If you bump into a doctor at a local restaurant and he or she appears to be in a good mood, ask them to pick up your tab. If their earnings are anything close to what federal statistics say, they’re bringing home really good money.
The Washington Post analyzed Internal Revenue Service data from 2017 and found a shocking but unmistakable trend: Doctors in rural states are making more money than those in the more populous ones.
South Dakota and North Dakota, in fact, reported the highest average income for doctors aged 40 to 55 in 2017 — including their salary, business income and capital gains.
The average income for South Dakota doctors in that age bracket was $524,000. North Dakota’s was $468,300. Three more rural states — Alaska, Wyoming and Nebraska — followed.
As for Mississippi, income for its doctors aged 40-55 averaged $436,500 in 2017. That was good enough for 11th place on the list.
Louisiana ranked 16th at $422,800, and given that the state includes large markets like New Orleans and Baton Rouge, it is a perfect illustration of this financial puzzle: How do Mississippi doctors have a higher average pay?
Nobody should begrudge physicians a high income. They spend years in medical school and residency. Good doctors are invaluable to their patients, the hospitals where they work and the communities in which they live. No hospital became a great institution without great doctors.
Economists who are studying the issue say doctor income does not have a strong relationship to local education levels or local real estate prices. Yet, “After accounting for training and experience, doctors of all stripes in low-income areas out-earn their peers in high-income ones.”
How can this be? One factor is less competition. The Post cited census data to determine that “rural America” has about 20% of America’s population but only 10% of its doctors. That means those who are willing to work in rural areas don’t have to worry so much about what they charge for their services. The closest competition may be 25 or 50 miles away.
However, there is another type of competition that helps the income of doctors. It can be difficult to convince doctors and their families to move to rural areas and give up all the amenities of a big city or larger market. One way hospitals can do it is by paying doctors a higher salary to relocate.
That’s interesting stuff. But a University of Chicago economist believes the federal government is playing an outsized role in this financial conundrum.
Through Medicare, “perhaps the biggest spigot of health-care cash on Planet Earth,” the government directly influences physician pay.
Medicare is set up so that retired Americans, who are by far America’s biggest health care customers, can get treatment anywhere in the country. These patients get medical care subsidies no matter where they live — in snowy North Dakota or sunny Miami.
Also, through a complicated formula that tracks what other professionals earn, the Centers for Medicare and Medicaid Services adjusts how much Medicare reimburses doctors in each market. The goal appears to be to lessen the potential for large variations in doctor pay.
But the big win for doctors’ incomes in rural states came through the Affordable Care Act, which raised reimbursements to the national average in all markets where it was below that.
Given our health care spending, it’s no surprise that the doctors who deliver it are well paid. The surprise is where their pay is higher.
Jack Ryan, Enterprise-Journal
