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It's Good to Be in Healthcare

John Commins, for HealthLeaders Media, November 15, 2010

These executives, physicians, and skilled clinicians undoubtedly would make a strong argument that they deserve the salaries they're getting. Besides, it's what the market is paying, a lot of them work well beyond a 40-hour week, and it's hard to blame anyone for earning as much money as they can.

 

However, let's put this in perspective. According to the U.S. Census Bureau, 4.1% of U.S. households had an income between $150,000 and $200,000 in 2009, and 3.9% had an income of $200,000 or higher, while 11% of U.S. households earn between $15,000-$25,0000 annually. The median household income in the U.S. that year was $50,221.

These relatively high salaries in the higher echelons of healthcare probably are not driving up the cost of healthcare, which accounts for about $2.2 trillion annually. It's hard to see that salaries could dramatically affect a number that big.

However, it does raise questions about perspective, because people in positions of relative wealth and influence are setting policies and pricing services for people who aren't. Can that 3.9% of households that make $200,000 understand the financial constraints on that 11% of households earning $15,000-$25,000? For those earning $250,000 a year, $100 for an office visit, or $1,000 or $5,000 for a health insurance deductible may seem reasonable. If you're earning $25,000 a year, however, that can be healthcare denied.

"Cost containment" in healthcare means shifting more costs onto the backs of patients, about 90% of whom who earn considerably less than physicians and hospital executives. Studies consistently show that healthcare inflation is relatively constant, at about 7% or so every year—often double or triple the Consumer Price Index—in boom times and in busts.  

Maureen Maitland, vice president of Standard & Poor's Indices, attributes the rise in healthcare costs to supply and demand; healthcare providers are charging more because they can. "Basically the demand for healthcare is high, and physicians and hospitals are trying to meet their budgets, and are able to put these rate increases through," she said.

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