31 May 2017

Do doctors deserve to get paid so much?

Stephen Kershnar
Are Doctors Overpaid?
Dunkirk-Fredonia Observer
May 30, 2017

            With the ongoing death spiral of Obamacare, there is discussion of how to shift the insurance costs for people with pre-existing conditions onto others, contain drug costs, and force insurance companies to let parents keep their adult children on their insurance. There is surprisingly little discussion of physician compensation. This is surprising given that, as Catherine Rampell writing in The New York Times points out, such compensation constitutes 20% of total healthcare costs.

            Physicians are well compensated (compensation includes salary, bonus, and profit-sharing). According to a 2016 Medscape study, male primary care physicians, on average make $225,000 and specialists $324,000. I focus on males because 25% of female physicians only work part-time. Using 2009 figures, over their lifetime, primary care physicians (men and women) earn $6.5 million and specialists earn $10 million (this is after and deductible business expenses and taxes, except income taxes,). Writing in The Atlantic, James Hamblin notes that, on average, a number of specialties make $400,000 or more (cardiologist, dermatologist, radiation oncologist, and various types of surgeons: radiologist, neurosurgeon, orthopedic surgeon, plastic surgeon, thoracic surgeon, and vascular surgeon).

            Writing in Forbes, Chris Conover points out that physician compensation is 78% higher than that of other industrialized countries, although this might be more like 35% for specialists once we control for relevant factors.

            These high salaries are the result of restricted supply of doctors rather than the free market. Princeton economist Uwe Reinhardt raises the idea that many more people want to become doctors than are admitted into medical schools. This is done by limiting medical school places and residency slots. The result is to limit the number of doctors and thereby raise their prices. 
Writing in Reason, Shikha Dalmia argues that the American Medical Association convinced Congress to limit the number of residencies, thereby restricting the number of physicians. She further notes that even foreign doctors with years of experience in their home country have to redo their residencies. Again, this limits the number of doctors. These things have produced an acute doctor shortage in the U.S.

            The return on investment in medical training is high. Physicians invest a lot of money in order to be able to practice. They go into pay a lot for and go into debt to pay for medical school (on average, $170-$200,000 debt), forego income while in medical school, and get reduced pay during residency. Still, one study showed that only four professions had a higher return on investment than medical specialists (for example, pharmacists and chemical/petroleum/nuclear engineers) and primary care physicians did nearly as well. Another study by Berkeley economist Nicholas Roth found a high rate of return on medical training, well above that of stocks and treasury bonds.

            One objection raised by the father of modern economics, Adam Smith, is that doctors are very important to our health, a crucial aspect of how well our lives go. We trust them with our lives. To ensure that only the most talented and trustworthy people go into medicine, doctors need to be highly compensated.
            The problem with this objection is that even if ratcheting up their compensation and prestige produces better physicians, doing so by limiting their numbers results in fewer physicians and less access to them. Fewer people get healthcare because of the increased cost caused by a shortage of doctors. Increasingly, care is given by healthcare workers who do most, but not all, of what a physician does at lower salaries: nurse-practitioners and physician’s assistants. It is not clear that the American people are better off with fewer but better physicians.  

            Writing in USA Today, Kevin Pho points that the talent pool that produces doctors also produces other high earners, such as business executives, lawyers, and corporate executives. A second objection is that some of these other professions get more money (or, at least, get similar money with far less investment in education and training) and it is necessary to pay doctors well in order to attract top talent away from these other fields and into medicine.

            The difficulty with this objection is that it is unclear whether it is efficient to have the best and brightest go into medicine rather than being investors or business executives. This is not the sort of thing that can be determined by legislators, bureaucrats, or gatekeeper to the medical field. Rather it is best determined by the market. The market can compare the cost and benefit of funneling the best and brightest in one field rather than another by seeing the profits generated by paying for the very best as opposed to those who are merely very good. The idea that physicians need to be as good as investors needs support, not emotion.

In addition, people who do most of what doctors do (nurse-practitioners and physician’s assistants) and physicians who lack a MD (specifically, DOs) are increasingly common in medicine. The former group have less training than MDs and the latter have noticeably lower medical board scores. This suggest that the market does not think all medical personnel need such talent.

            A third objection is that physicians are among the best and brightest in our country and so should receive a lot of money for what they do. They have high IQs, go through demanding and lengthy training, pay astronomical sums to medical schools, and are among the most trusted professions (ranking only below nurses and pharmacists). They’re impressive.

            This objection is bizarre. Just because physicians are talented, sacrifice a lot, and are trusted does not mean that they should make so much more money than others, especially when this amount would not be paid out by the free market. Farmers keep us alive, loggers and fishermen have dangerous jobs, physicists are incredibly bright, and investors (for example, hedge fund managers) direct large amounts of resources toward their most efficient use. It doesn’t follow from these facts that they should get rich. The same is true for physicians. 

A debate over eliminating the Fredonia philosophy department

TO:                  Virginia Horvath, President, Terry Brown, Provost, Andy Karafa, Dean, Carmen
                        Rivera, Associate Dean, Tracy Horth, Secretary
FROM:            Stephen Kershnar, Chair, Ray Belliotti, Neil Feit, and Dale Tuggy
RE:                 Elimination of the Philosophy Department
DATE:            April 4, 2017

Part One: Opposition to Elimination

            In his recent Right Serving Right Sizing memorandum, Dean Karafa wrote as follows about the Department of Philosophy.

[A] reorganization of CLAS is worth exploring. For example, as noted above, Philosophy’s enrollment has steadily declined and is now at 10 primary majors. (There are 9 secondary majors.) The work of the faculty has done to further streamline an already structurally simple program and revise its schedule to meet student demand is commendable. Unfortunately, it is likely not enough to stem the decline. (Declining enrollment is common across the country.) An examination of merging this department with another within CLAS is worth consideration.            

The philosophy department strongly opposes its elimination, which would be the result of the sort of merger Dean Karafa describes. Below are our reasons against elimination.
            It is worth noting that some members of the department were told about the plan to dissolve it (and move the faculty into the English Department) well before Right Serving Right Sizing. If this information was accurate, then it seems that this plan is not a response to the Right Serving Right Sizing study. We do not know if this was done for financial reasons, to get back at faculty that have opposed administration initiatives, or another reason.[1] If there was a discussion of this merger, we do not know why the philosophy faculty were not included in the discussion.   

Part Two: Reasons against Elimination

Reason #1: Minimal Savings and Substantial Costs
The savings generated by eliminating the philosophy department are small. The savings amount to the cost of three additional classes annually (assuming a philosophy professor does not serve as an associate chair), yearly chair stipend, and in the long term, an addition to the previous chair’s base. In the short term, this is roughly $13,000 per year (= [($3,000/class) x 3 classes] + $4,000 stipend). These savings are not great. When compared to the negative statewide attention that the campus will receive for eliminating the department, the negative national attention and protests on philosophical/academic blogs and related venues, and the risk of damaging a cheap and efficient academic department, even these expected costs of elimination far exceed the benefits.

On Sunday, April 2, we sent an informational email to philosophy department chairpersons in the SUNY system regarding Dean Karafa’s suggestion. We are waiting for more responses, but as we finalize this memo just two days later, we have already received support – including a willingness to write public letters protesting our elimination – from six of our SUNY comprehensive peer departments. Other departments have the issue on upcoming agendas.

Note that every one of Fredonia’s SUNY competitors has an independent philosophy department. See the comprehensive colleges (Brockport, Buffalo State, Cortland, Geneseo, New Paltz, Oneonta, Oswego, Plattsburgh, Potsdam, Purchase) and the university centers (Albany, Binghamton, Buffalo, and Stony Brook). If President Horvath and Provost Brown decide to eliminate the department, this will expose Fredonia as conspicuously imprudent, in a way that is inconsistent with our stated vision as a “premier public university.” A public university without a philosophy department is a lower-tier institution that does not take the liberal arts seriously.

Moreover, the department is cheap and efficient. The Data Notebook data indicate that the department’s direct instructional cost per SCH is $224, which is below the institution average of $244. We suspect that since Ray Belliotti was on a half-year sabbatical in Fall 2014 (with full pay while contingent faculty staffed courses) the numbers for the department are even better in a typical year. The department’s student-faculty ratio (FTE students taught/FTE faculty) of 19.3 also compares favorably with the institutional average, 14.1.

The philosophy department’s efficiency is noticeably better than the campus and, often, better than the national average. Please see Appendix #1. This is particularly impressive given that our small faculty needs to offer a substantial number of upper level courses for majors and minors. The same is true with enrollment. The philosophy department performs better than the institution and, importantly, already meets the enrollment-ratio goal. Please see Appendix #2. Dean Karafa’s focus on majors (especially primary majors), while not unimportant, is pernicious in the absence of attention to these other, relevant, data.

One way to see how cheap the department is by noting that the university spends considerably more money per administrator, business professor, and higher level police officer than per philosophy professor.[2] Please see Appendix #3.

Another cost has to do with the philosophy department’s unique focus and culture. Our department focuses on providing a rigorous, deep, and balanced education in philosophy. It also has a strong history of research excellence. (Consider the noteworthy research done by such extraordinary professors as Ray Belliotti, Randy Dipert, and Tibor Machan.) The department also has a friendly, positive culture. The concern is that this unique focus and culture will be lost if the department is eliminated by being merged into another department. This is especially true if the philosophy subsumed into a larger department. The concern is still greater if the department is plagued with internal strife (see, for example, English).

Reason #2: Program Performance
The department has fewer majors than normal, but previously it had an impressive number of majors per tenure-track faculty. Here is the recent history. The number of majors is down considerably, but there is little reason to believe that it will remain down. To roughly the extent that the administration is optimistic about reversing the decline in overall enrollment, it should be optimistic about the number of philosophy majors.

Table 1. Majors
Number Majors
33 majors per year

The lower recent numbers should take into account (a) the 24% decrease in the number of students at the university, (b) the decrease in humanities and other departments more generally, and (c) the elimination by the administration of the large section of our introductory class that was our best recruiting tool.[3]

Our placement is excellent. A significant number of graduates over the past four years are now attending (or have recently finished) top notch law schools and philosophy programs. Two of these students are at Ph.D. programs at Indiana and Syracuse (ranked in the top 25 and 40 in the nation, respectively) on free rides. Others are at Minnesota law, Arizona Law, Wake Forest Law (on free rides), and others are at Brooklyn and Albany Law, and four others are at philosophy or other MA programs. In the past decade or so, our students have attended the following excellent law schools and MBA programs (Penn, Duke, William & Mary, Illinois, Minnesota, Indiana, Rutgers, Ohio State, Wake Forest, Case Western, Brooklyn, Syracuse, and SUNY-Buffalo) and strong graduate programs (Duke, Indiana, Syracuse, University of Missouri, Northern Illinois University, Ohio University, University of Victoria, and University of Miami).    

Reason #3: National Climate
            The dean made the following argument with regard to a few interdisciplinary majors.

Other majors and minors have less-than-obvious homes. The majors Women’s and Gender Studies and American Studies and minor Ethnic Studies are good examples of this. … Given the national climate; our students need the content. Unfortunately, few are getting it, at least not from the curriculum. Many are impacted by the outreach (e.g., national speakers) made possible by the area’s budget.

While we are not entirely clear what “national climate” refers to, it seems that whatever argument can be made for students needing these interdisciplinary majors applies to philosophy as well. What students need now is the sort of critical thinking about regional, national, and global affairs that is the primary focus of a philosophy course or program. Eliminating the philosophy department will diminish its ability to provide greatly needed content and skills to students.

Part Three: Conclusion
            In summary, the philosophy department does not think that its elimination is good for students or the university. It endangers the unique focus and culture, the savings are minimal, and the department has over the last decade done a good job of generating majors and graduates, as well as contributing significantly to general education in the humanities and western civilization.

Appendix #1: Efficiency

Table 2. Efficiency
(percentage compared to institution)
National Average
% Undergraduate SCH taught be tenure-track faculty
55% (106%)
This is impressive given that the tenure-track faculty have to teach the higher-level classes that typically have fewer students than the introductory classes.
SCH per faculty FTE (all categories)
289 (140%)
This speaks for itself.
Direct instructional expenditure per FTE Student
(6% better)
This is true even though the department has only four tenure-track professors, all of whom are senior professors.
Direct instructional cost (Expenditure) per SCH
(8% better)
See above.
Direct instructional cost (Expenditure) per FTE SCH (without FB)
(7% better)
See above.

Appendix #2: Enrollment
Table 3. Enrollment
(Fall 2013-Spring 2016 Avg.)
[Percentage compared to institution]
Enrollment Ratio
[3.5% better]

Balanced Course Ratio
[31% better]
This is a very favorable comparison.
Enrollment Cap
(Fall 2011-Spring 2016)
[31% better]
See above.
Average Enrollment
(Fall 2011-Spring 2016)
[40% better]
See above

Appendix #3: Salaries

Table 4. Sample Salaries*
Arnavut, Ziya
Prof, CS
Belliotti, Raymond
DTP, Philosophy
Boisjoly, Russell
Dean, Business
$161, 362
Burns, Ann
Police Chief
Cornell, Charles
$78, 593
Daley, Michael
HR Director
Feit, Neil
DTP, Philosophy
Givner, Christine
Dean, Education
Hall, Linda
Prof., Business
Horowitz, Judith
Assoc. Provost
Horvath, Virginia
$215, 739
Huang, Lei
Asst. Prof, Business
Hunter, Lisa
Assoc. Provost
Kearns, Kevin
Academic Engagement
Kershnar, Stephen
DTP, Philosophy
Martin, Scott
Police, Fredonia
McNamara, Susan
Asst. Prof, Business
Miller, Benjamin
Police, Fredonia
Mohammed, Shazad
Assoc. Prof, Business
Prechtl, Greg
Athletic Dir., Fredonia
Robinson, Richard
Prof., Fredonia
Studley, Brian
Police, Fredonia
Tuggy, Dale
Prof., Philosophy
$77, 969
Walters, Lisa
Assoc. Prof, Business
Wheeler, Clifton
Police, Fredonia
Yi, Taihyeup
Assoc. Prof, Business

*This appears to include extra pay (for example, summer classes, overtime, and stipends).

Appendix #4: Graduation
Table 5. Graduates
Graduates per year
Number of graduates
11 students/year
32 students
(projected 43 over 4 years)
10 students/year
50 students
4.6 students/year
23 students
3.2 students/year
16 students
2.2 students/year

[1] A previous dean told the philosophy department that the administration was aware of their pattern of questioning the administration and that it made them very unhappy with the department. The questioning was well within the appropriate range of academic discussion and governance. Here is what the unhappiness likely rested on.
·         Administrative Review. Dale Tuggy and Steve Kershnar tried to allow the university senate access to reviews of the administrative divisions. It had long been a right of senators, but was eliminated by senate chair and English Department chair Bruce Simon.
·         General Education Program. Ray Belliotti, Neil Feit, and Kershnar led the opposition to the new general education program. The senate voted down the first two versions.
·         Enhanced Presidential Ceremonies. Belliotti was a leading commentator on the greatly enhanced ceremonies welcoming the appointment of the new president: Virginia Horvath. The ceremonies were far more than what had been done for previous presidents.
·         Faculty Voting. Feit and Kershnar were part of the effort to retain faculty voting on new hires and chairs (it has been in effect eliminated in the case of hires and there was an attempt to eliminate it in the case of chair selection). The administration does appear to have stealthily eliminated the faculty right to vote on new hires, although this does not appear to be consistent throughout the college. At least two deans opposed faculty voting on the chair and tried to implement a right of the administration to vet chair candidates before the faculty were allowed to vote on them.
·         Free Speech. Kershnar was denied a promotion by President Hefner and Vice President Horvath. There was then attempt to negotiate a prior-restraint requirement on his public writings. The negotiation broke down. Eventually, this was reversed but only after the college received a lot of bad publicity.
·         Associate Provost. Neil Feit was among a group of senators to move to recommend against hiring two Associate Provosts in Academic Affairs, and later (after two were hired) he pressed Associate Provost Horowitz on the decision to hire a grants development specialist to fill the line left vacant by Maggie Bryan-Peterson’s departure.
·         Senior Lectureship. The department’s request for a full-time position for its long-term contingent faculty (Chris Pacyga) has consistently been denied, despite the fact that similar requests were granted for many other departments.
·         UUP Matter. In a case involving President Hefner’s denying an award to a faculty member who was chosen by relevant committee, Belliotti and Kershnar pointed out that leading administrators were saying contradictory things to Hefner and the union. Hefner appeared to be none too pleased. The next year the faculty member received the award.

[2] In contrast to the attempt to save $13,000, consider over the last few years, the administration has found the money to fund a new division (including a new vice president who earned $175,000 last year) and an additional associate provost. It also hired an administrative team that is almost entirely external to the university. The last point can be seen in that none of the following came from the faculty: music director, four deans, two associate provosts, provost, and president. This adds cost to the university because the people are not temporarily removed from the faculty salary rolls. Instead, they are added onto the rolls on top of the faculty.

[3] It is worth noting that we received inconsistent explanations of why the class was eliminated. On one version, given from Dean Roger Byrne allegedly on behalf of President Horvath, the class was simply too large. On a second version, explicitly given by Provost Brown, the class was not too large, but the course release for teaching it was intolerable. Regardless of which was the administrative position, a significant recruiting opportunity has been eliminated.