Thursday, April 7, 2016

Doctor Shortages? Cut Tax Rates.

Doctor Shortages? Cut Tax Rates.

The Association of American Medical Colleges (AAMC) has released projections showing that we may have doctor shortages in coming years. The demand for doctor services is rising in our aging society, but various factors in the health care industry are hampering supply.
But policymakers should remember that high income tax rates inhibit the supply of top earners across all industries. America’s tax system is the most “progressive” or graduated among OECD nations, and that has consequences. If the government penalizes the most productive people, they will work fewer hours, retire earlier, and make other decisions to reduce their labor efforts.
Some politicians on the campaign trail want to raise tax rates on high earners, and they seem to consider them little more than economic leeches. The truth is that most high earners are very industrious people who add crucial skills to the economy. The nation’s 708,000 doctors and surgeons are a case in point.
The Bureau of Labor Statistics (BLS) reports that “physicians practicing primary care received total median annual compensation of $241,273 and physicians practicing in medical specialties received total median annual compensation of $411,852” in 2014.
That high pay makes sense because doctors are highly skilled, face substantial stress, and often work long hours. The BLS notes, “physicians complete at least 4 years of undergraduate school, 4 years of medical school, and, depending on their specialty, 3 to 7 years in internship and residency.” And after all that training, they often “work long, irregular, and overnight hours.”
So how does Congress reward that hard work? It imposes punitive marginal income tax rates on them of up to 40 percent, with state income taxes on top of that. Even lower-earning doctors can be pushed into the highest income tax brackets if their spouses work.
Doctors are exactly the type of workers who have large negative responses to high tax rates because they have substantial flexibility in managing their careers. With high tax rates, fewer people will want to go into this difficult profession, stay in it, and work the long hours—and that ends up hurting all of us who use the nation’s health care system.


  1. Here in Las Vegas, there is already a doctor shortage and a pretty bad one at that. My problem with an article like this Lou, is that they are basically saying if we just lowered the tax of doctors, they will suddenly love the fact that they have to fight with insurance companies and still see up 30 patients a day if they work for an HMO. Do you really believe this?

    This to me, suggests we don't want to change our for profit medical system. So what tax rate should doctors pay? 13% like "investors"? Admittedly, my experience of spending an entire year in a primary care office does not make me an expert. Still, the things my preceptor complained about were not tax related. He wants to do a good job, and our tax code was not blocking him from doing that. I think that gap in pay noted above has much more to do with the lack of people being willing to enter primary care.

    1. We also face the same issue. Now doctors chose patients.
      Mine will not accept medicaid or ACA insurance. One insurance retaliated (Cigna) and tried to force him to take ACA patients. He dropped Cigna.

      He's moving toward faster payments. Regular insurance pays withing 30-60 days. He will accept medicare from existing patients even though it's 60-90 day pay.

      Imagine a doctor in California. 39% Federal income tax, 13.3% state income tax. What's the incentive to be a doctor in a high tax state?

      The cost of healthcare will continue to rise as the cost rises. They pay more in taxes, they charge more. Just like any business.
      The question remains, how do we cut the cost of healthcare with so many costs built into the system from college, med school, specialty, internship with little compensation then add in the costs after the fact of insurance, interest on loans, employee costs, rent, utilities, equipment, follow up education, etc. Where's the incentive to become a doctor other than the desire to help people?

    2. It's so funny to me that you and I magically have anecdotal evidence from two physicians that not only are 180 degrees different, but also reflect our world views. My preceptor is not fond of dealing with Cigna either because of all their pre-authorization bullshit, but he was happy to take ACA patients and he has no problem at all with Medicare.

      Lowering taxes on MD pay will not make healthcare cheaper.

      As I asked up top, do you believe that doctors will suddenly be so happy with a lower tax rate that they will flock to primary care?

      Do you believe doctors will suddenly charge less because they have lower taxes so that they basically put themselves right back in the same spot?

      I mean, it's the tax thing AGAIN with the belief that lower taxes will fix everything despite the fact we have about 3 decades of data that suggest something entirely different.

    3. I don't believe I said lowering taxes would make healthcare cheaper but raising taxes will certainly make it more expensive.

      Would a tax break for physicians with the probability of making more be an incentive for more to become doctors?

      Of course no one charges less when costs are reduced from the paper delivery person to ice cram to any business in the US. Raising cost will certainly result in price increases.

      Lower taxes fix nothing but it does leave the person paying less in taxes with more. The 10 million people who were removed from the tax rolls with the Obama tax cuts in 2013 will attest to that.

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    5. The thing is, primary care physicians aren't really going to make more or get paid better, they will just pay less taxes and they will still make way way less than physicans who specialize and they will still have to deal with all the bullshit that insurance companies dish out. Anecdotally (again) I've been talking to the doctors just out of residency who are doing a fellowship with our company for palliative care. They expressed a lot of disappointment with what they found out medicine would be versus what they hoped it would be. Money was not an issue, but job satisfaction was. I think you answered my question (not sure) with an affirmative that you think lower tax rates from primary care docs will entice more residents to enter that field. Nothing I've seen so far from the inside suggests taxes have any meaningful impact on the decision to avoid primary care.

      My preceptor enjoys primary care and his patients love him. However, he only schedules 13-15 patients max every day. A tax break would make him happy cause he would take home more money, but it's not like he's going to leave primary care if tax rates go up. I believe that removing people from the tax roles was basically a bribe for sending good paying jobs away and to compensate for the fact that they did not get raises for year after year after year. I'd bet a fair amount of money Lou that those people would much rather make better money than pay no taxes. Do you disagree?