Do Teaching Hospitals Lose Money or Turn a Profit on Residents?
Uwe Reinhardt writes a provocative post about medical education in today’s New York Times.
He begins by calling attention to “Why Medical School Should Be Free,” a recent commentary in the New York Times, by Peter B. Bach, M.D., and Robert Kocher, M.D., which proposes that medical school be tuition-free for all students. (Dr. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center, was a senior adviser at the Centers for Medicare and Medicaid Services in 2005-6; Dr. Kocher is a guest scholar at the Brookings Institution and was a special assistant to President Obama on health care and economic policy in 2009-10.)
Back and Kocher estimate that the annual tuition for medical students would be roughly $2.5 billion, and—here is what I found most interesting—that equals only about 0.017 percent of GDP or $15 trillion. In other words this society could afford to subsidize medical education for all students who manage to make it into med school.
But Bach and Kocher don’t want to burden taxpayers with that $2.5 billion. I understand their reasoning. These days, we have many pressing reasons to raise taxes. In a time of high unemployment we must create jobs and strengthen social safety nets. Meanwhile public education, K-16, infrastructure repair, and research exploring alternative sources of energy all need funding. Finally, over the next few years, we should begin to reduce the deficit. We cannot do this all at once, but it should be a goal. Given the demands on taxpayer dollars, this is probably not the time to try to subsidize med school for all students.
Bach & Kocher have a novel solution: they would raise the $2.5 billion by forcing medical-school graduates who choose residency training in specialties other than primary care to forgo much or all of their annual salary – currently about $50,000 – during their residency training, which may span four years or more. Residents in primary-care specialties would continue to receive their salaries. Their aim is to encourage more students to pursue primary care. If they choose this route, they could attend med school tuition free, and earn about $50,000 annually during their four years of residency. This is hardly a princely sum, but enough to cover basic living expenses.
Meanwhile, those who choose a specialty such as oncology or orthopedics still would receive free tuition. Today, the average med student graduates $200,000 in debt; and much of that money is borrowed to cover tuition that average $38,000 a year. (Here it is worth noting that first-year med school tuition varies widely. At state universities like Florida State, or Louisiana State University New Orleans, tuition, fees and health insurance for in-state residents may run as low as $21,700 (Florida) or $16,500 (LSU). At the University of North Carolina, $15,000 will cover a Tarheel’s first-year bill.
By contrast, the tab for that first year is much higher at private universities, running anywhere from roughly $50,000 (Duke and NYU) to $56,000 (Tufts.) By contrast, Mayo is a bargain at $32,600.
But would-be cardiologists wouldn’t be paid during residency, so they might wind up borrowing $200,000 to cover living expenses during those years—unless a spouse was supporting them.
Reinhardt asks: “Would residents who wanted to become specialists put up with forfeiting their salaries?” His answer “They would have little choice — because any resident is, in effect, an indentured laborer, a circumstance that society has long exploited to its advantage.”
“In this boot camp through which all doctors must pass, residents can be made to work long hours at very low pay, making them among the cheapest forms of labor in any teaching hospital. For years, teaching hospitals have justified the long hours by arguing that residency programs cost them money. Congress seems persuaded by that argument,” he notes, “currently bestowing on teaching hospitals $10 billion a year in subsidies toward graduate medical education. But at least some economists, including me, are not persuaded by that argument, either.”
Reinhardt argues that residency programs “produce net profits for teaching hospitals — as the hospitals would quickly learn if they had to replace the labor of residents with regular, similarly skilled employees.” On the other hand, he points out, “teaching hospitals probably use the profits from residency programs to subsidize the charity care they routinely render the low-income uninsured. So I see the indentured-labor story as one in which society exploits residents to finance health care for the poor that society does not wish to pay for up front. The teaching hospitals merely function as a vehicle for that exploitation.”
A neat theory—and I think Reinhardt is right. Though his argument does raise a question: if some teaching hospital doesn’t offer as much charity care as many others, should they receive the same government subsidies just because they are academic medical centers? (Some teaching hospitals do not welcome the poor.) Also, once health reform covers 32 million uninsured, should the subsidies for academic medical centers be cut? This is a subject for another post, and I don’t have the answers. But it is worth thinking about.
Finally, on the question of whether Bach & Kocher’s scheme would work, Reinhardt suggests that several years of working for no pay “might alter the attitudes these specialists would subsequently bring to medical practice — and the fees they might charge for services and care. In medical parlance, the Bach-Kocher treatment might have unintended and untoward side effects. It behooves policy makers to think of them.”
Though, I would add that it’s hard to imagine that physicians in the best-paid fields would be able to charge much more than they do now. The pool of wealthy people able or willing to pay more just isn’t that large. We often forget that only 2 percent of the population earns over $200,000 a year.
But I see another problem: asking some residents to forego wages while those going into primary care are paid would only heighten the divisions and resentments that plague a fragmented health care system. This would not enhance the spirit of teamwork and collaboration that reformers are looking for.
And then there is the final question: to what degree does money determine a student’s choice of specialty? Would someone who had always wanted to be a surgeon change his mind under the new program? I definitely believe that subsidizing medical education would allow more medical students who want to become family physicians do just that. I think we should subsidize tuition for many of these students, based on financial need and their willingness to work in parts of the country that attract fewer family physicians. But I also think we need to improve working conditions by providing more support for primary care doctors, both while they are training and in practice.
Reinhardt ends his column by suggesting that “we all ponder whether simpler solutions are available to address the shortage of primary-care physicians. I am eager to hear the ideas of others, and I will return to this issue in a while.”