation, but considerably higher loan burdens than US students.

      It is clear talking to them that they believe the ROI of this investment is clearly in their favor.

      As long as there are more students seeking med school admissions than those accepted, I have to think that there is a payback to the tuition costs. It is possible that masses of students are misguided in the short term, but I can’t believe that you can mislead them in the long run.

    • Just as a little reality check here, just do a google map search for Burlingame or Hillsborough. Burlingame is about 5 minutes past SFO airport, about an equal distance to Palo Alto, as to SF.

      Rural? No. Commuting distance from vibrant urban communities? Absolutely.

      So, for all the talk about the loneliness rural practice, in this case, I think not.

    • Loan Repayment programs are post facto. By the time someone is eligible for loan repayment, they’re out of med school and he decision on whether to be a primary care physician or specialize was made before that.

      I also agree with the commenters above who say specialists or primary care docs can go elsewhere, still cover their loan payments and make more money working fewer hours.

    • Rose makes a fair point that this place isn’t rural – however this place has the other problem (my #3 above) – it probably doesn’t pay well yet is in an area of the country with some of the highest housing costs. So it fits with my point above that this loan just allows you to accumulate even more debt trying to live there as a primary care MD. Maybe if you’re married to a specialist it is a good deal! But then you wouldn’t really NEED the loan, it would just be a nice inducement to move there and get a bigger house.

    • This is NOT a loan forgiveness program. Its a 50k lump sum loan that you can use to cover start-up practice costs, or if you dont have any startup practice costs (laughable) then you could use that to pay down student debt. But its only 50k, it is NOT forgive your entire student debt.

      There have been several blogs who noticed Aaron’s post and have incorrectly interpreted it as a total student debt forgiveness program, which it is not. Its still a lot of money, but the average student loan indebtedness according to the AAMC is closer to 150k. There’s no loan forgiveness program in the country that will pay off 150k for 4 years of work. Most of them only pay 25-50k per year with a cap of 3-4 years.

    • Aaron,
      This was a very poorly put together post. Others have poked the holes in your post already. This calender year, due to CMS changes to Relative Value Units, I have seen all of my private payers decrease their rates by about 15%. My practice has already taken a hard hit with the recession already because patients can’t pay. But did my operating expenses or cost of living go down by 15%? They went up like every year. Did my student loan payments go down by 15% each month? No. I really don’t know what world you live in. Is support a spouse and 2 children. We have a tiny house in the exhurbs. Our cars are over 10 years old. Should I be sorry I chose psychiatry? Or that I did not marry another physician? Let me know your secret…..

      • It never fails.

        Look, I understand your issues. I have them, too. I bet a lot of docs do. But we, as a profession, are doing quite well compared to almost everyone else in the country. The “poor me” act doesn’t fly well when you’re making a salary that puts you easily in the upper or upper-middle class. Do you really think no one else is feeling the pinch?

        Moreover, I don’t fault anyone for making any choices about their careers or specialties. Go do whatever you like! Be a psychiatrist! But own that it’s your choice.

        • Don’t forget the high profits the insurance companies are making while many docs are taking pay cuts. Where is that money going that patients think is going to their care, or they think is going to the doctor? Where is all this “help” for primary care I read about in the journals and blogs? I haven’t seen any yet.

    • Here is a recent article about the least costly medical school in the U.S. :

      Do graduates of these medical schools charge less than the graduates of the most expensive medical schools? When physicians apply for jobs, are they required to submit their outstanding loan balances so that their compensation can be adjusted to reflect the cost of their education? After school loans are paid off, do physicians accept lower pay? Although the annual tuition for medical school is higher than, say, that for a graduate program in philosophy, the mean time to doctorate for a philosopher is longer than the mean time to MD, so the total expenditure on educational costs can actually be quite close. Is compensation for philosophers equivalent to the compensation for physicians?

      • Addendum: Medical school costs have been rising. Do recent graduates of medical schools demand more than physicians who have been working continuously since their graduations 10, or 20, or 30 years ago when educational costs were lower?

    • I’m still amused by the line:

      “I bring it up because I think there are few professions that seem to do as well financially, which also complain about pay so vocally.”

      I find this true…. in my experience interacting with MD’s, while some believe they are gods gift to the universe, and some seem to think they’re owed at least $200k per year for simply showing up at the office, some do work hard, and there also really seems to be an industrial complex dedicated to extracting money from physicians…. lots of people constantly trying to convince their practice to spend on something…

      Which makes me wonder.. the salaries, the costs, the unsustainability of it all, the expanding overhead costs and the hurry to treat treadmill makes me wonder how soon it will all explode…