Uwe Reinhardt has an odd take on doctors’ compensation in the NYT Economix blog today. First he shows that the median income for all doctors in each specialty is almost $200,000 and for most specialties is much higher. For more than half of the specialties listed the median income is above $350,000.
But the question he is trying to answer is whether or not doctors are overpaid or underpaid. His evidence that they are overpaid seems (to me) to be strong. Supply is artificially reduced by the number of medical school slots and residencies. Doctors in countries with similar levels of GDP per capita make much less. And a significant percentage of those in the top 1% are doctors.
But then he says that it doesn’t take that much income to be in the 1%. After all, you could make only(!) half a million dollars and be in that group. This is what comes of being of the 1% even if you’re not in the 1% (although Professor Reinhardt very well may be in the 1%). That’s a lot of money!
Then he goes on to make the argument that doctors aren’t overpaid because other people (such as in the world of finance) are even more overpaid. Well, that’s not exactly how he phrases it, but that’s the argument. To me, that seems insane. He is basically arguing that because of these extremely high income levels of some, we must overpay others that presumably could go into that field. It makes more sense to me to try to reign in the out-of-control compensation of all those at the very top.
His final argument is that doctors do some great things and therefore deserve this extremely high compensation. It’s true that doctors can perform miraculous things these days. Fifty years ago my first born probably would not have survived. I would be willing to pay quite a lot for that. But that’s not how we set prices.