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Higher Physician Spending In U.S. Driven By Fees, Not Practice Costs

September 8th, 2011

Research appearing in the newly released September issue of Health Affairs shows that physicians in the United States are paid more per service than doctors in other countries—in some cases double. There is also a far bigger gap between fees paid for primary care and fees paid for specialty care in the United States, compared to other countries. These higher fees in turn lead to higher incomes for US physicians than those earned by their foreign counterparts, and are the main driver of higher overall spending in the United States on physicians’ services.

The study—by Miriam Laugesen of the Mailman School of Public Health at Columbia University and Sherry A. Glied, also of the Mailman School and currently serving as assistant secretary for planning and evaluation at the US Department of Health and Human Services—compared fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States.

It found that US primary care physicians were paid on average 27 percent more by public payers for an office visit, and 70 percent more by private payers for an office visit, compared to the average amount paid in other countries. However, the largest difference in fees paid to US physicians versus fees paid to doctors in other countries was for hip replacements. US physicians were paid 70 percent more for these procedures by public payers, and 120 percent more by private payers, than the average fees paid to physicians in the other countries studied.

“The gap between the fees paid for primary care and those for orthopedic services such as hip replacements is significantly bigger in the United States than it is in other countries,” says lead author Miriam Laugesen. “For decades, policy makers and medical leaders in this country have debated financial incentives to spur more doctors to become primary care physicians. Our work shows that continuing attention needs to be paid to the difference in payments across specialties, and how we can get better value for those expenditures.”

Wide Disparity

Laugesen and Glied’s research demonstrated a wide range of fees earned by physicians in the countries studied (stated in 2008 dollars and adjusted for purchasing power parity). Public fees paid to doctors for primary care visits ranged from a low of $32 in France to a high of $66 in the United Kingdom, with the United States coming in at $60 a visit. Overall, fees paid by Medicare for primary care approximate what is paid in other countries. 

The gap in fees paid to doctors for hip replacements was even higher. The public fees paid to doctors for hip replacement ranged from a low of $652 in Canada to a high of $1,634 in the United States. The difference in fees to doctors paid by private insurers was substantially higher still: fees paid to US physicians were double that charged in other countries—for example, $1,340 in France versus $3,996 in the United States. 

The study underscores that the biggest disparities in US pay to physicians are on the private side. Fees paid by large private national insurers in six markets in the United States averaged about one-third above Medicare rates for primary care and 50 percent higher than Medicare for hip replacements. Private insurers have been less successful in negotiating fees with orthopedic surgeons than with generalist physicians, says the study.

Physician Income

Physicians in the United States also reported higher salaries in comparison to the other countries, despite the fact that there was little difference in the volume of services provided. The authors suggest that the differences may reflect the fact that US physicians are being paid more for their skill and time than are physicians in other countries. Whether or not those higher payments are warranted is a question beyond the scope of the study.

US primary care physicians earned the highest average annual incomes ($186,582) while French ($95,585) and Australian ($92,844) primary care physicians earned the lowest. US orthopedic surgeons earned the highest average annual incomes at $442,450, followed by $324,138 for surgeons in the United Kingdom. Although UK surgeons still earned 50 percent more than surgeons in the other comparison countries, they earned 30 percent less than US orthopedic surgeons.

The gap in salaries between the primary care physicians and orthopedists was also significantly higher in the United States, where primary care physicians earned just 42 percent as much as orthopedic surgeons did. In contrast, primary care physicians in Canada, France, and Germany earned about 60 percent as much as orthopedic surgeons did there.

The finding that US health care fees and spending are higher than in other countries is nothing new. However, the study concludes that the higher fees paid to physicians—rather than factors such as higher practice costs, volume of services, or medical school tuition expenses—are the main drivers of higher US spending on physicians, particularly in orthopedics. As policy makers look for ways to restrain health care spending, findings from the new study could provide impetus for targeting physician fees to reap desired savings.

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2 Responses to “Higher Physician Spending In U.S. Driven By Fees, Not Practice Costs”

  1. Policy Prescriptions Says:

    Let’s be cautious about seeking to use the physician services slice of the pie to drive down health care costs. It represents only 1/5 of health expenditures. If you want the best young people to enter medicine instead of law, business, or other sectors of the economy, the authors of the above-mentioned study suggest that the premium US primary care doctors earn over their international counterparts might not be such a bad thing. Orthopedists on the other hand….

  2. etchory Says:

    Yes American physicians are paid more than European physicians. How does that fact have anything to do with the conclusion that physician reimbursement is a major contributing factor to our health cost crisis? 20% of health spending goes to doctors. That percentage is not that much different in the other countries cited. European countries are having similar problems with explosive growth of health care expenditures. We do not have a monopoly on this problem. This is hardly “research”. This is propaganda. Shame on you for passing it off as such.

    While I’m still trying to understand the purpose of this propaganda bashing doctors let’s do a study comparing the salaries of college professors that publish such pathetic “research” in the US and France, GB, Australia etc. Let’s study the salaries of auto workers, plumbers, school teachers, garbage collectors, lawyers, bankers and CEO’s too. Perhaps they can draw some more meaningless “conclusions”.

    Ed Chory

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