Don’t go into medicine for the money

Today’s inane image of the day:

Classof 2015Tassel
With graduation around the corner, this struck me as an opportune time to talk about the finances of medical training.


I’m usually a huge fan of Dr. Ezekiel J. Emanuel‘s writing – whether it’s his controversial piece on healthcare resources at the end of life or his book describing the tumultuous healthcare policy that led up to the Affordable Care Act [I’m about halfway done with it – the title is pretty… epic: Reinventing American Health Care: How the Affordable Care Act will Improve our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System], I generally enjoy reading his editorials and vehemently agree with many of his opinions. This being said, when I saw that he contributed to the latest issue of JAMA on the topic of professionalism – entitled, Enhancing Professionalism Through Management, I was intrigued. Per usual, I started reading the piece and nodded my head in agreement – yes, professionalism can be defined in many ways and money definitely plays a role – but when I got to the 9th paragraph:

“In 1950, when 4.6% of the gross domestic product went to health care, the average salary of a primary care physician was 2.75 times the median income, or $8800.4 Sixty-five years later, roughly 17.4% of the gross domestic product goes to health care, and the median household income is $51 900 with nearly 50% of households having 2 income earners.5 Today, the average salary of a primary care physician in the United States is 3.40 times the median household income, and some specialists earn 10 and 20 times that level.6More importantly, the majority of physicians are in 2-income families—often 2 professional incomes—so the income gap between the average US household and the physician household is even greater. Looked at another way, many, if not most, physicians are probably in the top 1%. These numbers suggest that most physicians should have all the financial security they could—or should—ever want, yet some still have managed to falter in their commitment to professionalism.” – Excerpt from Enhancing Professionalism Through Management published in JAMA

Woah, hold on there, Dr. Emanuel – have you checked out the latest data on medical student debt? Let me catch you up a bit – median debt for a graduate of a public medical school is $170,000 and $200,000 for a private medical school. Back in 1950, when the median household income was $3300 per year [or $3200 if you take the $8800 you cited for a physician salary and divide it by 2.75], medical school tuition at the University of Pennsylvania was $700 with a general fee of $20 – so let’s say $720/year. Today, tuition at the Perelman School of Medicine is $50,444/year – almost the amount of the current household median income of $51,900. So back in 1950, it cost ~22% ($720/$3300) of the median household income to attend medical school and today, it costs ~97% ($50,444/$51,900) of the median household income. High compensation for physicians is the only way it’s possible to finance medical school (especially if the medical student is from a middle-class or low-income household).

Having been an engineer in my past life, I turned to a spreadsheet to crunch some numbers. Feel free to follow along here: I made the following assumptions:

  • I am comparing an individual with a median salary of $51,900 to a physician who will have a median salary of 3.4 * $51,900 = $176,460.
  • Both individuals are assumed to have no undergraduate debt at Postgraduate Year 1.
  • I am assuming pre-tax income and 30% pre-tax savings into an investment account with 5% returns annually.
  • I have started the comparison from when the physician starts medical school – this is the point when debt begins accumulating. Both the median income individual and the medical student begin at time zero with no debt.
  • The physician accumulates $50,000/year of debt at an interest rate of 7% annually.
  • The physician does a 3 year residency with a PGY1 starting stipend of $50,000. This increases by $1,000 each year.
  • The physician does not accumulate savings while he/she still has debt – only after loans are paid off (at an equal rate of 30% pre-tax income) can the physician begin investing at the same 5% annual return.

After accounting for all of these assumptions, I found that at Postgraduate Year 17, the physician finally exceeds the savings of the individual with a median household income. This means that you cannot really say that a physician is even above the median until after they are at least 39 years of age. In reality, at a stagnant income of $176,460, a physician will never reach the 1% (at least according to this article on The Atlantic – this income only puts you in the 1% if you’re between the ages of 27-31). I actually think it’s a fair assumption to keep the physician salary stagnant with the shift in fee-for-service to value-based reimbursement. While the 2 income household may change these calculations so that the 2 physician household catches up sooner, at least in my medical school class, most of my classmates will not be in 2 physician or 2 professional families. Additionally, with 2 physician households, one of the challenges that arise is the potential for double the student loan debt, which would ultimately lead to a conclusion similar to what I already arrived at. Even with 2 professional families, tuition is high at most professional schools (e.g. law school, pharmacy school, etc).

When we look at physician salaries, we often forget that medical school tuition and protracted medical training (i.e. residency +/- fellowship) result in substantial lost income potential. If I had modeled my example off of my friend’s engineering salary (and expected trajectory), a physician’s total investment value would not surpass the engineer’s until Postgraduate Year 33 – or at least 55 years of age.

I’m not going to discuss whether it’s fair for some physicians to be making 10-20 times the median income. But I do think it’s important to recognize that the vast majority of physicians are not seeing that exorbitant income. Also, let’s make sure when we discuss physician salaries that we are adjusting for medical school debt and lost income potential during medical school and residency. Then, it’s a fair comparison.

With all of that being said – don’t go into medicine for the money.

2 thoughts on “Don’t go into medicine for the money

  • July 6, 2015 at 1:21 pm

    I don’t know where income taxes come into this, but physicians come out from paying little tax to the highest tax bracket which also cuts into the actual “income” we’ll receive. Thank you for crunching the number. Couldn’t have done it myself.

  • July 18, 2015 at 2:37 pm

    Good point. Something I’ll have to consider using to adjust my calculation in the future!

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