The average doctor in the United States earns about $300,000 per year, roughly twice as much as physicians in other rich countries. Does that mean U.S. doctors are "seriously overpaid," as one prominent economist argues—or is it fair compensation for these high-skilled, highly trained workers?

Report: How you can attract and retain physician talent—without competing solely on compensation

Here's what Greg Rosalsky of NPR's "Planet Money" newsletter found when he took on the controversy.

How much are doctors actually paid?

Physician pay varies widely depending on specialty, geography, and other factors, but there's no doubt that U.S. physicians are highly paid professionals. A 2011 study in Health Affairs found that the typical U.S. doctor is paid about $300,000 per year, and in 2018, Medscape's annual Physician Compensation Report offered a similar average figure of $299,000 per year.

It's also clear that U.S. physicians are paid significantly more than their counterparts in other wealthy countries—roughly twice as much, according to research.

Report from the frontier of physician compensation

What's less clear, however, is whether it's fair to say that this means U.S. doctors are "overpaid."

The argument that doctors are paid (way) too much

Dean Baker, a senior economist at the Center for Economic and Policy Research, offered a blunt assessment: "[D]octors are seriously overpaid," he told "Planet Money."

What's more, he offered an explanation for why: American physicians function as a "cartel," he argued, limiting the pathways through which professionals can practice medicine—thus limiting the supply of doctors and raising incumbent physicians' wages.

Specifically, Baker said, the U.S. residency system is set up in a way that each year prevents many qualified medical students from getting a slot. Baker noted that that Medicare, which funds the bulk of residency slots, capped the number of funded slots in 1997 in response to lobbying from doctors' groups—in particular, the American Medical Association (AMA).

While the number of residencies have increased by 26% over the last ten years, the increase hasn't been enough to bring up the supply of new doctors to a level that's aligned with demand, Baker argued.

And according to Baker, physician trade groups have taken other steps to prevent competition for their services. For instance, they've argued against expanding scope of practice for nurse practitioners, physician assistants, and other providers.

All of this comes at a big cost to the U.S. health care system, according to Baker. He projected that bringing doctor salaries down to competitive levels would save about $100 billion annually.

The argument that doctors are paid fairly

But not everyone agrees with Baker's argument, Rosalsky reports.

Those in the "doctors are fairly paid" camp often argue that doctors' high pay reflects the fact they are highly skilled, highly trained professionals. After many years of training, physicians must earn enough to pay back an enormous debt burden: The typical medical student who took out loans graduated with $192,000 in debt in 2018, according to an analysis by the American Association of Medical Colleges.

Further, AMA contends that Baker's argument about residency slots is misguided. AMA acknowledged many states are facing doctor shortages, but it argued the problem stems from "a maldistribution of physicians" that it is working to address, in part by boosting medical school capacity and funding for residencies.

AMA also noted that the association supports the Resident Physician Shortage Reduction Act of 2019, which would add 15,000 Medicare-funded residencies over five years.

Baker, for his part, expressed skepticism about whether AMA is truly dedicated to taking steps that might lower physician pay. "OPEC sometimes votes to increase the supply of oil," he said. "That doesn't meant that OPEC isn't restricting the supply of oil and pushing up the price," he added (Rosalsky, "Planet Money," NPR, 3/12; Murphy, American Medical Association release, 3/19).