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The Great Unmentionable

The role of high salaries and wages in health care inflation.

Jul 30, 2012, Vol. 17, No. 43 • By ELI LEHRER
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In discussions of America’s high health care costs, surprisingly little attention is paid to salaries and wages. Yet the fact that medical jobs simply pay more than those in other sectors is beyond dispute. A physician practicing in a primary care setting, according to the Bureau of Labor Statistics, earned an average of just over $200,000 in 2010, while specialists averaged over $355,000 (the highest of any professional category tracked). By comparison, lawyers average just over $110,000, airline pilots about $92,000, and chartered actuaries (who calculate risk for insurance companies and must pass complex exams longer and arguably more difficult than the medical boards) about $150,000.

Doctors Price Gouging?

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The wage disparities, however, don’t stop with physicians, who do, after all, need to complete an academic curriculum that’s beyond most people’s abilities. Registered nurses and dental hygienists, who need only associate’s degrees, earn about $70,000 a year. This is about as much as degreed computer programmers. And it’s significantly more than high school teachers and forensic scientists, who need master’s degrees but earn a little less than $60,000 on average. And wage disparities exist at all levels of the health care industry: Even nonmedical professionals like janitors tend to earn more in health care settings than those working elsewhere. An extensive report from the Brookings Institution sums up the evidence: “Health care pays higher than average wages regardless of workers’ skills and demographic characteristics.” Indeed, the report goes on, “expanding health care is likely to raise wages throughout a metropolitan area by putting upward pressure on wages throughout the metropolitan labor market,” even for jobs requiring no post-high school training at all.

There’s no way around it: Wages drive high medical costs much more than any other factor. Between 2005 and 2011, as overall average wages barely kept pace with inflation (with rising health costs making real take-home pay flat for many workers), average medical wages grew a healthy 18 percent, rising from just over $62,000 to almost $73,000. The American Hospital Association estimates that two-thirds of all medical costs are attributable to wages and benefits. 

Not only are the wages high but medical jobs have the kind of security few other professions can match. Total employment in the medical/education “super-sector” has never declined in the more than 40 years that the Bureau of Labor Statistics has tracked it, using current methodologies. Between 2008 and 2010, as the country sustained the deepest job losses since the Great Depression, the number of health care practitioners and support personnel increased by almost 400,000, even as the economy overall shed more than 7 million jobs. Doctors’ unemployment rate has never exceeded 2 percent.

Unfortunately, all this expense is not producing significantly better health care outcomes. While the United States undoubtedly leads the world in medical innovations and cutting edge care for uncommon conditions, gross measures of health care outcomes like life expectancy and infant mortality (which, it’s true, are heavily influenced by lifestyle, demographic, cultural, and genetic factors independent of the medical system) are below average for wealthy countries. By some measures, American health care practitioners work less hard than their peers in other countries. While other wealthy countries average just a little over three hospital staff per hospital bed, American hospitals have more than five people for each bed. The U.S. health care system may not be worse than those elsewhere—it does draw people from all over the world—but there’s no evidence the enormous labor costs are producing world-beating outcomes.

While American hospitals do generally have higher capital expenses than those elsewhere in the world in terms of high-tech diagnostics and creature comforts like private rooms for patients, many costs paid by all hospitals everywhere—rents, taxes, energy, food service—are more affordable in the United States than in other rich nations.

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