Today’s Economist: Casey B. Mulligan: The Incomes of Physicians

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

Laws that govern training and licensing of physicians influence their incomes at least as much as health care demand does.

Today’s Economist

Perspectives from expert contributors.

Medical doctors are a critical part of the supply of health services and their incomes are an important determinant of health care costs.

While a desire to help people motivates men and women to become physicians and go to work every day, that desire has existed for centuries and will continue to exist in the future and thereby is not the primary variable that causes physicians’ incomes to fluctuate over time.

By law, physicians are educated people, the types of people who would have earned college degrees, if not advanced degrees, even if they had never become doctors. For this reason, the incomes of physicians depend on the supply-and-demand factors determining the incomes of college graduates generally, such as technological change and the emergence of worldwide markets in many products.

As the wages of scientists, accountants, lawyers and other college-graduate professionals have pulled ahead of the wages of high school graduates, so too have the incomes of physicians, because most aspiring physicians have the option to enter another profession instead (Figure 2, on Page 37 in this paper, shows how incomes of physicians have been pretty constant relative to those of lawyers since World War II).

You would think that a greater demand for health care, such as the demand associated with the aging of the population or perhaps a universal health care law, would increase physicians’ incomes as more patients (or insurance companies on the behalf of patients) compete for physicians’ time. And that’s true in the short run, because physicians take many years to train. But demand is less important in the longer term (a decade or two).

In the long term, a relatively small increase in the incomes of physicians could be enough to attract a substantial number of physicians from pursuing other careers or from pursuing medicine in other countries (that’s one reason my Economix colleague Uwe Reinhardt concluded that the slow aging process was not a major cost driver in health care). Indeed, some of today’s physicians began their careers understanding that the population was aging and the health care industry offered many job opportunities (see also this paper on career choice and industry prospects).

Barriers to professional entry may have a greater influence on physicians’ incomes than health care demand would by itself. Laws regulate the training and licensing of physicians and the tasks that can be performed by people without a doctor of medicine degree. The number of medical schools in the United States has hardly changed since the 1980s, despite significant population growth.

Perhaps the restrictions on medical training and licensing are desirable, even though they raise physicians’ incomes.

State laws are starting to widen the scope of medical services that can be performed by nurses and physician assistants to include services previously permitted only by medical doctors. Physician outsourcing has also been discussed.

It is possible that the new health care law, with its emphasis on reducing costs, will apply pressure to ease restrictions on entry into the provision of health care services. On the other hand, centralized health care policy may naturally seek the advice of industry experts – especially medical doctors – who may appreciate the merits of keeping medical doctors closely involved with the provision of health services.

Article source: http://economix.blogs.nytimes.com/2013/02/13/the-incomes-of-physicians/?partner=rss&emc=rss