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Who Values Human Capitalists' Human Capital? Healthcare Spending and Physician Earnings

Author

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  • Joshua D. Gottlieb
  • Maria Polyakova
  • Kevin Rinz
  • Hugh Shiplett
  • Victoria Udalova

Abstract

Is government guiding the invisible hand at the top of the labor market? We study this question among physicians, the most common occupation among the top one percent of income earners, and whose billings comprise one-fifth of healthcare spending. We use a novel linkage of population-wide tax records with the administrative registry of all physicians in the U.S. to study the characteristics of these high earnings, and the influence of government payments in particular. We find a major role for government on the margin, with half of direct changes to government reimbursement rates flowing directly into physicians' incomes. These policies move physicians' relative and absolute incomes more than any reasonable changes to marginal tax rates. At the same time, the overall level of physician earnings can largely be explained by labor market fundamentals of long work and training hours. Competing occupations also pay well and provide a natural lower bound for physician earnings. We conclude that government plays a major role in determining the value of physicians' human capital, but it is unrealistic to use this power to reduce healthcare spending substantially.

Suggested Citation

  • Joshua D. Gottlieb & Maria Polyakova & Kevin Rinz & Hugh Shiplett & Victoria Udalova, 2020. "Who Values Human Capitalists' Human Capital? Healthcare Spending and Physician Earnings," Working Papers 20-23, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:20-23
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    File URL: https://www2.census.gov/ces/wp/2020/CES-WP-20-23.pdf
    File Function: First version, 2020
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    References listed on IDEAS

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    4. Duggan, Mark & Starc, Amanda & Vabson, Boris, 2016. "Who benefits when the government pays more? Pass-through in the Medicare Advantage program," Journal of Public Economics, Elsevier, vol. 141(C), pages 50-67.
    5. Marika Cabral & Michael Geruso & Neale Mahoney, 2018. "Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage," American Economic Review, American Economic Association, vol. 108(8), pages 2048-2087, August.
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    7. Quentin Brummet & Denise Flanagan-Doyle & Joshua Mitchell & John Voorheis & Laura Erhard & Brett McBride, 2018. "Investigating the Use of Administrative Records in the Consumer Expenditure Survey," CARRA Working Papers 2018-01, Center for Economic Studies, U.S. Census Bureau.
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    Cited by:

    1. Jeffrey Clemens & Joshua D. Gottlieb & Jeffrey Hicks, 2020. "How Would Medicare for All Affect Health System Capacity? Evidence from Medicare for Some," NBER Chapters, in: Tax Policy and the Economy, Volume 35, National Bureau of Economic Research, Inc.

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