The United States pays more than twice as much per person for health care as other wealthy countries. We tend to blame the high prices on things like drugs and medical equipment, in part because the price tag for many life-saving drugs is less than half the U.S. price in Canada or Europe.
But an unavoidable part of the high cost of U.S. health care is how much we pay doctors — twice as much on average as physicians in other wealthy countries. Because our doctors are paid, on average, more than $250,000 a year (even after malpractice insurance and other expenses), and more than 900,000 doctors in the country, that means we pay an extra $100 billion a year in doctor salaries. That works out to more than $700 per U.S. household per year. We can think of this as a kind of doctors’ tax.
Doctors and other highly paid professionals stand out in this respect. Our autoworkers and retail clerks do not in general earn more than their counterparts in other wealthy countries.
Most Americans are likely to be sympathetic to the idea that doctors should be well paid. After all, it takes many years of education and training, including long hours as an intern and resident, to become a doctor. And people generally respect and trust their doctors. But they likely don’t realize how out of line our doctors’ pay is with doctors in other wealthy countries.
However, as an economist, I look for structural explanations for pay disparities like this. And when economists like me look at medicine in America – whether we lean left or right politically – we see something that looks an awful lot like a cartel.
