Inequality among doctors
By Scott Sumner
The following graph perked my interest:
I notice that the inequality of Medicare payments mirrors the overall income inequality in American society. (Which is ironic as Medicare is a socialist program beloved by pundits like Paul Krugman.) I don’t know the exact share of income earned by the top 2% of Americans, but if the top 1% earn 20%, then it must be about 25%. The top 25% of Americans actually earn much less than the 75% going to the top 25% of doctors reimbursed by Medicare. That made me wonder about income inequality among doctors. Here’s my conjecture:
1. Income inequality is much less among doctors than among the general public, when measured conventionally.
2. Income inequality among doctors is comparable to income inequality among the public, when measured in the same way that the US government measures income inequality.
The first point reflects the fact that Medicare reimbursements are very different from income. They don’t include costs, nor do they include non-Medicare income. Some doctors concentrate much more on elderly patients than others. Taking all those factors into account, it seems likely that overall doctor income inequality is less than inequality in Medicare payments.
The second point reflects the fact that official income inequality data glosses over life cycle issues. I spent 8 years in the bottom quintile (age 18-26) and I’ve probably spent at least 8 years in the top quintile. I’ve been in all the intermediate quintiles. Thus if one really wanted to compare doctor income inequality to overall American income inequality, the relevant measure would include the entire lifetime income profiles of people who spent part of their lives as doctors. Here’s my conjecture:
1. Average lifetime incomes of doctors would be much higher than for average Americans. But that has no bearing on inequality.
2. The bottom quintile would be composed mostly of doctors as undergraduates or graduate students.
3. The second quintile would be doctors as residents (average of $45,000/year) or doctors as retirees.
4. The top three quintiles would reflect the various hierarchies such as general practitioners, small town docs, big city doctors, specialists, surgeons, etc.
I’d expect to see a lot of inequality, although I have no idea exactly how much. Of course this would not represent exactly the same social problem as the current income inequality in America, as it would be inequality around a much higher average. Thus even at their worst (bottom 20%) medical students would be doing no worse than the typical American college or university student. And at their best they’d do far better than average.
I read that 16% of the now infamous “one percent” are medical professionals. It also seems plausible that doctors are much less likely to reach the rarified levels of hedge fund managers. Putting all this together I’d expected doctor inequality to be even worse than average at the bottom (college students) and less extreme at the very top.
Does any of this matter? It’s not clear. One could say it’s an apple and oranges comparison, because doctors never do poorly compared to other Americans. Or one could argue exactly the opposite, that worrying about American inequality in a world with billions of Africans and South Asians (and billions of dead people from previous centuries) is as grotesquely offensive as worrying about doctor inequality in America.
I’m a humble utilitarian so I don’t worry about how things look; rather I focus on policies that boost utility. I’m willing to support policies that help low income Americans, such as wage subsidies and progressive consumption taxes. But I’m also willing to entertain policies that would hurt poor Americans, such as (relatively) open borders.
Our current Congress seems uninterested in doing any sort of useful reforms, to benefit anyone.
PS. Believe or not there is a recent WaPo article on the “problem” of income inequality among doctors:
Understandably, income inequality among physicians may not engender too much sympathy among patients. Even primary-care doctors earn roughly four times more than the median household does. In fact, 16 percent of the country’s sometimes scorned “1 percent” is made up of medical professionals.