Wednesday, April 09, 2008

ECON 365: High cost of inputs

A big part of the high costs of US health care is that we pay doctors more:

But many health care economists say both sides are wrong. These economists, some of whom are also doctors, say the partisan fight over insurers and drug makers is a distraction from a bigger problem: the relatively high salaries paid to American doctors, and even more importantly, the way they are compensated.

“I always find it ironic that when I go to doctor groups and such, they always talk about the cost of prescription drugs,” said Dana Goldman, director of health economics at the RAND Corporation, a nonprofit research institute in Santa Monica, Calif.

Prescription drugs cost, on average, 30 percent to 50 percent more in the United States than in Europe. But the difference in doctors’ salaries is far larger, Dr. Goldman said.

Doctors in the United States earn two to three times as much as they do in other industrialized countries. Surveys by medical-practice management groups show that American doctors make an average of $200,000 to $300,000 a year. Primary care doctors and pediatricians make less, between $125,000 and $200,000, but in specialties like radiology, physicians can take home $400,000 or more.

In Europe, however, doctors made $60,000 to $120,000 in 2002, according to a survey sponsored by the British government in 2004.

Given the years of training that doctors require and the stress and importance of their jobs, few would disagree that they should be well paid. In addition, with a year of medical school now about $30,000, many doctors leave school deeply in debt. And many doctors would argue that cutting salaries would only persuade talented, college graduates to pursue better-paying professions.

Still, the lower salaries are a significant part of the reason that European countries spend less on health care than the United States does — a fact liberals avoid mentioning when they preach the advantages of a European-style single-payer system.

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