NCPA - National Center for Policy Analysis


June 23, 2006

The average physician's net income declined 7 percent from 1995 to 2003, after adjusting for inflation, while incomes of lawyers and other professionals rose by 7 percent during the period, according to a new report from the Center for Studying Health System Change.

Researchers say the decline in doctors' inflation-adjusted incomes appears to be affecting the types of medicine they choose to practice and the way they practice it -- resulting in fewer primary care doctors and a tendency to order more revenue-generating diagnostic tests and procedures:

  • Primary care doctors, who are already among the lowest-paid physicians, had the steepest decline in their inflation-adjusted earnings -- a 10 percent drop.
  • The average reported net income for a primary care physician in 2003 was $146,405 after expenses like malpractice insurance but before taxes.
  • The highest-paid doctors were surgeons who specialize in areas like orthopedics, who had an average net income of $271,652, nearly double what the primary care doctors said they earned.

Doctors are reacting to the financial incentives under the current payment system by choosing to specialize and work in fields where they can increase their income by providing more services, like diagnostic tests or procedures, says Paul B. Ginsburg, the center's president and a health economist.

According to Cecil B. Wilson, chairman of the board of the American Medical Association, for practicing physicians the survey "confirms what they already know from their own practices: payments are not keeping up with inflation."

  • During the eight-year period in the study, payments from Medicare and commercial insurers had indeed lagged general inflation.
  • While the general inflation rate was 21 percent during the period, payments from Medicare rose only 13 percent, according to the study, and payments from private insurers rose even more slowly.

Source: Reed Abelson, "Doctors' Average Pay Fell 7% in 8 Years, Report Says," New York Times, June 22, 2006; based upon: Ha T. Tu and Paul B. Ginsburg, "Losing Ground: Physician Income, 1995-2003," Center for Studying Health System Change, Tracking Report No. 15, June 2006.

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