Who Values Human Capitalists’ Human Capital? The Earnings and Labor Supply of U.S. Physicians

Is government guiding the invisible hand at the top of the labor market? We use new administrative data to measure physicians’ earnings and estimate the influence of healthcare policies on these earnings, physicians’ labor supply, and allocation of talent. Combining the administrative registry of U.S. physicians with tax data, Medicare billing records, and survey responses, we find that physicians’ annual earnings average $350,000 and comprise 8.6% of national healthcare spending. The age-earnings profile is steep; business income comprises one-quarter of earnings and is systematically underreported in survey data. There are major differences in earnings across specialties, regions, and firm sizes, with an unusual geographic pattern compared with other workers. We show that health policy has a major impact on the margin: 25% of physician fee revenue driven by Medicare reimbursements accrues to physicians personally. Physicians earn 6% of public money spent on insurance expansions. We find that these policies in turn affect the type and quantity of medical care physicians supply in the short run; retirement timing in the medium run; and earnings affect specialty choice in the long run.