To hear most American doctors tell their stories, one would think they are horribly underpaid. A recent study found not only how much doctors in the USA actually get paid in salary, but also how much wealth they are able to accumulate.
Recently I did an article for SteadyHealth on doctor salaries in the USA. Although most doctors will tell you they are not paid very much, the truth is that the lowest paid American doctors, pediatricians, earn on average $189 thousand per year, and the highest paid American doctors, orthropedists, earn on average over $400 thousand per year.
However, physician salaries and profit participation don't tell the whole story. Maybe the reason a slim majority of American doctors feel they are underpaid is that they are unable to accumulate wealth like most other people. The Medscape Physician Compensation Report 2015 also addressed this telling issue.
Here are some highlights of the data from the survey:
- Fewer than one in ten medical students, by the age of 28, has a net worth (total assets, such as house, car, and investments, minus total liabilities, such as student loans, personal loans, and business liabilities) of $500,000 or more. Apparently it is very hard to earn that first million dollars during medical school.
- Only three percent of even the best paid of all physician specialists in the USA, the previously mentioned orthopedists, manage to accumulate more than $5,000,000 while they are still in practice.
Obviously, American doctors have nothing on movie stars, sports figures, or hedge fund operators when it comes to accumulating wealth. No wonder your doctor is likely to complain about the measly few hundred dollars or even less your insurance company will pay for your ten-minute office visit. Perhaps after you read even more shocking figures about American doctor incomes you will want to leave a tip.
Many American Doctors Cannot Make Ends Meet
How does income translate into net worth? The Medscape Physician Compensation Survey found that:
- 40 percent of male physicians in the United States have a net worth of less than zero, that is, their debts and liabilities exceed the value of their assets, including real estate, cars, investments, and the value of their practices.
- 59 percent of female physicians in the United States have a net worth of less than zero. In other words, if you are seeing a doctor who is a woman in the USA, chances are that she has a lower net worth, in financial terms, than you do.
American Women In Medicine Paid Less Than Men
There is a reason that women who practice medicine in the United States have a lower net worth than men. As is the case in many other professions in America, women doctors are paid less than their male counterparts. Women in medicine in the USA are paid, on average, 24 percent less than men in the same speciality. Compounding the problem is the fact that the specialties most popular women, pediatrics and family medicine, are the lowest paid, pediatricians earning even less than family practice physicians. This is perhaps in part due to the fact that 58.5 percent of all US pediatricians are women.
That isn't to say that there are no women who earn high salaries in medicine in the USA. About four percent of women in medicine, for example, practice orthopedic surgery. However, even these women earn less than men doing the same job.
Don't Take An Investment Tip From Your Doctor
Why should so many doctors, even though they are the most highly paid of all professionals in the United States, have relatively low satisfaction with their wealth? One possibility is that doctors are trained to think of themselves as smarter than you. To get into medical school, they had to have extremely good grades in their university coursework. They ranked at the top of their classes. They have to be utterly confident when your life is on the life, for example, on the operating table. They carry this attitude over into making investment decisions and get hoodwinked.
In 2014, about one in five doctors in the US reported serious financial problems. In the 2015 compensation survey, however, three in four doctors, about 75 percent reported they had made bad financial decisions.
What kinds of financial decisions cost doctors their hard-earned money?
- Many doctors reported buying their houses at the top of the market, when they had the money to buy the home they wanted, not when it was available at a good price.
- Some doctors (about 28 percent) reported making bad investments in small businesses, such as restaurants, health food stores, and private label vitamin companies.
- Other doctors (also about 14 percent) claim to have received bad advice from their brokers and investment advisors.
Doctors in certain specialities are more likely to make investment mistakes than others. Anesthesiologists (40 percent) reported making the greatest percentage of bad choices in business and stock investments among all medical specialists. Ophthalmologists and urologists (both 39 percent ) and radiologists and orthopedists (both 37 percent) were next in line. Orthopedists (22 percent) reported the highest percentage of bad real estate investments, followed by anesthesiologists (19 percent ), and urologists and plastic surgeons (both 18 percent).
A major financial risk for any doctor, of course, is having to pay a malpractice settlement. Court awards of medical negligence by surgeons (typically in cases tried in federal, rather than state, courts) can run over $10 million. Doctors carry insurance against malpractice awards, but their premiums reflect their experience. Even being accused of malpractice can be quite costly.
The medical specialties that result in the largest total malpractice cost, however, are not general surgery and anesthesiology, which can suffer huge awards, but more specifically orthopedic surgeons, allergists, plastic surgeons, ophthalmologists, and urologists, who have to deal with multiple small claims. A urologist is three and one-half times more likely to have to defend against a malpractice claim than an intensivist, who supervises patients in the ICU. Of course, the intensivist's patients are more likely simply to die, and therefore not to sue, and the urologist's patients are more likely to be unhappy with their sex lives after treatment, and have plenty of energy to sue. Sometimes the less damage a doctor does, the more likely is legal action.
The major bugaboo in managing nearly any doctor's financial portfolio, however, is paying off loans for medical school in a timely fashion.
A significant number of doctors surveyed were still paying off their student loans after the age of 50. The first priority of a young doctor finally earning a salary, usually in his or her early thirties, is to provide for spouse and family, understandably so, but at the cost of long-term financial progress.
READ Can You Keep Your Doctor After You Go On Medicare?
When you see your doctor in the USA, remember that even if a checkup costs you $500, you may still be better financially off than your doctor even though you earn a lot less. No amount of money is likely to make every doctor happy, but you can at least avoid sore topics of conversation when you are in the office for your health needs.
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