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Ready for deflation?

November 2011

The rich in this country are getting richer and the poor are getting poorer. If the Occupy Wall Street movement is any indication, this inequality is producing a growing discontent with the richest 1%. Not to anyone’s surprise, a significant number of doctors, 15.7%, can count themselves in that vaulted percentile. Obviously, a greater number do not because after all, only 1% can be in the 1%.

What follows is purely a social observation that I find interesting–and I know that my interest is driven by the fact that I am a doctor within a rapidly changing system. I am not about to make any value judgment such as teachers should be paid more than baseball players who should, of course, be paid less than hospitalists. While most would agree that teachers have more intrinsic value to our society, income is generally subject to the laws of supply and demand. As a result, I’ll hold the political commentary on whether this is good, bad or ugly.

I don’t envision doctors anytime soon replacing what was traditionally this country’s middle class. But make no mistake: Deflation in doctors’ income is in the near future. In fact, many specialties will attest it is already here.

The most basic reason is the simplest: The country is broke, and health care is what’s breaking it. Anyone who has practiced in the last 10 years knows this, but the full impact of this inevitability has been particularly obvious within the last five years, and especially within the last two.

A broke country faces tough challenges. To truly make an impact, we would need some form of rational care rationing. I don’t want to touch that one with a 100-foot pole, but let me just say that a friend recently reported that his great-grandmother went to a hospital for slurred speech and got a MRI of the head as part of the workup. In and of itself, not crazy–but she was 104. Sorry, that is a bit crazy.

Rationing of care, intelligent or otherwise, is not easy. Decreasing physician reimbursement isn’t easy either–but compared to rationing, check off the latter as easy. I don’t see hospitalists getting hammered in this equation but proceduralists will be squeezed. Of course, this will probably lead to de facto rationing. That will be bad if it decreases access to care, especially for preventive medicine or needed procedures. It might be good if it means one less CT or surgery that was of questionable benefit.

And the trend to physician employment will eventually accelerate pay deflation. Hospitals are going to get cut. They will cut and cut around the physicians, but that simply won’t be enough. Physicians will feel this in their paychecks and face interesting decisions. Play the supply and demand market by moving to the Dakotas? Or stay put and begin to believe work-hour restrictions are no longer just for medical residents? Again, I believe hospitalists will fare well in this scenario, but look for this to be another trend toward compressing the salary gap between generalist and specialist.

Then there is the ever-growing medical school debt. With average post-residency debt approaching $200K, it begins to add up. It reminds me of the quote attributed to the late senator Everett Dirksen: “A billion here, a billion there, and pretty soon you’re talking real money.” While not quite analogous, $200K paid back over 30 years with pretax dollars at a rate around 5% is going to be a $20K encumbrance for the rest of your career.

No one is arguing, well, I’m not arguing, that this is not money well spent, but it is far from trivial. And a quick note on your kids’ educations. Most doctors are fortunate to be able to secure their children’s college education. That said, the sticker price is rapidly hitting $200K per kid, and most doctors will find themselves making just enough to qualify for little if any aid.

But now the reality check. Medical school applications are at an all-time high. Perhaps paradoxically, being a doctor is no longer looked at as a profession where you are guaranteed entry into the 1%. But it is perhaps something, in these tough economic times, even more valuable: a guaranteed job.

So perspective is everything. Good job by most standards, better than average pay and promised gainful employment. Sign me up, especially when told I won’t any longer be an indentured servant in residency nor working 80-hour weeks once fully employed.

There’s that old adage: What do you call the medical student who graduated last in his class at Worse Medical School USA? “Doctor.”

Let me update that for today’s economy: “employed doctor.” Even on your worse days, it’s probably not a bad thing to remember.