The Deceptive Income of Physicians
Doctors do not
make as much money as you think
Physicians
spend about 40,000 hours training and over $300,000 on their education, yet the
amount of money they earn per hour is only a few dollars more than a high
school teacher. Physicians spend over a decade of potential earning, saving and
investing time training and taking on more debt, debt that isn’t tax
deductible. When they finish training and finally have an income – they are
taxed heavily and must repay their debt with what remains. The cost of tuition,
the length of training and the U.S. tax code places physicians into a deceptive
financial situation.
The road to becoming
a licensed and board certified physician is a long one. Physicians spend the
equivalent of 20 years of full-time work just learning how to be a physician.
First, one must earn a bachelor’s degree. Attending college full time, this
will take about four years or 6,400 hours of work. 4 years x 40 wks/yr x 40
hrs/wk = 6,400 hours. To be competitive for acceptance into medical school you
will likely spend far more than 40 hours per week studying, doing research and
volunteering. However, to keep it simple and consistent we will neglect that
extra time. After college future physicians must attend medical school. Medical
students spend about 80 hours per week for 48 weeks each year studying and
training which amounts to 15,360 hours over four years. After medical school,
physicians must complete post-graduate training known as residency. To practice
medicine in the United States physicians must pass all 3 parts of the United
States Medical Licensing Exam (USMLE©) and complete at least the first year of
residency, which is known as internship. Residents work long hours, weekends,
nights and holidays. Most approach the legal work hour limit of 80 hrs/wk for
50 weeks each year. Many residents exceed 80 hrs/wk studying and doing research
in addition to their clinical responsibilities. To become board certified,
future physicians must complete an entire residency-training program and pass
all additional exams for that particular specialty. For example, to become
board certified in Internal Medicine, one must graduate from medical school,
pass all 3 USMLEs, complete a 3-year Internal Medicine residency and pass the
Internal Medicine board exam. A board certified Internal Medicine physician
will spend about 34,000 hours training. To become board certified in Thoracic Surgery
– one must graduate from medical school, pass all 3 USMLEs, complete a 5-year
General Surgery residency, complete a 2-year thoracic surgery fellowship and
pass the Thoracic Surgery board exams. A board-certified Thoracic Surgeon will
spend about 49,760 hours training. The shortest residency training programs are
3 years long and include the primary care specialties of Internal Medicine,
Family Medicine and Pediatrics.
Spending 40,000
hours of one’s young adult life learning how to be a physician is an admirable
sacrifice, especially considering one must spend more money than one earns to
work those 40,000 hours. The long hours don’t necessarily end after residency.
In 2007, physicians from over 20 specialties were asked how many hours per week
they generally work – the average was 59.6 hours per week.1 So even
after physicians finish their 40,000 hours of training they continue to work
one-and-a-half times as much most Americans for the rest of their career. In
short, physicians work two-full time jobs while in training and one-and-a-half
full time jobs when they are finished. They have to work nights, evenings,
weekends, holidays and take call. For most physicians, there is no such thing
as overtime or holiday pay.
Why does it
have to take so long?
There are no
shortcuts to gaining the knowledge and experience one needs to be a competent
physician, they need to put in the time to get the experience. Because there is
no shortcut to gaining the experience one needs to be a competent physician,
decreasing resident work hours from 80 hours per week to 60 hours per week is a
terrible idea. If such a change occurs, residency training would have to become
years longer in order to get the same experience. Making physician training
longer will further increase student debt loads and decrease the number of
years physicians are able to work after they are trained. It will increase the
number of physicians in training and decrease the physician workforce.
Becoming a
physician is expensive. For the 2009-2010 academic year, the average total
student budget for public and private undergraduate universities was $19,338
and $39,028, respectively.2 If one attends an average priced
institution, receives subsided loans and graduates in four years they will have
about $100,000 of student loan debt from college. For the 2009-2010 academic
year, the median cost of tuition and fees for public and private medical
schools was $24,384 and $43,002 per year, respectively.3 This does
not include the cost of rent, utilities, food, transportation, health
insurance, books, professional attire, licensing exams fees or residency
interview expenses. Therefore, the average medical student budget is about
$45,000 per year; $30,000 for tuition and $15,000 for living expenses. If one
attends an average priced medical school, receives 1/3 subsidized loans and
graduates in 4 years; at a 7% APR they will have $200,527 of debt from medical
school at graduation. If one borrows $22,500 bi-annually and two-thirds of this
accrues interest compounded bi-annually at 3.5% – their total student loan debt
for both college and medical school will then be $300,527. Forbearing this debt
through 5 years of residency and paying it off over 20 years will cost about
$788,880 of one’s net income.
Loan repayment
programs such as those offered by the military are not a solution for the
majority. Each year, about 22,000 medical students graduate from U.S.
allopathic and osteopathic medical schools.4,5 Each year the
military matches 800 students into its residency training programs, because
that is the military’s anticipated future need for physicians.
The U.S. tax
code allows taxpayers to deduct a maximum of $2,500 per year of student loan
interest paid to their lender. This deduction is phased out between incomes of
$115,000 and $145,000.6 Therefore, this benefit is of no help to
most physicians. If one were to start a business, they could deduct nearly all
of their expenses. Yet for unclear reasons, one cannot deduct the cost of
becoming a physician; not the tuition or even the interest on the money they
borrowed to pay their tuition.
During
residency, if one makes payments of $1,753 per month, or $21,037 per year, to
pay off the accruing interest, thier debt will be still be $300,527 at the end
of residency. However, they will have spent $63,111 over the course of a 3 year
residency or $126,222 over the course of a 6 year residency to keep their debt
from growing. Though paying off the interest during residency is the
responsible thing to do; coming up with $21,037 each year from one’s net pay of
$40,000 may be quite difficult.
Time spent
training, student loan debt and the U.S. tax code makes the income of
physicians deceiving. A board certified internal medicine physician who is
married with 2 children, living in California and earning the median internist
annual salary of $205,441 will be left with $140,939 after income taxes and
$106,571 after student loan payments.7 This is assuming a federal
Income tax rate of 28%, California state income tax rate of 6.6%, Social Security
tax rate of 6.2% and Medicare tax rate of 1.45%. You can go to www.paycheckcity.com
to get an idea of what one’s net pay would be for different incomes, states of
residence, marital status, number of children, etc. Paying off a debt of
$369,425 over 20 years at a 7% APR will require annual payments of $34,368.
Those student loan payments will continue to consume about $34,000 of their net
income for 20 years until they are finally paid off. What started off as
$300,527 in student loan debt will end up costing $687,360. This debt that
consumes one-fourth of their net income for 20 years wasn’t accrued because
they bought a house they couldn’t afford – it is because they chose to become a
physician.
Believe it or
not, the amount of money reaching a physician’s personal bank account per hour
worked is only a few dollars more than that of a high school teacher.
In order to
make this calculation we will neglect inflation of the U.S. dollar by assuming
that inflation will increase at the same rate as the purchasing power of the
U.S. dollar decreases. We will also assume that physician incomes keep pace
with inflation. We will also assume that tuition costs, student loan interest
rates, resident stipends, physician reimbursements and the U.S. income tax
structure are as described above and do not change.
The median
gross income among internal medicine physicians is $205,441.7 The
median net income for an internist who is married with two children living in
California is then $140,939. Internal medicine is a three-year residency, so
throughout residency they will earn a total net income of about $120,000 and
spend about 35,000 hours training after high school. The total cost of training
including interest, forbeared for three years and paid off over 20 years as
explained above is $687,260. One study reported that the average hours worked
per week by practicing Internal Medicine physicians was 57 hours per week.8
Another study reported the mean to be 55.5 hours per week.9 We will
use 56 hours per week and assume they work 48 weeks per year. If they finish
residency at 29 years old and retire at 65 years old they will work for 36
years at that median income.
[(140,939 x 36)
+ (120,000) – (687,260)] / [(56 x 48 x 36) + (34,000)] = $34.46
The adjusted
net hourly wage for an internal medicine physician is then $34.46
The median
gross income among high school teachers, including the value of benefits but
excluding their pension, is about $50,000.10 The median net income
for a high school teacher who is married with two children living in California
is then $42,791. This is assuming a federal Income tax rate of 15%, California
state income tax rate of 6.6%, Social Security tax rate of 6.2% and Medicare
tax rate of 1.45%. You can go to www.paycheckcity.com to get an idea of what one’s
net pay would be for different incomes, states of residence, marital status,
number of children, etc. Teachers spend about 6,400 hours training after high school,
the amount of time it takes to get a bachelor’s degree. The total cost of
training if one attends an averaged priced institution and pay off their debt
over 20 years at a 7% interest rate is $186,072. At this income one would be
able to deduct the interest on their student loans from their income taxes;
however, those savings are not accounted for in the calculation below. High
school teachers have about 10 weeks off each summer, 2 weeks off during
Christmas, 1 week off for spring break and 1 week of personal paid time off.
Therefore, high school teachers who work full time average of 40 hours per week
for 38 weeks each year. Yes, teachers spend time “off the clock” preparing for
class, correcting papers, etc. However physicians also spend time “off the
clock” reading, studying, going to conferences, etc. If a high school teacher
finishes college at 22 years old and retires at 65 years old, they will work
for 43 years. Most teachers also receive a pension. We will assume their gross
annual pension including the value of benefits is $40,000 which is a net
pension of $35,507. If they die at 80 years old they will receive this pension
for 15 years.
[(42,791 x 43)
+ (35,507 x 15) – (186,072)] / [(40 x 38 x 43) + (6,400)] = $30.47
The adjusted
net hourly wage for a high school teacher is then $30.47
The median
gross income among internal medicine physicians is $205,441.7 The
median gross income among high school teachers, including the value of benefits
but excluding their pension, is about $50,000 per year.10 Accounting
for time spent training, student loan debt, years worked, hours worked per year
and disproportionate income taxes – the net adjusted hourly wage of an
internist is $34.46 per hour, while that of a high school teacher is $30.47 per
hour. Though the gross income of an internal medicine physician is 4 times that
of a high school teacher, the adjusted net hourly wage of an internal medicine
physician is only 1.13 times that of a high school teacher. Most people would
argue that high school teachers are not paid enough, yet for some reason most
people would also argue that physicians are paid too much.
Isn’t taking
care of patients rewarding regardless of income?
Yes, taking
care of patients is rewarding. However, when physicians are unfairly reimbursed
for their services they feel exploited. This feeling of exploitation or being
taken advantage of is what bothers physicians the most. Physicians spend 40,000
hours training after high school and take out over a quarter million dollars in
loans all so that when they are done they can work 60 hours per week, be paid
less than they were expected, give about 40% of their income to the government
in taxes and pay 25% of their net income to their student loan lender. They
feel exploited because after all that they have sacrificed they are enslaved to
the highly regulated healthcare industry, which unfairly pays them.
On June 18,
2010 the Centers for Medicaid and Medicare Services (CMS) instructed its
Medicare contractors to start processing claims for physician payments at a
21.3% reduced rate.11 Should other payers follow Medicare, as they
so often do, physicians may have to find another line of work. Decreasing a
physician’s reimbursements by 21.3% doesn’t mean that a physician’s gross
income will go from $200,000 to $157,400 – it will likely decrease much, much
more. Let’s say Dr. Smith, an internal medicine physician, spends 15 minutes
caring for a Medicare patient and bills Medicare $100 for this service. From
that visit, Dr. Smith’s profit margin is say 40%, $60 to cover her overhead and
$40 profit. Prior to this recent change, Medicare typically paid about 60 cents
on the dollar, which is why most physicians barely broke even caring for
Medicare patients. The 21.3% decrease in physician reimbursements will likely
be 21.3% of that $60, so Dr. Smith will now be reimbursed only $47.22 dollars
for that visit which is less than the $60.00 it cost Dr. Smith to see the
patient. Therefore, Dr. Smith will spend $12.78 to care for that
Medicare patient. This is generous of Dr. Smith and all, but it is
unsustainable. It is unsustainable for Dr. Smith and unsustainable for the
future of medicine.
In an era of
skyrocketing healthcare costs, an increasing need for healthcare services and
diminishing resources – Americans need to be cognizant of whom they exploit.
Physicians want to work hard and do whatever they can for their patients. And
like every other American, physicians also want to be appreciated and fairly
compensated for their time and financial sacrifice.
The median
gross income among general dentists who work full time in a group practice is
$220,000.(12) The median net income for a general dentist who is married with
two children living in California is then $149,681. General dentists who work
full time in a group practice with partners work an average of 38 hours per
week, 1,727 hours per year.(12) Dentists spend about 17,920 hours training
after high school. The total cost of training if you attend averaged priced
institutions pay off your debt over 20 years at a 7% interest rate is $558,216.
If you finish dental school at 26 years old and retire at 65 years old they
will work for 39 years.
[(149,681 x 39)
– (558,216)] / [(1,727 x 39) + (17,920)] = $61.91
The adjusted
net hourly wage for a general dentist is then $61.91
The median
gross income of a registered nurse is $62,450.(13) The median net income of a
registered nurse who is married with two children and lives in California is
then $51,787. To become a registered nurse via the associate’s degree route
takes 2 years, about 4000 hours of training. The average total student budget
at a public 2-year university is $14,285.(14) The total cost of becoming an
R.N. is then $28,570. If that debt is paid off over 20 years at a 7% interest
rate it will end up costing a total of $53,160. At this income you will be able
to deduct student loan interest costs from your federal income taxes, these
savings are not included in the calculation below. If you finish nursing school
at 20 years old and work until you are 65 years old you will work for 45 years
at that median income. We will assume you work 40 hours per week, 50 weeks per
year.
[(51,787 x 45)
– (53,160)] / [(40 x 50 x 45) + (3,200)} = $24.43
The adjusted
net hourly wage for a registered nurse is $24.43
What if an R.N.
worked as much as an internal medicine physician? Unlike a physician, an R.N.
would receive overtime pay for the hours they worked in excess of 2,000 per
year.
Variables that
will decrease a physician’s adjusted net hourly wage include: a shorter career,
increased taxation, decreased income, working more hours for the same or less
pay, spending more than average on tuition, spending more time training and
decreased resident pay.
Variables that
will increase a physician’s adjusted net hourly wage include: a longer career,
decreased taxation, increased income, working fewer hours for the same or more
pay, spending less than average on tuition, having less debt, paying off your
debt early and increased resident pay.
Addendum #2.
Residency Match Data.
Food for
thought.
Data of
applicants who successfully matched by specialty in 2009 (14-17)
(Calculations
include both U.S. Allopathic Seniors and Independent applicants)
|
Specialty
|
Average
USMLE
Step 1 |
Average
USMLE Step 2
|
% US Seniors who were AOA
|
Average # Abstracts,
Presentations and Publications
|
|
Plastic Surgery
|
242
|
242
|
42
|
9
|
|
Dermatology
|
240
|
248
|
51
|
7
|
|
Otolaryngology (ENT)
|
240
|
245
|
37
|
4
|
|
Neurosurgery
|
239
|
237
|
28
|
8
|
|
Radiation Oncology
|
238
|
241
|
35
|
8
|
|
Diagnostic Radiology
|
238
|
242
|
23
|
4
|
|
Orthopedic Surgery
|
237
|
240
|
28
|
4
|
|
Ophthalmology
|
235
|
-
|
-
|
-
|
|
Pathology
|
226
|
227
|
13
|
5
|
|
Neurology
|
225
|
229
|
12
|
4
|
|
Anesthesiology
|
224
|
230
|
10
|
2
|
|
Internal Medicine
|
224
|
229
|
15
|
3
|
|
General Surgery
|
224
|
230
|
12
|
3
|
|
Internal Medicine/Pediatrics
|
222
|
231
|
21
|
2
|
|
Child Neurology
|
221
|
-
|
-
|
-
|
|
Emergency Medicine
|
221
|
229
|
11
|
2
|
|
Pediatrics
|
218
|
227
|
12
|
2
|
|
Obstetrics & Gynecology
|
217
|
227
|
14
|
2
|
|
Physical Medicine &
Rehabilitation
|
213
|
216
|
4
|
2
|
|
Psychiatry
|
213
|
217
|
4
|
2
|
|
Family Medicine
|
208
|
214
|
5
|
1
|
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