The case for free medical school

At i2g Consulting, we encourage people to think differently.  Different perspectives lead to different conclusions.  Let's start with healthcare.

Everyone knows that the cost of healthcare has gotten out of control.  The average cost of employer sponsored healthcare is $20,000 for a family plan.  We know that a portion of that money goes drugs, a portion to hospitals, a portion to home health and nursing.  About 16% of the money spent on healthcare goes to doctors- approximately $550 billion a year.  

To do some simple math, there are about 1 million physicians in the country.  So, physician services average about $550,000 per year.  Of course, doctors have to pay malpractice insurance, staffing costs, some office costs and other expenses.  But, the average physician salary is still around $300,000 per year. Pretty good pay, right? 

Right about now, the reader is checking the title of this piece and trying to connect "$300K per year" with "free med school".  To better understand this, we need to answer 3 questions:

• Are physicians well paid?
• Do all physicians make the same amount of money?
• What is the role of medical school in physician compensation (and, by extension, in the cost of healthcare overall)?

Why are physicians so well paid?
Physicians aren't necessarily well paid around the world.  In the US, Western Europe, Australia and New Zealand, doctors are well compensated.  However, in Spain, doctors make about $63,000 while in Mexico, doctors make about $22,000.  These differences aren't in line with the difference in cost of living or the size of economies.  Doctors in the US are well paid for a few reasons:

• Medicine is a highly valued and highly respected profession in the US.  As a result, the best people consider it and the salaries reflect the intellectual and professional quality of the people in the profession.
• American medicine is considered the most advanced in the world.  While care outcomes and the general health of the population do not generally reflect the quality of this care, it is true that there are procedures, techniques, medicines and solutions available in the United States that are available in few, if any, other parts of the world.  Despite the price disparity, far more people come to the US for specific procedures than the reverse flow of US residents as medical tourists abroad.  Unique, specialized care supports higher salaries for those few physicians who can deliver these services.
• Med school is expensive- setting a high hurdle for expected future compensation.  We will come back to this point in a moment.

Do all physicians make the same amount of money?
The simple answer is, no.  In fact, the disparity between 2 doctors who may have gone to the same med school is pretty substantial.  There are 2 primary reasons for this:

1. Some specialties require more training and expertise than others.  The longer a physician trains, the longer they defer payment (residencies and fellowships generally pay poorly) and defer life in general.  Loans and liabilities pile up, requiring a higher income level to "clear the decks".
2. Those physicians with deeper and rarer specialties are able to perform more challenging procedures, which generally come with higher reimbursement.  Therefore, to hospitals at least, their time is worth more than another physician with less specialization.

You can see where this leads.  Longer training demands higher compensation; higher compensation  makes longer training more attractive.  This is a self-feeding loop because the difference in compensation more than pays for itself over time.  Deferring full salary for 6 years to essentially double lifetime pay makes a lot of economic sense, particularly in an industry that has proven to be essentially recession proof.
Medical School Role
By now, it should be obvious that the cost of medical school is part of this equation.  The "pot of gold at the end of the rainbow" is one of the reasons that medical schools can charge what they do.   The average annual cost of tuition at public schools is more than $30,000; more than $50,000 at private medical schools.  But that doesn't capture the full cost.  Students generally borrow for living expenses as well and often have to continue to borrow money through a portion of their training.  As a result, the median debt for students at private medical schools is $180,000.  That number drives behavior for years, from choice of specialty (higher compensation) to choice of location (cities or academic medical centers which pay more) to the actual practice of medicine (more patients, more volume, less personalized care).  

This necessary appetite for higher compensation directly affects both the quality and the cost of healthcare in America:

• Fewer physicians can afford to choose lower compensation areas and those are generally in the primary care arena- pediatrics, internal medicine, family medicine.  While the idea of "shortage" may be overblown, long waits for these services are not.  
• The need to pay doctors a lot of money leads to over-treatment, particularly in lucrative elective services.  For example, according to the Journal of the American Medical Association (JAMA), as many as 1/3 of joint replacements are unnecessary.
• Rural healthcare, and other high need areas like the Indian Health Service, are poorly supplied.  One doctor profiled in the Washington Post covers 11,000 square miles by himself.

The case for free medical school
Given everything we've discussed, free medical school may seem an illogical conclusion.  An industry that generates $4 trillion in revenue annually seemingly has the money to pay high salaries and absorb high costs.  However, the fiscal impact of medical school debt impacts what we pay for healthcare and where we can get healthcare far into the future.

With that in mind, consider this modest proposal:

• In each year's budget, the US Government allocates $48,000 per medical student for tuition.  
• This would cost approximately $5.75 billion per year based on 120,000 current students in medical and osteopathic schools.  This number represents about 1.5% of the total money spent on healthcare in the United States each year and approximately the same percentage of the federal budget.
• Each accredited university would have the option of "opting in" or "opting out" of the program. If a university wants to continue to charge tuition, they may do so and their students would have none of the obligations associated with the program.  However, those schools would also not be eligible for any federally funded aid programs.
• In exchange for free tuition, students register with a Medical Selective Service.  This "draft" would be used to fill high need positions in specific areas of public concern, whether rural, urban, Indian Health Service, Public Health Service or other.  Minimum commitment would be 4 years of service after residency but the solution would work more like the Reserves or National Guard rather than Active Duty.  A doctor may find that they are not tapped for service during their 4 year commitment; they are, however, active registered and available as necessary.

This is not a panacea.  However, it plants the seed for a more sustainable healthcare system,  addressing structural issues that affect our system today.  In 10 years, one would expect:

• A larger number of physicians choosing primary care specialties because they would not have the economic burden associated with enormous debt. 
• An alleviation of shortages in geographic areas based on the ability to assign doctors for several years to otherwise ignored populations.
• Lower pressure on healthcare costs overall based on physician compensation and a right-sizing of the number of specialists against true demand.

Indeed this is a bold leap.  But, it's the kind of 10 year plan that would change our healthcare future for the better.