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The Medical Wage Gap Is Helping to Torpedo American Health Care

If doctors made a little less and nurses a little more, the entire health-care industry could be transformed

When you think of a cartel, typically, you think of a ruthless criminal organization. You think of drugs being smuggled across the border in black bags or overflowing suitcases. The images are often violent ones — severed limbs, kidnappings and murder. But there are other types — in fact, any group that works to uphold high prices by restricting competition is by definition a cartel. And that’s exactly the right description for the American Medical Association (AMA), the largest association of physicians in the country.

The AMA’s influence over the U.S. government and, by extension, their control over the U.S. health-care system, is well documented. In February, Rachana Pradhan, a reporter for Kaiser Health News, unveiled the “on-the-ground stealth campaign” undertaken by physicians who occasionally perform lobbying duties so that all the health-care chatter doesn’t mean less money for them. In short, they wanted to remind Congress that if they wanted the money that’s long been funneled into their campaigns to continue flowing, when the time came to answer the calls of their constituents and do away with surprise medical bills (extra charges to a person who has health insurance, but who inadvertently receives care from an out-of-network provider), the insurers, and not the doctors, would suffer the financial hit. 

“Four physician organizations that have heavily lobbied on surprise medical bills and have private equity ties — the American College of Emergency Physicians, Envision Healthcare, U.S. Acute Care Solutions and U.S. Anesthesia Partners — gave roughly $1.1 million in 2019 to members of Congress, according to a Kaiser Health News analysis of Federal Election Commission records,” reports Pradhan. The biggest recipients were Democratic representatives from Florida Donna Shalala and Stephanie Murphy, who got $26,000 each. 

This, according to Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research, is precisely why the average income of doctors in the U.S. is nearly twice that of doctors in almost every other country in the world, and more than four times that of nurses. “Doctors are by far the highest paid major profession in the U.S.,” says Baker. “Their average pay is around $300,000 a year.” 

For comparison, the average salary of a doctor in the U.K. is $138,000. In Germany, it’s $163,000. “It just sort of jumps out at you, why are doctors paid so much more in the U.S.?” asks Baker. “It’s not true of other occupations.” The wages of manufacturing workers in the U.S., he cites as an example, are lower than in other countries. “Germany’s [manufacturing workers’ wages] are like 40 or 50 percent higher,” he explains. “France is higher. Denmark. Pick a country, they’re almost all higher.”

To be clear, doctors in the U.S. aren’t more skilled than doctors in other countries. In 2017, Time reported on a new study published in The BMJ which found that “foreign-trained physicians practicing in the U.S. had slightly better patient survival rates than their American-trained colleagues.” And yet, as Baker tells me, here in the U.S., we very much limit immigration of foreign doctors, “even well-trained ones.” “So, while our trade policy has been quite explicitly designed to put our manufacturing workers in competition with workers from all over the world to put downward pressure on wages in manufacturing, there’s been basically nothing done to facilitate foreign doctors coming into the U.S.,” says Baker. 

Quite the opposite: Here in the U.S., the AMA has effectively made it impossible for foreign doctors to practice. “We’ve reduced the number of foreign medical residents, and we’ve made it more difficult for foreign doctors to test into the U.S.,” says Baker. “So we keep out doctors, even ones who are almost certainly very well qualified.” 

In other words, a doctor who has been practicing in Germany or France for 10 years isn’t allowed to practice in the U.S. unless they go through medical school all over again. “Basically, they have to take a U.S. residency program,” says Baker, which takes at least 10 years and costs up to $270,000. “That’s a big part of the story: We limit international competition.” 

But we limit domestic competition, too. Baker points to some interesting research in recent years on a range of health-care professionals, like physicians’ assistants and nurse practitioners — all of whom are paid less than doctors — “who have very, very extensive training and are very skilled professionals, but we restrict what they can do.” 

This restriction, according to Allison Marier, co-author of the study on occupational licensing Baker is referring to, tells me that licensing requirements in some states effectively tie nurses to doctors. Because of the way nurses are regulated, many health-care practitioners are subject to licensing restrictions that determine what tasks they may do, such as having the authorization to write prescriptions without a doctor present. This not only reduces the efficiency of the health-care system but also keeps a check on the supply of services, therefore driving up prices for patients. 

“When you compare services that both a nurse and a doctor are both able to professionally provide — our research uses well-care visits — empirically, there is no difference in outcomes,” says Marier. “Our research finds that the consumer is definitely better off [with less licensing restrictions for nurses] because of the price drops for common services, along with more access to medical providers because of licensing requirement relaxation.”

And just as foreign doctors are able to provide at least the same level of care as American doctors, the same is true when we allow specialized nurses who have undergone extensive schooling — in some cases taking six to eight years to become a nurse practitioner — to perform the full scope of skills for which they’re trained. Surprisingly, according to a report in Econo Fact, several studies have even found that “relaxing some of these laws is associated with better health outcomes, such as a decrease in emergency room use when nurse practitioners practice independently.” There is also evidence, per the same report, that “maternal and infant health-care outcomes are somewhat better when certified nurse midwives practice independently as women in these states have lower rates of cesarean sections and of pre-term and low birth weight births.”

Better yet, the overall wage disparity between doctors and nurses — which is greater than in any other country in the world — also becomes less pronounced. In 2019, the average income of a registered nurse in the U.S., according to the Bureau of Labor Statistics, was $77,460 per year, compared, again, to $313,000 for a doctor.

It’s a glaring gap, and one that goes hand-in-hand with the lack of diversity amongst physicians. Last year, 5.8 percent of active doctors identified as Hispanic, and 5 percent identified as Black or African American, according to the Association of American Medical Colleges. Alternatively, according to MinorityNurse.com, among nurses, 9.9 percent identify as Black or African American and 8.3 percent identify as Hispanic or Latino. “We absolutely should be trying to get more Black doctors, and hopefully we will,” says Baker. “But even if you increase the number of Black doctors by 50 percent, which would be good and probably would be a really big lift in the sense that we’d be expecting a lot from our our med schools to increase it by 50 percent over the next two decades, that still means they’re hugely underrepresented.”

This is why Baker believes that one way to reduce the wage gap between white people and people of color in the health-care industry is thinking about it in terms of reducing the overall pay gap between doctors and everyone else. “The story, in my view, is bringing pay down from the top,” he says. Which is why he thinks the recent effort to combat systemic racism is sometimes too focused on simply promoting more Black people to leadership roles, or in this case, creating more opportunities to increase the number of Black doctors. “That’s all good,” says Baker. “I mean, I don’t want to knock anyone for [wanting to increase the number of Black doctors]; that’s a really good and important thing. But on the other hand, if we still have the same levels of inequality between the high paying health-care jobs and lower paying health-care jobs, we’re still going to have a lot of Black people in the lower paying jobs.”

Baker’s proposal is to give more responsibility to nurses via a system with less licensing requirements for completing basic services, like well-care visits, while simultaneously expanding the pool of doctors, thereby balancing the wage disparity between the two.

But as any cartel knows, increasing the supply is just as likely going to lead to a decrease in how much this service is worth. The AMA, then, is unlikely to yield their mid-six figure paychecks without a fight. “You have the American Medical Association, and they very much are concerned with limiting supply,” says Baker. “Now, one of the things you’ll find is that, in recent years, there has been such a doctor shortage that they’ve actually supported things like increasing the number of residencies. But that’s in a context where they feel that, really, there’s way more demand than they could meet.”

The other issue with curbing doctors’ salaries is that because members of Congress are so easily lobbied by private-equity backed physicians’ groups offering millions in campaign funds, there’s little incentive for anything to change. “The main argument is that U.S. political institutions, namely the legislative branch, developed in a much more fragmented manner relative to its European counterparts throughout the 20th century,” says Soleil Shah, a medical student and researcher at Stanford and formerly a Fulbright Scholar in health policy. His point is that the current system, wherein Congress is divided into numerous committees and subcommittees — “all of which could exert influence on the final outcome of a legislation before it even reaches the floor of the chamber” — is perfectly situated to be exploited by lobbyists. “Thus, it mattered little what party was in command — the AMA could just funnel money to the appropriate committee member, who could then threaten to veto the bill entirely unless changes were made,” he continues.

This exact sequence of events happened just last year, according to the New York Times. It wasn’t enough that every American, despite where they may land on the political spectrum, agreed that the issue of surprise medical bills is completely out of control. When the time came to do something about it, apparently, the deal didn’t have “strong enough support from Democratic leadership.” “The proposal’s apparent demise wasn’t a result of partisan division, but instead, reflected certain lawmakers’ reluctance to pursue an approach that would reduce doctors’ pay,” reported Margot Sanger-Katz. “Several of the key lawmakers who scuttled the deal were Democrats.”

There is, however, a bit of hope that’s arisen out of the recent pandemic-induced carnage — seeing the way the pandemic has overburdened hospitals across the country could force Congress to legislate more permanent solutions to mitigate a future health crisis. “One of the things that was interesting to me during the height of the crisis in New York, back in April, is that [Secretary of Health and Human Services Alex] Azar sent a letter to governors in the U.S. relaxing a lot of the rules that had been put in place to limit foreign doctors, and even doctors that haven’t passed residency programs from practicing here,” says Baker. “It basically vastly expanded the number of people who could, in principle, work as doctors.”

The next step is finding a powerful enough entity willing to push the envelope further. “Presumably, if a major insurance company said, ‘Okay, we’re prepared to take on the doctors, and we want to push for bringing in more foreign-trained physicians,’ that, I think, would be the most likely route,” says Baker. There are, he says, some states that have dabbled in such programs. “Missouri took the lead on this, but other [states] have too,” Baker continues. “There are, of course, some qualifications around this, but in those states, they allow a foreign doctor who didn’t go through a residency program in the U.S. to practice under the supervision of another doctor. If you exploited those openings, in principle, you could vastly expand the pool of doctors.”

That solution, in addition to Marier’s suggestion of loosening licensing restrictions for nurses, would be of greatest benefit to people living in areas that lack adequate access to health care. “If we look at an area with unmet need, customers either aren’t able to pay current prices or they can’t access a provider due to undersupply of medical services,” she says. “If we go for the argument that all customers should be able to afford medical care due to insurance coverage and that the unmet need is a direct result of medical services undersupply, removing licensing restrictions [for nurses] in those areas should only provide more financial opportunity to all medical providers.” 

That way, doctors can see complex cases and be paid accordingly, “while not losing business because they’re not addressing the more mundane issues,” Marier concludes. “Nurses will never run out of work, either.”

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