Nonphysician Clinicians Nurses Physician Compensation Supply of Medical Services

Are doctors and nurses to blame for high health care costs?

A study by Glied, Ma and Pearlstein (2015) says the answer is no. High worker wages are a reasonable place to start for explaining why US healthcare costs are so much higher than other countries as about half of healthcare spending is spent worker compensation. The study by Glied, Ma and Pearlstein does find that:

…average wages earned by health-sector employees are about 3 percent above those of comparable workers in other sectors… Nonprofessional employees in nursing homes and other health care delivery settings earn 10–12 percent less at the mean and median than would be expected based on their characteristics…By contrast, health care professionals earn more than would otherwise be predicted. At the mean, nurses earn about 40 percent more than would be predicted based on education, experience, and demographics, and physicians earn nearly 50 percent more than would be predicted.

The authors found that nursing wages generally increased relative to similar occupations over time, but the largest change in relative earnings occurred for physicians between 1984 and 2008.

Although physician and nurse earnings are higher then similar professions in other industries, nurses earnings have increased relatively modestly over time. Further, as “physicians’ compensation constitutes
less than 10 percent of all health care expenditures, and nursing compensation accounts for
less than 7 percent of expenditures”, differences in earnings can only partly explain the higher level of US healthcare spending relative to other countries. The authors conclude:

These results suggest that efforts to reduce the rate of growth in prices paid for health care services cannot be accommodated primarily through reductions in the pay of health-sector employees. Instead, such efforts will likely require providers to improve their productivity, producing the same services with fewer, or less costly, labor inputs.


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