Health Affairs: Physician salaries fuel higher healthcare spending in U.S.

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High physician fees, rather than factors such as practice costs, volume of services or tuition expenses, were the main drivers of higher U.S. healthcare spending and physician income, according to research presented in the September issue of Health Affairs.

The study, conducted by Miriam J. Laugesen, PhD, and Sherry A. Glied, PhD, both of the Mailman School of Public Health at Columbia University in New York City, found that in some cases, physicians in the U.S. are paid as much as double their counterparts in other countries. There is also a larger gap between fees paid for primary care and fees paid for specialty care, particularly orthopedic surgeons, in the U.S. compared to other countries evaluated by the study.

Fees paid by public and private payors for primary care office visits and hip replacements were compared in six countries: Australia, Canada, France, Germany, the U.K. and the U.S.

Laugesen and Glied found that primary care physicians in the U.S. were paid, on average, 27 percent more by public payors for an office visit, and 70 percent more by private payors for an office visit, compared to the other countries. The largest difference in fees paid between countries was for hip replacements. Physicians in the U.S. were paid 70 percent more by public payors and 120 percent more by private payors for these procedures as compared with physicians in the other countries.

Across the fees analyzed by the study, the biggest disparities in pay to U.S. physicians existed on the private side. Fees paid by private insurers in six markets in the U.S. averaged about 33 percent above Medicare rates for primary care and 50 percent above Medicare rates for hip replacements.

“Our analysis suggests that policymakers in all countries need to consider how differential prices paid by both public- and private-sector payors to specialists influence specialty choices,” wrote the authors. “Furthermore, this analysis suggests a need for greater standardization of cross-national data on the nature of physician services provided, fees, education and incomes to allow ongoing comparative research on the relationship between prices and healthcare spending growth.”

Incomes were also higher for U.S. primary care and orthopedic physicians compared to their foreign counterparts.

The authors said other factors thought to contribute to physicians’ fees, such as high medical education tuition costs for American physicians or increased work volume, could not fully explain the disparity in fees when compared across the countries.

“Although the tuition cost of medical education in the U.S. borne by individuals is substantial, it cannot fully account for the observed differences between the earnings of U.S. physicians and physicians in all other countries,” wrote Laugesen and Glied.

For the services examined by the study, higher physician incomes did not appear to be due to a higher volume of services, though the authors acknowledged the rates of other procedures not studied may be higher and contribute to the elevated fees and incomes.

One possible explanation offered by the authors for the high U.S. physician fees was the notion that higher fees may reflect the cost of attracting highly skilled candidates. When physician fees in each country were compared to the mean incomes of the top 1 percent of households within that country, the results were broadly consistent, suggesting higher U.S. fees were the result of a “society with a relatively more skewed income distribution,” according to Laugesen and Glied.