Saturday, April 16, 2011

Physician salaries and loan debt: Is it worth it to go to Medical School?

This post is fueled by a few recent blog posts on which have attracted A LOT of discussion:

Real life example of medical school debt

Why medical education needs to be more affordable

Why does society frown on doctors earning a reasonable living

Think about medical school tuition debt before becoming a doctor

The comments attached to these posts are filled with entries by bright eyed medical students cringing at the debt load they will face, seasoned doctors telling them to get out now, nonphysicians telling us to quit our whining, and a few well reasoned entries.  Below are my thoughts. Please note that initially I am taking the cold "financial" approach to evaluating medical school and not adding the human, job satisfaction element of being a doctor.

Not all debt is created equal
As debt goes student loan debt when used correctly is one of the best kinds of debt to have. Any basic personal finance class will tell you that taking a loan that will increase your earning potential is a good thing. Clearly for the subspeciality surgeon working in private practice who will make 300-400k a year the upfront investment of 150-200k for medical school + the time spent making effectively minimum wage as a resident are worth it for the end result. Also, paying off your student loan debt early is not necessarily a good thing. If you have a student loan with a fixed rate of 4% and you could invest your money for more than that you are better off investing your money and being more liquid and lengthening your payment term. This is why it's absolutely essential to consolidate the loans when the rates are low and once you have consolidated them to invest your extra money rather than pay them off early (same goes for low-interest morgage refi's as well). While psychologically it can seem WORSE to wait it out for 30 years, it's better from a financial standpoint to have more low interested fixed debt and more cash on hand (if invested properly).

Physician salaries do not correlate to length of training
What's often amazing to me is the marked difference between physician salaries even with the same training. For example, if a pediatrician does any one of a number of fellowships (effectively doubling the time they make minimum wage from 3 to 6 years) they will often make the SAME SALARY as a general pediatrician (for example adolescent medicine). Unfortunately, doing this extra training does not net additional income despite bringing you clinical expertise. However, with certain other subspecialities (say ER or NICU or even PICU) you can effectively double your salary by doing the extra 3 years. Now, before I get flack from my intensivist friends, I will say that the training in the 3 specialties I named is way more rigorous than the adolescent medicine fellowship. All 3 of those involve in house overnight duties and frequent encounters with deathly ill children while the adolescent medicine fellowship is more outpatient based. Note that for ANY of these fields the amount of educational debt (4 years of med school) is the same and has NO BEARING on future income.

Quantifying the value of medical education
This blog takes an interesting approach to quantify the value of the medical degree as it compares to other fields. What the author does is divide the total money earned over a life time minus debt by the total hours worked for a few common fields. By his math an internist earns about $34/hr while a teacher earns about $30/hr (taking into account the pension). I think while the math is interesting, the are a few flaws with this argument. He does not account that hopefully the physician will advance over time in salary and outpace inflation (i.e. grow their practice, if in a hospital system get promoted, etc). That being said it does show that the debt and minimum wage earned during residency put a dent on the lifetime income of a physician vs. other fields.

Is primary care "worth it"?
Your average person starting a practice in primary care is making 100-130k a year and probably gives 12k (post tax) out in loans. Looking at this that gives them a post tax income of around 70-90k a year. Is it worth it? I'll let you be the judge. However, for the sake of our healthcare system I hope more find it worth it. You can be a nurse anesthetist for less training and make more money. I think it really depends on your perspective. If you are someone who did a bachelors and a masters in a non medical field at a private institution you may say, I don't understand what all the fuss is about. Why do these doctors feel so entitled?

The overwhelming majority of folks I meet in primary care, esp servicing underserved patients are pretty saintly. They'll put in the extra hour to call a kids grandma to make sure he got the right formula or call a kids school to see how the ADHD meds are really working out. Unfortunately these folks are not that common. I find the same thing for doctors in many pediatric subspecialitites who despite extra training make the same as their generalist colleagues.  As evidenced that fewer than 10% of medical school grads go into primary care fields. Like it or not, especially with the new health care reforms we need A LOT more primary care physicians, especially those willing to work with the indigent.

Many primary care doctors are opting out of traditional practice models and are going cash only or adopting a "concierge" model of practice which allows them to not worry about the normal constraints caused by lousy insurance payments. Some say that this is wrong and limits access to care. Others would say: "My mechanic charges a fixed advertised rate for his time, why shouldn't I?"

What can we do to fix it?
The answer is simple and I think one of necessity given primary care workforce issues.

1. Pay primary care docs more. Unfortunately the current CPT codes (billing codes used by doctors) were derived by subspecialists so primary care codes tend to pay less. I think revamping the coding system to place value on the work of the primary care MD. This is the only way to kill the primary care shortage. With out this you will either a) see more doctors not enter primary care or b) go into concierge practice to circumvent the constraints of insurance companies. One answer is to just pay primary care per time with the patient at a rate that's enough to cover expenses and make a decent salary (i.e. enough so people do not bail on primary care for higher paying specialities). Also, to include in the cost the time away from the patient making phone calls and doing paper work. Finally, we need to have codes that allow for "phone visits" and "evisits". Many folks using a concierge type model (free from what traditional insurance will pay) will make an e-visit with a patient over a webcam when appropriate.

2. Revamp the lending system. Medical school loans are some of the safest bets for the banks. They always get paid back. The interest rates should really be next to nothing (i.e. 2-3%) not the 6% that some of them are at now. Also, going into primary care should be accompanied by complete loan payback from the outset. While there are some NHSC (national health service corps) programs out there with loan repayment they are not always competitive. i.e. a doctor can make more money by not taking the NHSC job and just repaying the loans over time.


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