I have to begin any discussion about how much doctors make with a full disclosure - I'm a physician. I, like all of you, enjoy making more money than less money, so take all of what I say in that context. However, it is possible to have data-driven conversations about how much people who work in health make versus other sectors, and what that might mean for health care spending.

In a recent piece in Health Affairs, Sherry Glied, Stephanie Ma, and Ivanna Pearlstein did just that. In "Understanding Pay Differentials Among Health Professionals, Nonprofessionals, And Their Counterparts In Other Sectors" the authors state:

About half of the $2.1 trillion of US health services spending constitutes compensation to employees. We examined how the wages paid to health-sector employees compared to those paid to workers with similar qualifications in other sectors.

Every time I write about health care spending, I like to remind people that one person's waste is another person's income. Money that isn't spent on health care isn't put into a big pile and burned. It's put into other people's pocket. Even the first line of the abstract here is instructive. More than one trillion dollars a year is spent on employee compensation for health care. That's more an 8% of GDP alone. We spend a lot of money employing people in the health care sector.

The researchers used data from the March Current Population Surveys from 1979 through 2013, and controlled for many other factors that could be associated with income. If you're interested in the full methods, I encourage you to go read the paper, as it's well written. I want to focus on the results here.

Workers in health care are more educated in general than those in other sectors. Non-professional health care workers average between 0.3 and 0.6 years more in schooling that non-health-sector employees. Professional health care employees, like nurses and physicians average from more than 1 to almost 6 more years of schooling.

After controlling for other factors, workers in health care make about 3% more than those of comparable workers in non-health care sectors. That's more, but not as much as many might think. The spread is not even though. Those in the bottom quartile of health care employees make about the same as non-health care employees, while those in the top quartile make about 4.7% more than their non-health care counterparts.

Health care professionals, on the other hand, make quite a bit more. Nurses make about 40% more than would be predicted by education, experience, and demographics. Physicians earn almost 50% more than would be predicted. The spreads are different, though. Nurses at the lower end of the pay spectrum earn more than their counterparts in the non-health care world, compared to those at the higher end of the pay scale. For doctors, the opposite it true; there's more of a difference at the higher end of the spectrum.

Contrary to what many might think, having a job in the health care sector does not lead to larger salaries, on average, compared to working in other areas. Nonprofessionals in health care earn very similar amounts to those outside of health care. Those employed in nursing homes earn less than you would expect, even. The exception is professionals, including nurses and physicians. But such professionals comprise a minority of the health care workforce, making it unlikely that high salaries, in general, can be blamed for outsized health care spending. Physicians compensation is less than 10% of all health care spending, and nurses account for less than 7%. As this paper reports, if tomorrow somehow policy makers were able to strip all extra pay for health care professionals above what you'd expect they'd make in other sectors, overall health care spending would be reduced by only 6%. Further, given that the pay differentials haven't been increasing over recent time, doing so would do nothing to bend the curve in the future.

The conclusion of the paper is as follows:

These results suggest that efforts to reduce the rate of growth in prices paid for health care services cannot be accommodated primarily through reductions in the pay of health-sector employees. Instead, such efforts will likely require providers to improve their productivity, producing the same services with fewer, or less costly, labor inputs.

I think that makes a lot of sense. I look forward to hearing what you think, in comments or on Twitter.


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