Uwe Reinhardt on Subsidizing Medical School Education

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.”

14 thoughts on “Uwe Reinhardt on Subsidizing Medical School Education

  1. I think your point about the kind of resentment this proposition would cause is very important. You’re right that primary care doctors often resent the limited scope of practice and higher salaries enjoyed by many specialists, while specialists (especially surgeons) resent working more evenings and weekends than primary care doctors.
    I also worry what would happen to the lower-paid specialties, like infectious diseases or rheumatology. The investment of an extra 3 years and hundreds of thousands of dollars may not seem worth it to earn an extra $25-$50,000 per year, while it would be worth it for an extra $200,000 per year.
    I still think the best path is to decrease medical school debt for primary care doctors, both by offering more special scholarships or grants than are currently available (most medical school grants are based on the financial situation of the student’s parents rather than the student’s future specialty) and by increasing and improving loan repayment programs.

  2. Sharon M.D.
    Good to hear from you.
    I agree that it makes more sense to offer scholarships to people going into primary care without trying to ask other residents to fund the project. It would, as you say, only heighten resentments.
    As you note, when awarding these scholarships med schools usualy take parents’ incomes into account . This makes sense insofar as wealthier parents often help out med students in some way (if not by paying tuition, they may help them with the extras beyond minimal living expenses.) These students have a safety net.
    By contrast, parents who earn median middle-class incomes (around $60,000, joint) or median working class incomes (around $35,000 to $40,000 joint) don’t have much if any extra money to help, even if students run into financial trouble.
    Also, as I have written in the past, we need more med students from low-income families so that our physicians better reflect the diversity of the paitient population. (Here, I’m not just thinking of more doctors coming from minority famliles. We also need more physicians coming from low-income white famlies who are more likely to understand the culture of patients in low-income rural areas or working-class towns in many parts of the country.
    I also think it makes sense to earmark generous scholarhips and loan-forgiveness programs for primary care docs and others willilng to work where they are most needed: poor rural areas, and poor neighborhoods in less desirable towns and cities for a few years. Some will put down roots and stay there. . .
    Finally, you are right, while some specialists may earn $800,000, others earn $350,000. It doesn’t make sense to lump them all together. And we do need those physicians specialzing in infectious diseases.
    All in all, I think Bach ahd Koche’s suggestion is useful in starting a conversation about how we might subsidize medical education for some docs–and increase the supply of primary care docs. (I think that this is preicsely what Uwe was trying to do.)
    Moreover, it is interesting that two influential physicans would suggest that some residents should subsidize others– a radical (some would say outrageous) proposal. I don’t think it would work. But their proposal does underlline the fact that many in the health care communitiy are increasingly uncomfortable with the enormous disparity between what we pay primary care phyiscian and what we pay doctors in specialtiies at the top of the income ladder .
    Today, median income for primary care physicans is $175,000. As a society, we cannot afford to pay them median income of $400,000. Or even $375,000. We coud afford to subsidize their med school education. (The cost is far less than paying many doctors an extra $200,000 a year, year after year, for decades.)
    Over time, my guess is that primary care incomes will rise by 15% or 20% – and that many more primary care docs will be working in situations where someone else is paying the overhead– real estate. malpractice insurance, a back office that does billing, receptionists, nurse practioners who work with them, etc. So their net income will be higher than it is today. Meanwhile, economies of scale will make the administrative costs of primary care much lower — a win/win for doctors, patients and taxpayers.
    Meanwhile, the incomes of some specialists will slide by 15%– or more, at the very top of the ladder. This will be in large part becuase we won’t be paying for as many very lucrative treatments that provide no benefit for many patients . But this will happen over time, not all at once.
    There still will be a gap that reflects differences in the number of years that doctors in certain speciaites are still training, the lost income during those years, and differences in working conditions Some specialties are more stressful . ( Here I am thinking of physicians who perform 9- hour surgeries, pediatric oncologists, etc.) and require that doctors be “on call” some nigihts and week-ends.
    But the gap won’t be as wide as it now.

  3. The plan seems a little half-baked to me.
    First, many privileged kids going into medical school have parents that can afford the tuition bill. So, if tuition were free, they’d simply transfer the resources towards subsidizing the few years of getting their specialization.
    Second, there isn’t much difference between taking out $200K in student loans to get through med school, then getting $50K per year in residency VS. having med-school be free and taking $200K in loans to subsidize their residency cost-of-living.

  4. If the goal is to alleviate the shortage of primary care doctors, we should consider increasing the supply of nurse practitioners (NP’s) and then allowing them to practice at the top of their license. They can handle a large percentage of typical primary care encounters and they can be trained more quickly and at less cost than PCP’s. In addition, they are trained to follow rules so they are more likely to practice evidence based medicine. The main constraint is the shortage of nursing faculty which can be addressed, at least over the intermediate term, by significantly increasing faculty compensation. From a societal standpoint, it should be a lot cheaper to increase nursing faculty pay enough to eliminate the shortage than to provide free tuition to all medical school students.

  5. Barry–
    I agree–and the good news it that the Affordable Care Act does just that:
    It funds higher salaries for teachers in nursing schools, and it provides some generous loan forgiveness and scholarships for nursing students –including financial aid earmarked for nursing students who want to teach in nursing shcol.
    By 2014, we’ll have more students in nursing school, and they will be coming out of the pipeline soon. Today, more nurses are getting Ph.D. in various areas.
    In most cases, they will probablly work with a primary care doc, but some nurse-practioners will be running community clinics. And they will continue to work solo in some places–particuarly areas that have a hard time attracting primary care docs (rural areas, etc.)

  6. this seems like an oddly romantic concept — defying the increasing specialization that is overtaking every other sector of our society. it also is an victory for the economic determinists who deeply believe that that somewhat decreasing income disparity would yield more primary care docs in response to a society that deeply believes, which equal scant evidence, that there’s now a shortage of them.

  7. Kanth 245 and Jim–
    Kanth 245– I agree, This plan does not take lower-paid specialities into account.
    Though I also would like to think that many people pick infectious diseases as a specialty because they are truly interested in infection disease. And that if this plan kicked in (which it never will)
    they would still pick infectious diseases even though the no tuition, but no salary during residency would turn out to be a waish, leaving them left them with little benefit.
    That said, I wrote about this plan not becuase I think it is a practical idea, but because it is provocative enough to make us stop and think: how should we (or could we) adjust med school costs to give us more of the doctors that we need?
    I agree–I don’t think of this as a practical idea, or one that would fly.
    But as Uwe made clear at the end of his column, he was presenting this idea to provoke thought: What Should we do to increase the supply of primary care docs?
    In terms of what you say about increasing specialization in other parts of society . . .
    Medicine isn’t like other sectors.
    Human beings–and bodies– are far more complicated than the many hi-tech areas where specialists excel. This is in part because every body is unique, and more importantly, because mind and body cannot be separated. (This is connected to the fact that every body is unique). We still don’t know that much about the constant dialogue between mind and body, but we do know that this is all tied up with why some treatments work for some people and not for others– and it is key to all of the diseases that we really don’t know how to treat.
    Because both mind and body (not to mention the many parts of the body) are so interconnected, human beings who want to remain healthy need doctors who see the whole person (body & mind),
    provide preventive care, and teach the person how to keep himself healthy and manage his own chronic diseases.
    Even when the patient grows older and is sick, he is likely to suffer from more than one health problem. Again, the patient needs a doctor who can see the whole person, not just the liver or the heart.
    Idealy, an older person suffering from 2 or 3 or 4 diseaes has a geriatrician overseeing his or her care. Insofar as the geriatrician is successful, that patient rarely need to see a specialist or undergo surgery. Of course a geriatrician cannot keep him or her healthy forever. At some point many/most of us will need to be hospitalized, undergo surgery, & need more aggressive treatments.
    But these days, the goal is to healthy enough (and lucky enough!) that we don’t need aggressive treatments in our 60s and 70s. . .
    In cities like N.Y. many people prefer going to specailists because they assume that they are are “smarter” than primary care docs or geriatricians. AFger all they often trained for a longer period of time– and they are much more expensive.
    In some sectors, you may get what you pay for (if you are a wise shopper).
    But this is not true in medicine. Whether you are talking about drugs, hospitals or doctors (see my recent post on hospital infections) the most expensive often are not better.
    This is because when it comes to medicine the “consumer” (patient) just is not in a position to judge value.
    If I look at a piece of cloth, a piece of furniture, or even a house, I can judge value. based on materials, craftmanship, and, in the case of a house, location plus a history of values in that neighborhood. (I dont’ want to buy into a bubble).
    But if I went to three cardiologists who gave me three different pieces of advice, I would be hard-pressed to know who was right, was was a better doctor, who was more intelligent, and who was charismatic and persuative but ultimately money-driven.
    I don’t have the medical training to second-guess a doctor. (Unless he is really bad and is recommending something very expensive and aggressive that seems way over the top. Even then, I couldn’t be sure. Perhaps he is brilliant, and the only one who realizes that if something aggressive isn’t done soon, I could be dead in six months . . . )
    Thus, the mediocre specialist, the sub-par specialist and the outstanding specialist can all charge a large fee (assuming they are likable, or at least personable and very confident, have a well-appointed office that inspires confidence, and have networked professionally so that they are ssswociated with what I perceive to be a good hospital, and are recommended by other docs in their social/professional network. (The latter may be most important.)
    Many docs who fit that description are excellent. Many are not.
    As Atul Gawande points out, doctors, like everyone else, exist on a bell curve– the majority are, as he puts it “mediocre” a small number are outstanding, and a small number are poor. (You can Google his New Yorker article on the “Bell Curve”)
    You and I would have a very hard time differentiating between the excellent and the mediocre specialist. We might spot a poor doctor (his office is dusty), but if he keeps up appearances, we probably wouldn’t–or at least not until it was too late.
    Because a primary care doctor or a geriatrican performs fewer procedures and spends more time talking to us and istening to us, he
    a) is less likely to hurt us, and
    b) it is somewhat easier to tell if he is good. Most of us can tell if the other person is really listening. And we know whether his responses seem useful. (Do you think: “I can do that!”)

  8. I think creating a sustainable system of health care funding overall, ie, Medicare for All, would establish a sense of national priority and also enable the country to subsidize the education of the medical providers we need to care for the people.
    We are coming to the end of For Profit medicine as it relates to providers, insurers and manufacturers. Hopefully these “experts” will refrain from suggesting measures that keep this dying horse alive too much longer.
    The profit motive was supposed to provide greater health outcomes. Instead it has created conflicts of interest. As a result we are a sicker poorer nation.

  9. Lauren Serven wrote:
    I think creating a sustainable system of health care funding overall, ie, Medicare for All, would establish a sense of national priority and also enable the country to subsidize the education of the medical providers we need to care for the people.
    I know Maggie does not like Single payer talk, but that current federal court challenge to the individual mandate of the ACA may well declare that mandate to buy private health insurance unconstitutional. If that happens, then with time (emphasis on with time), a Canadian style, government provided, single payer universal system will be likely all that can be then done. When or if that happens, then many of the side issues such as this subsidizing “the education of the medical providers we need to care for the people” will be easier to achieve.

  10. Lauren & NG
    Lauren– I agree with what you say about for-profit health care creating conflicts of interest.
    This is why every other nation in the developed world uses govt’ regulation to control drug prices, for instance.
    But what does this have to do with the subject of this post– how to create more primary care docs?
    It’s not that I object to “single-payer talk”–it’s that I object to single-payer advocates using a blog post to talk about single-payer— even when the post has nothing to do with single-payer. (See my response to Lauren).
    The goal of a post is to start a conversation. When someone interrupts the thread to say: “This reminds me of my favorite topic,” it’s just as rude as if someone interrupted a conversation at dinner to say “This reminds me of a story about me.”
    As for the Supreme Court and the individual mandate: As Timothy Jost has aruged, it’s very unlikely that the Supreme will declare the mandate unconstitutional (I won’t go into the legal arguments here– Google Jost)
    And if Jost is wrong, and they did declare it unconstitutional, it would be fairly easy to re-name the “fines” and call them “taxes.” There is no question but what the federal govt has a right to levy taxes.
    As for Canada: Canada and the UK are the only developed countries in the West that have single-payer. Other Western European countries have hybrid systems that include privaite-sector insurers–usually they are non-profits, but they are private sector. Moreover, the government does not own all of the hospitals, and all doctors are not govt employees.
    When the govt runs everything, the system can easily become poiticized and a poitical ideology will begin to domiante health care. Look at what Margaret Thatcher did to healthcare in the UK.
    It’s still trying to recover.
    As for Canada, the CommonWealth Fund’s 2012 Internaation comparisons of 7 countries has just been released. When it comes to “quality of care,” effectivness of care” and “timeless of care” Canada ranks dead last. (The U.S. ranks 6th).
    When it comes to “overall ranking” and “efficiency” Canada ranks 6th. (The U.S. ranks 7th.)
    On “safety,” patient-centered care and co-ordinated care, Canada ranks 5th.
    Does this really sound like a system that we want to imitate?
    Many Western Euopean systems are much better: Germany, France, the Netherlands, to name three.
    That’s all I have to say about single-payer. It’s not happening at this time. If, in the future, it becomes a live issue, I will write about it—and my concerns.

  11. Maggie,
    Just 2 points on your reply. First is the relation of my answers to the original Blog post. I believe there is a major relationship to the original post because subsidizing medical education would be much much easier and almost a natural outgrowth of a single payer, government controlled/regulated system!
    Second is my take on the individual mandate of the ACA. The government did it correctly with universal programs such as Social Security and Medicare where the government provides the benefits to people through public programs and government controlled and mandated revenues. The problem with the ACA is that due to politics of the time, the mandate is for everyone to be forced to buy from private companies or be fined. That is unprecedented, un-American, and really cannot stand. You know from my writings that I am very progressive, so if I see this mandate as clearly unconstitutional, it likely is a problem!

  12. NG–
    You write: ” subsidizing medical education would be much much easier and almost a natural outgrowth of a single payer, government controlled/regulated system”
    Subsidizing medical education requres $$$.
    There is nothgn easy about this.
    A great many taxpayers would object to this use of federal funds, in large part because the majority of med students in this country are coming from wealthy families.
    A single-payer system doesn’t solve the knottiest problems in our health care system.
    In countries that have single-payer, taxes are much much higher.
    Most Americans are not prepared to accept much higher taxes.

  13. Since the passage of national health reform, politicians and pundits have dominated the debate. But for health reform to truly take root, we should take our cue from the millions of low-income Californians who have the most at stake — and let their expectations inform implementation.