What Is a 'Just' Physician's Income? - NYTimes.com: "The payment of physician income has been the subject of a lively debate for centuries. In fact, one finds it addressed at length in the famous Code of Hammurabi, chiseled into stone tablets some 4,000 years ago by edict of the Babylonian King Hammurabi along, by the way, with a malpractice system that makes today’s look like a pussycat.
Adam Smith, who generally is regarded as the father of modern economics, mused at length on the compensation of physicians in his celebrated book “An Inquiry Into the Nature and Causes of the Wealth of Nations” (1776).
Chapter 10 of Book 1, titled “Wages and Profit in the different Employments of Labour and Stock,” is a gracefully written treatment of what we now call labor-market theory. It is well worth a read.
“Honour makes a great part of the reward of all honourable professions,” Smith wrote. “In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to show by and by. … Disgrace has the contrary effect. The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever.” (Italics added.)
Today we teach students that seemingly mysterious differences in the pecuniary income of different occupations can be explained in part by what we call “compensating variations in the psychic income” associated with different occupations.
Remarkably, in his treatise on compensation, Smith then departed sharply from the traditional demand-and-supply framework he popularized and we economists usually employ to explore employment and wages. Instead, for physicians and lawyers he appeared to lean on the medieval doctrine of “just price.” Thus he wrote:
We trust our health to the physician: our fortune and sometimes our life and reputation to the lawyer and attorney. Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires. The long time and the great expense which must be laid out in their education, when combined with this circumstance, necessarily enhance still further the price of their labour.
Although I’m a card-carrying economist who normally is quite comfortable with our supply-demand framework for virtually anything, I do find Adam Smith’s perspective persuasive.
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Monday, September 19, 2011
What Is a 'Just' Physician's Income? - NYTimes.com
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Chris, I revisited your blog as there is a lot of good material about a most controversial subject - physician salaries. In this post, you quote Adam Smith: “Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed."
These historic insights are intriguing, and I think Mr. Smith could be satisfied that our honorable profession has for the most part been far from under-recompensed.
As my voluntary leave from practice to participate full-time in healthcare reform enters the final season, I need to plan to return to at least part-time work. I've just been offered a position with former colleagues in Oakland, California, where I can do med-legal evals. Coded as ML-102 in California, an eval and report takes 30m and pays $500. At 30% I will take home $300 and my clever associates will pocket $700 - per hour. Nothing illegal, no exploitation. Just "business as usual." Should I ask for more? Is it fair for them to get $2,800 of mostly passive income, for a half-day of my work? Until studies are based on physicians tax returns, we'll never know the truth. Unless, perhaps, those of us who do know come forward en masse and expose it. Yet, those able to do so have the most to lose. It appears that for the time being, this hidden cost-driver will continue to contribute to our crippled healthcare "system."
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