New research paints richer picture of physician earnings

Physicians may be the most common occupation among the top 1 percent of income earners, but their earnings are nonetheless difficult to measure — despite the government's role in the market. New research out of the University of Chicago aims to resolve that. 

University of Chicago health economist Joshua Gottlieb, PhD, worked with a team of researchers to create a new dataset that links administrative information on physicians to tax records from 2005 to 2017. With this information married, the researchers measure physician earnings and estimate the influence of healthcare policies on their incomes, labor supply and talent allocation.

"Combining the administrative registry of U.S. physicians with tax data, Medicare billing records, and survey responses, we find that physicians' annual earnings average $350,000 and comprise 8.6 percent of national healthcare spending," the authors wrote in their working paper.

Below are six more notes from the team's research brief, which is titled "Who Values Human Capitalists' Human Capital? The Earnings and Labor Supply of U.S. Physicians" and can be found here. 

  1. The average physician in 2017 earned $243,400 in wages and $350,000 in total individual income. Median total individual income is $265,000 per year. More than 25 percent of physicians in 2017 earned more than $425,000 and the top 1 percent earned more than $1.7 million. 
  1. Earnings vary substantially across specialties. Primary care physicians are the lowest earning, with an average income of $201,200. Procedural specialists and surgeons are the highest earners, with average income 2.3 times that of PCPs.
  1. Age accounts for 14 percent of the variation in physician earnings. Physicians earn around $60,000 on average in their late 20s while they are still in training. This escalates to more than $185,000 on average in their early 30s and at approximately $425,000 at age 50. 
  1. Female physicians earn 30 percent less than their male counterparts. Related to this finding, the Commonwealth Fund in 2022 found the pay gap between male and female physicians translates to $900,000 to $2.5 million less in career earnings for women, depending on the type of medicine practiced.
  1. Seventy percent of the difference in physicians' income across areas is attributable to the impacts of the local market rather than the characteristics of the physicians who work there.
  1. Physicians' incomes are highest in parts of the Great Plains. This is unlike the broader economy, where high incomes tend to be found on the coasts. 

The authors next used income tax, Medicare billing, and specialty choice data to assess the impacts of government policies on physicians' earnings. They zeroed in on two types of insurance policy changes — changes in coverage and changes in payment rates.

In response to short-term reimbursement changes, 25 percent of marginal Medicare reimbursement dollars flow into physician earnings. For the permanent change in demand induced by the public insurance expansions under the Affordable Care Act, the authors document a 6 percent pass-through of public spending to physician incomes. 

Greater earnings draw physicians with higher test scores to a specialty while displacing those with lower test scores and less choice. For instance, increasing primary care earnings by 5 percent — while holding constant the number of available slots and earnings of other specialties — increases the probability that graduates from top-five medical schools enter primary care by 4.8 percent, researchers found. 

"The upshot is that government payment rules play a key role in valuing and allocating one of society's most expensive assets: physicians' human capital," the researchers conclude. "Taken together, the results here suggest that policies subsidizing surgery will increase surgeons' incomes and allocate more top talent to surgical specialties, improving surgery for a generation. Subsidizing primary care will instead increase these physicians' incomes and allocate top talent to primary care, improving primary care for a generation."

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