Professor William Byrnes, Texas A&M University School of Law, Risk Management Graduate Program.

Based on my recent debate with Robert Bloink, “Should the Tax Bill Expand HSAs?”, a reader asked me to comment on both parties’ failure to address the central issue of costs regarding the sustainability of Medicare and Medicaid. This is my part one response, focused primarily on physicians. I plan to author a part two focused on other stakeholder roles in health care costs.

The sustainability of Medicare and Medicaid, and U.S. healthcare in general, is a challenging topic, especially when considering the political hurdles associated with reducing medical care costs and enhancing efficiency. Despite past efforts like the ACA, which aimed to address healthcare costs, the actual regulatory impact on reducing inflationary trends in medical services remains, at best, questionable.

Let’s consider health care expenditure data pre- and post-ACA and then what portion physicians take.[1] Before the ACA in 2010, U.S. health care services expenditures were $2.6 trillion (inflation-adjusted for 2023, it’s $3.4 trillion). In 2023, $4.9 trillion. Arguably, health care expenditures grew more slowly between 2011 and 2020 compared to the previous decade of 2000 through 2010. Yet, the 2011 – 2020 cost growth was still well above the inflation rate (more than double the national annual inflation rate in most years). Whether the Titanic sank in two and a half hours or five hours, the (mostly poor) passengers without access to lifeboats died.

Alarmingly, the post-COVID yearly inflation costs of medical services have accelerated well beyond their pre-ACA years. The American Medical Association (AMA), the lobby trade organization of medical professionals, has no interest in alerting the public or Congress to the inflationary cost of physicians. Its members’ interests are to point the blame for rising medical expenses toward anyone but physicians (e.g., ruthless insurance companies, bureaucrats in hospitals, greedy pharma, greedier trial lawyers, inept regulatory bodies, overbearing student loan debt of $264,000 on average).[2] Yet, the AMA reported in its most recent Trends in Health Care Studies that from 2014 until 2023, physician services costs grew at an average annual rate of 5.3 percent – double inflation in several years.[3] In 2023, spending on physician services jumped by 7.6 percent, more than double the consumer price index inflation rate of 3.4 percent.[4]

Physicians’ annual income rose correspondingly, by varying degrees, across all practice areas. Medical industry reports (e.g., Medscape, Doximity, White Collar Investor) range from 3 to 6 percent overall increases. Some groups, like primary care, fared much better in 2023, with 11 percent.[5] Looking at average physician compensation by specialty provides some context for medical costs. Across all medical specialties without regard to U.S. regional variances, the average 2023 compensation was $398,000, yet for primary care, $281,000.[6] The highest average compensation for a specialty is orthopedics, a range of $543,000 to $745,000, depending on the industry survey. Other specialty examples: radiologists $520,000 to $620,000, plastic surgeons $516,000 to $620,000, general surgeons $420,000 to $512,000, emergency medicine $374,000 to $406,000, psychiatry $336,000 to $339,000, family medicine $276,000 to $301,000, and pediatrics $236,000 to $260,000.

With high incomes relative to other professions, it’s not surprising that 2023 was a bumper year for first-time state board-licensed physicians, 30,924, which followed a record year of 31,504 in 2022.[7] From 2010 until 2022, the U.S. expanded its total number of physicians by 23 percent.[8] The total U.S. licensed physician population has, as of 2025, reached 1.1 million. The number of physicians per hundred thousand persons has increased from 277 to 313, albeit rural areas (131 per hundred thousand) have much less than half.[9] However, the U.S. population is older. The CDC reported that 84.5 percent of U.S. adults had a medical visit in 2023.[10] In 2019, before COVID, the total number of physician visits had already reached 1.0 billion, with 320.7 visits per 100 persons, half of which were primary care, 29 percent specialist, and 20 percent for surgeons.[11] As the numbers indicate, annual visits per physician would be above 1,000. But some, like primary care physicians, will experience more visits per physician than, for example, an orthopedic surgeon.

For a comparable trading partner comparison, Canada, France, and Germany have physicians per 100,000 population of 243, 330, and 452, respectively.[12] France’s health expenditure per capita is $4,865, Canada’s is $5,922, Germany’s is $6,182, and the U.S.’s is double that: $12,434. But the U.S.’ double the per capita health care spend does not buy better health outcomes. For 2022, the U.S.’s life expectancy of 77.43 was the worst of the four countries, Germany’s 80.71, Canada’s 81.30, and France’s 82.23. Of course, the other countries partly achieve lower costs through much lower physician compensation. These countries’ physicians earn approximately one-third to one-half of their U.S counterparts, depending on whether they undertake private work outside the public health system.

As the physicians’ lobby, the AMA deflects attention rather well. All U.S. health spending increased by 7.5 percent in 2023, the highest growth rate since 2003.[13] Personal health care spending rose 9.4 percent, the most considerable annual growth since 1990. The two most significant components of 2023’s increase were pharma (prescription drugs, 11.4 percent) and hospital care (10.4 percent). Hospital care accounted for 31.2 percent of all health care expenditures, and physicians accounted for under half that, at 14.8 percent.

Hospitals may take home the largest share of health care expenditures, but not the largest net margin, 6.97 percent.[14] The Medical Group Management Association reports that hospitals generally had negative net margins for the COVID year of 2022. Median medical revenue per full-time physician was $1.578 million, but the median provider physician cost was $627,000 in addition to a $1,015 million median operating cost per physician.[15] KFF found that for 2023, the average hospital margin stood at 6.4 percent, but it differed significantly between for-profit and nonprofit hospitals: 14.4 percent versus 4.4 percent.[16] One explanation of the decline of hospital net margin may be found in the Congressional Budget Office report that Medicare’s payment-to-cost ratio for hospitals decreased from 99 percent in 2000 to 87 percent in 2018.[17] Meanwhile, the share of physicians with private practices dropped between 2012 and 2024 from 60.1 percent to 42.2 percent, the rest working for hospitals or private equity purchasers of a practice.[18] Physician private practices may earn net margins up to 20 percent. In contrast, large (‘AmLaw’) law firms generate from 35 to 45 percent net margin on average.[19] Medical insurers, like hospitals, earn net margins in the 3 to 6 percent range, with an industry average of 3.4 percent.[20]

Back to the subscriber question of Medicare and Medicaid sustainability, technological advancements, such as Robot AI medical providers and gene modification therapies, promise to transform healthcare delivery costs. However, regulatory bodies and legislative decisions ultimately shape the future of healthcare practices.

In a hypothetical scenario, envisioning significant reductions in billable charges within law firms and restructuring compensation models for partners and associates could potentially make legal services more accessible. Similarly, advocating for substantial pay cuts in public company management and investment firm staff aims to prioritize investor interests. While these measures may seem logical for economic sustainability, the complex political landscape often hinders their implementation. For example, 140 members of the House (31.7 percent) and 47 Senators are lawyers, whereas 21 House members and 5 Senators are physicians or dentists.[21] In 2020, government relations expenditures by the health care industry exceeded $700 million.[22] 116 healthcare and pharma companies contributed $16 million to candidates in the 2024 Congressional election cycle.[23] Achieving a sustainable healthcare system involves navigating intricate political dynamics supported by substantial political funding while regulatorily embracing innovative technological solutions prioritizing affordable care.

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[1] Matthew McGough, Emma Wager Twitter, Aubrey Winger, Nirmita Panchal, and Lynne Cotter; How has U.S. spending on healthcare changed over time?, Peterson KFF, Dec. 20, 2024.

[2] What is the Average Medical Student Debt?, laurel road for Doctors, May 12, 2025.

[3] Trends in health care spending, American Medical Association, Apr. 17, 2025.

[4] Consumer Price Index: 2023 in review, U.S. Bureau of Labor Statistics, Jan. 19, 2024.

[5] Cathy Kibbe, New Data Shows Strong Physician Compensation Growth, Gallagher, 2024.

[6]  Josh Katzowitz, How Much Money Do Doctors Make a Year? Salaries Have Yet Another Disappointingly Small Increase, The White Coat Investor, May 21, 2025.

[7] Physician Licensure in 2023. Federation of State Medical Boards, 2024.

[8] Aaron Young, PhD; Xiaomei Pei, PhD; Katie Arnhart, PhD; Jeffrey D. Carter, MD; Humayun J. Chaudhry, DO, MS; FSMB Census of Licensed Physicians in the United States, 2022. Journal of Medical Regulation (2023) 109 (2): 13–20.

[9] About Rural Health Care. National Rural Health Association, 2025.

[10] Ambulatory Care Use and Physician office visits. National Center for Health Statistics, Center for Disease Control, Dec. 12, 2024.

[11] Characteristics of Office-based Physician Visits by Age, 2019. National Health Statistics Reports, Number 184, Center for Disease Control, Apr. 19, 2023.

[12] Global Health Expenditure Database, World Health Organization, June 2025. Physicians and physiotherapists in the EU: how many? Eurostat, Aug. 18, 2023.

[13]  National health expenditure data  Historical. Centers for Medicare & Medicaid Services, Dec. 18, 2024.

[14] Margins by Sector (US). Stern School of Business, NYU, Jan. 2025.

[15] Nearly all medical groups still feeling the squeeze of rising operating expenses. MGMA Stat, June 26, 2024.

[16]  Zachary Levinson, Scott Hulver, Jamie Godwin, and Tricia Neuman. Key Facts About Hospitals. KFF, Feb. 19, 2025.

[17] Cohen, M., Maeda, J., & Pelech, Daria. The Prices That Commercial Health Insurers and Medicare Pay for Hospitals’ and Physicians’ Services. Congressional Budget Office, Jan. 2022.

[18] Physician Practice Benchmark Survey. AMA, Jun 12, 2025.

[19] Madhav Srinivasan, Shape of the Profit Margin Curve. Penn Carey Law School, Mar. 28, 2023.

[20] U.S. Health Insurance Industry, 2023 Mid-Year Results. National Association of Insurance Commissioners.

[21] Membership of the 119th Congress: A Profile (2025), https://www.congress.gov/crs-product/R48535.

[22] Schpero WL, Wiener T, Carter S, Chatterjee P. Lobbying Expenditures in the US Health Care Sector, 2000-2020. JAMA Health Forum. 2022 Oct 7;3(10):e223801.

[23] Pharmaceuticals/Health Products PACs contributions to candidates, 2023-2024. Open Secrets.