What does society owe its doctors?

Shortly after we moved to New Jersey in 1977 from Portland, Oregon, my first wife and I bought a house in South Orange, New Jersey not knowing that my life was about to change in a very dramatic way. I was swimming in the town's community pool when I noticed someone who was trying to figure out if he knew me. After a brief period, he exclaimed, "Chay?" Chay is what all my friends call me. How I got that name is a long story.

My friend, whom I grew up with in school - from grade one through high school - had become an oncologist, a pillar of the community, someone people from all over the country consulted with when they discovered they had cancer.

We quickly renewed our friendship and his wife quickly became one of the closest friends of my wife. I said that my life, unbeknownst to me, was going to take a dramatic turn. It did. My friend introduced me to his circle of doctor friends and suddenly I was moving around in a circle of highly accomplished doctors.

I maxxed out my credit cards, went to the best parties, tried to keep up with the Filipino Joneses. It was very different in Portland, Oregon and before that in Seattle. In both cities where I had been, most of my friends were working-class people and Filipino old-timers. Now my wife and I were in the giddy company of doctors who were destined to become some of the best doctors in their fields in the New York metropolitan area.

I was having career midlife crises at the time and it was inevitable that I would eventually start feeling sorry for myself. I felt, at times, that my new friends were asking, in the back of their heads, why I did not become a doctor. Doctoring, after all, was for them the zenith of anyone's professional aspirations, so why did I not go into medicine when I had the chance? Assuming that I had the chance.

I was convinced that the world was tailor-made for doctors. All they had to do was put in the work and the long hours, and bingo, after a few years they would live in these houses that ordinary people could only dream about. Not to mention the sports cars.

I went through much of my life not being in awe of anyone, but I must admit I looked at doctors with awe. Except my life-long friend. He was my friend, after all, and I would never allow myself to be in awe of him.

I lucked out when later in life my net worth increased to a level I had never imagined I was capable of accumulating. Not in the league of doctors' fortunes, but still more than enough for me to live on for the rest of my life.

It was only then that I felt I was equal to the doctors. I started to ask the questions that I would never have asked if I had not known financial success later in life. I would never question doctors' incomes if by doing so I would expose myself to suspicion of committing the cardinal sin of Envy.

But now that the whole country is discussing health care reform, I feel that it is time to analyze the level of income of doctors and that one of those who will do this analysis is me.

I will also try to analyze the impact of lawyers on the health care costs in this country in a future blog post.

For starters, let us look at the macro picture. Australian doctors earn 70,000 to 98,000 Australian dollars (U.S. 63-90,000 dollars) per year, compared to U.S. general practitioners and internists at $125,000 (according to the McKinsey report). This is a fair comparison because in the latest World Health Organization rankings of health care systems, Australia came in at number 32 while the U.S. came in at number 37. We're comparing similar health care effectiveness, though Australia is ahead of the U.S. in that category for half to 80% of the cost of internists and general practitioners.

The WHO rankings' number one health care system is the French. There general practitioners earn 71,000 to 72,000 Euros (about $100,000 U.S.). Again, compare this to $125,000 Internists and General Practitioners in the U.S. Not much difference in earnings.

It is estimated that the U.S. pays its doctors $58 billion a year more than they deserve to be paid for comparable care in other countries (McKinsey report). If the difference in earnings is not in Internists and General Practitioners between U.S. doctors and doctors in foreign countries, whose earnings account for the excess $58 billion a year that U.S. doctors are paid?

You guessed it. It's in the specialists. While specialists in Australia typically earn $200,000 a year, U.S. specialists' earnings are in the millions.

There is a special category of doctors in the U.S. who have opted out of the health maintenance organizations and the Medicare/Medicaid systems. They don't need the insurance companies because they are in such highly-specialized fields that people mortgage their houses to be treated by them.

Why do U.S. specialists earn as much as they do? Most people will tell you that it is because of two factors. One, U.S. doctors - especially those who have specialized in extremely complicated surgeries - went through highly intensive and rigorous study not only in medical school but also in hospitals as interns and residents before they began their independent practice. They therefore deserve whatever rewards society will grant them. U.S. doctors go through 16 to 18 years of intensive study, according to some reports, before they establish their practice.

Two, doctors are in the business of saving lives and making lives more productive by curing diseases.

Let's analyze reason number one. If doctors are compensated highly for the number of years they spent in intensive study, then we should also compensate the PhD's in philosophy, in science, in psychology nearly as much as if not as much as the doctors.

Aha, you might say, those PhD's do not do a lot of overtime work and save lives. I will grant this, though in the case of the PhD's in Psychology, they do save lives by preventing suicides. I will not go there, will instead grant that doctors save lives and PhD's don't.

But what about the firemen and the policemen? Don't they save lives? And don't they put in long hours? Don't they patrol the dangerous streets where in an instant they could be dead? Firemen and policemen save more lives than doctors, so why do they not make anywhere near as much as doctors?

Let's redirect our inquiry to doctors all over the world - not just in the U.S. Why is it that doctors in Australia, in many European countries and in developing countries like the Philippines are not automatically some of the richest people in those countries?

What is unique about doctors in the U.S.? I have wrestled with this subject lately because I am one of those who are glued to the TV watching talking heads spew their wisdoms about the health care crisis in America.

Doctors in underdeveloped countries are operating in lean mines. The economies simply cannot support the lavish lifestyles of doctors that are typical in America. Some doctors in third-world countries like the Philippines are in fact paid, not with currency, but with livestock (chicken, pigs, etc.)

In Europe, Canada and Australia the practice of medicine is restricted because doctors for the most part work for a single payer, the government. Government, as we all know, is stingy. It's built that way. Have you ever heard of anyone working for the government - except the successfully corrupt - getting rich from that employment?

The conditions in the U.S. are tailor-made for the fortunes being amassed by doctors. This, after all, is the richest country in the world, and in this richest country, there is no mechanism for keeping doctors' incomes down. The sky is the limit for doctors' incomes, and that is the way it should be, if one embraces the pure capitalistic system of charging patients what the market will bear.

And here is where we go back to Adam Smith. Is there perfect competition in the practice of medicine? Adam Smith always assumed that perfect competition was possible. When we look at the fees charged by doctors to rich or uninsured patients or to insurance companies, etc. are these fees what a willing market must pay?

Why are there shortages of doctors in the U.S., which should have a bumper crop of doctors since the practice of medicine is very profitable here? Has our legal system in fact created conditions that led to a chronic shortage of doctors thereby insuring that those who practice medicine here are rewarded with lavish lifestyles?

I must be careful not to overstate this case since there are many doctors who are barely getting by. The insurance companies have over the years cut back on doctors' compensations and doctors no longer make as much as they did.

You want to know why health care is so expensive in the U.S. that now 17% of the country's GDP is spent on health care? It is because many doctors, including most specialists here, are automatic multi-millionaires. Radiology companies, independent staffers of nursing, collection agents for doctors, ambulance companies, MRI and kidney dialysis companies - all businesses connected to the field of medicine - are raking in. If no drastic changes occur, the field of medicine and satellite industries will bankrupt the Medicare and Medicaid systems in as little as one generation.

More and more Americans are just one major sickness away from bankruptcy - even if they have insurance.

How do we get out of this loop? The obvious solution is through a single-payer system. Let there be universal health care, with the government setting limits on what doctors and peripheral medical service providers charge for their services.

If Americans do not want a single-payer system, then they must lobby their government to step in and address the problem of too few specialists and too many general practitioners in the field of medicine.

For far too long, the actual numbers of specialists have been kept down artificially by all the silly requirements imposed by the states' medical boards and by the AMA. A doctor who performs complicated surgeries in India, Thailand or the Philippines, for example, will not be allowed to practice in the U.S. unless those doctors are willing to take the medical board exams, go through an internship program, etc. which will set these eminent foreign doctors back a few years from which the doctors could never recover. So these accomplished doctors don't come here.

The doctors who are recent graduates of medical schools in foreign countries are being shunted into general practice and internal medicine and psychiatry, which are not as lucrative as the glamour specialties.

This assures that the glamour specialties - the various surgery specialties, oncology, cardiology, etc. - always have a shortage of practitioners. The system has institutionalized those shortages. That is why we as a country pay so much for surgical procedures and other highly specialized doctors' services.

We pay to the tune of $58 billion a year more than what we should pay each year, according to the McKinsey report.

The solution, therefore, is to open up the practice of medicine in this country, with the specific mission of recruiting more specialists who have made a name for themselves in their home countries. Actual work experience in foreign countries must be considered equivalent to work experience in the U.S. Only U.S. arrogance denies that fact.

The government must provide incentives by underwriting the cost of medical school for aspiring high school graduates. The government can start by canceling student loans for those medical school graduates who choose to specialize in fields where there are shortages that cause huge fees being charged by doctors.

Recently, two new medical schools have opened up. More are on the pipeline. That will help.

We are on the cusp of insuring 30 million Americans who have not had health insurance through the health care reform movement in Congress, graduating more doctors will tend to keep costs where they currently are. Or bring costs down. "Down" is ironic because in the U.S. that still means high up there in the deep blue sky.

Either we do this, or we as a country will be forced at some future date to revisit the idea of a single-payer system similar to Australia's, and Canada's, and many European countries.

We will have to ask ourselves: What does American society owe its doctors?

(Next week: How do lawyers contribute to the high cost of health care in this country? After lawyers, we will examine the drug companies, then the hospitals.)