Relative incomes and rates of return for U.S. physicians

Since 1967 the supply of physicians in the U.S. has been growing by more than 3 percent per annum. This, coupled with public insurer fee discounts, might have been expected to depress both the relative and absolute incomes of physicians in spite of growing insurance coverage and new technologies. Real incomes of physicians did decline at a 0.2 percent annual rate between 1967 and 1980, but this was apparently due to economy-wide events since the income trends for lawyers, dentists, and college graduates were virtually identical. Internal rates of return to undergraduate medical training remained high--between 14 and 17 percent in 1980. Specialty training became more profitable for internists, general surgeons, and obstetricians/gynecologists (all with 10-15 percent rates of return), while pediatricians continued to suffer a financial loss. While Medicare and Medicaid fee discounts have been criticized as inequitable, the programs are also shown to provide a 'hidden subsidy' to physicians during residency training, materially adding to rates of returns.