於蠡函層 The NeW ENGLAND journal of medicine Perspective NOVEMBER 21, 2013 Are We in a Medical Education Bubble Market? David A. Asch, M.D., M.B.A, Sean Nicholson, Ph. D, and Marko Vujicic, PhD n November 1636, the prices of tulip bulbs in the ble, in which prices of Internet Dutch market rose rapidly from their normal level stocks rose until 2000 and then plummeted. Bubbles burst when to the point where a single bulb might sell for 10 some new sense of lower intrin- times the annual earnings of a typical worker. Just sic value appears. The last buyers as quickly, in May 1637, tulip-bulb prices had shot up in the first paid too much for and can no prices returned to their previous place. Clearly, tulipmania was a longer unload. It's like being alues. The causes of this dramat- bubble market fueled by specula- caught without a chair when the ic rise and fall remain in dispute. tion rather than intrinsic valuation. music stops, but whereas even the The event occurred during the After all, why would people be losers at musical chairs knew that Dutch Golden Age, when stock willing to pay 10 times the average at some point someone would be exchanges, central banking, and annual wage for a single tulip bulb left standing, bubble markets are many of the fundamental struc- unless they were confident that usually recognized only in retro- tures that govern contemporary they could sell it to an even great- spect- the losers never saw it capital markets and the approach- er fool willing to pay even more? coming es deployed by MBAs today were Bubble markets are created Are we in a bubble market in developed hen an asset trades for increas- medical education? In medicine One modern economic analy- ingly higher prices as it is bought students buy their education from is suggests that the precipitous by people who are hopeful about medical schools and residency decline in tulip-bulb prices re- its future value and then sold to programs(which pay wages that sulted from a February 1637 others with even more optimistic are lower than the value of the change in the way that futures views of that value. Recent exam- work that residents provide in re- contracts were enforced, which ples include the U.S. housing bub- turn). This education is trans immediately reduced the value of ble, in which home prices rapidly formed into skills and credentials those contracts by 97%, but this rose until 2007 and then just as that are then sold to patients in analysis doesn't explain why the rapidly fell, and the dot-com bub- the form of services. So long as it N ENGL J MED 369: 21 NEJM. ORG NOVEMBER 21, 2013 1973
Perspective The NEW ENGLAND JOURNAL of MEDICINE november 21, 2013 n engl j med 369;21 nejm.org november 21, 2013 1973 as quickly, in May 1637, tulip-bulb prices returned to their previous values. The causes of this dramatic rise and fall remain in dispute. The event occurred during the Dutch Golden Age, when stock exchanges, central banking, and many of the fundamental structures that govern contemporary capital markets and the approaches deployed by MBAs today were developed. One modern economic analysis suggests that the precipitous decline in tulip-bulb prices resulted from a February 1637 change in the way that futures contracts were enforced, which immediately reduced the value of those contracts by 97%,1 but this analysis doesn’t explain why the prices had shot up in the first place. Clearly, tulipmania was a bubble market fueled by speculation rather than intrinsic valuation. After all, why would people be willing to pay 10 times the average annual wage for a single tulip bulb unless they were confident that they could sell it to an even greater fool willing to pay even more? Bubble markets are created when an asset trades for increasingly higher prices as it is bought by people who are hopeful about its future value and then sold to others with even more optimistic views of that value. Recent examples include the U.S. housing bubble, in which home prices rapidly rose until 2007 and then just as rapidly fell, and the dot-com bubble, in which prices of Internet stocks rose until 2000 and then plummeted. Bubbles burst when some new sense of lower intrinsic value appears. The last buyers are stuck with something they paid too much for and can no longer unload. It’s like being caught without a chair when the music stops, but whereas even the losers at musical chairs knew that at some point someone would be left standing, bubble markets are usually recognized only in retrospect — the losers never saw it coming. Are we in a bubble market in medical education? In medicine, students buy their education from medical schools and residency programs (which pay wages that are lower than the value of the work that residents provide in return). This education is transformed into skills and credentials that are then sold to patients in the form of services. So long as it Are We in a Medical Education Bubble Market? David A. Asch, M.D., M.B.A., Sean Nicholson, Ph.D., and Marko Vujicic, Ph.D. I n November 1636, the prices of tulip bulbs in the Dutch market rose rapidly from their normal level to the point where a single bulb might sell for 10 times the annual earnings of a typical worker. Just
PERSPECTIVE ARE WE IN A MEDICAL EDUCATION BUBBLE MARKET patients and what schools can Family medicine charge students. Just as tulip bulbs can be sold at high prices only to people who think they can resell hem at still higher prices, schools Obstetrics and gynecology can sustain their high tuitions General surgery only if students can be convinced Anesthesiology of higher returns in the form of payments from future patients. So, he amount that schools are able Orthopedics to charge students is inextricably linked to how much we pay doc- tors now and how much we plan to pay them in the future. Medi- I students can take on enormous debt only because the costs of that debt can be easily passe along to others down the road So are we in a medical educa- tion bubble? we would realize we 乎小心心少炉 have been in one if a sudden col lapse in what patients are willing to pay doctors made it impossi Figure 1. Ratio of Debt to Income, According to Medical Specialty. ble to sell medical education at Data on median incor from the Medical Group Management Association. Data current prices, causing applica- on average debt are from surveys conducted by the Association of American Medical tions to fall and some medical schools to cut tuition to continue to attract qualified applicants. Fig is believed that patients, or who- dents must borrow rather than ure 1 might be seen as suggest- ever purchases health care on their what they must pay and, given ing that we are approaching such behalf, will keep paying more and whatever other assets they may a collapse in primary care fields more for physicians'services, stu- have, how much in the hole they and psychiatry. But that is not like- dents and trainees should be will- have to go. Thus, these ratios may ly to be the case. First, at least at ing to pay more and more for the better reflect how students actually the level of undergraduate medi- education that enables them to feel about buying education. cal education, schools charge a sell Figure 1 shows these ratios for single price to students whether A simple measure of this mar- selected medical specialties over they go into family medicine or ket economy is the ratio of the the past 15 years and reveals that orthopedics. Although it isn't nec- average debt of a graduating stu- the ratio has become less favor- essarily clear to students or schools dent to the average annual income able for students overall but par- which students will choose what in the profession on entry into ticularly unfavorable for students fields, the income of the average the workforce. There are more entering family medicine or psy- doctor can sustain the debt of the precise ways to measure the re- chiatry. Although the cost of be- average doctor even as the differ- turn on investment in medical coming a doctor is roughly the ences among specialties create education-for example, the net same whether you go into pediat- pressures for primary care and present value of the stream of cash rics or orthopedics, you earn much psychiatry flows out (for education) and in more in orthopedic Second, as high as the debt-to- income ratios may be for primary and psychiatry, they dents. In 1g income ratios reflect what stu- tween what physicians can charge notably, veterinary medicine, op N ENGL J MED 369: 21 NEJM. ORG NOVEMBER 21, 2013
PERSPECTIVE 1974 n engl j med 369;21 nejm.org november 21, 2013 is believed that patients, or whoever purchases health care on their behalf, will keep paying more and more for physicians’ services, students and trainees should be willing to pay more and more for the education that enables them to sell those services. A simple measure of this market economy is the ratio of the average debt of a graduating student to the average annual income in the profession on entry into the workforce. There are more precise ways to measure the return on investment in medical education — for example, the net present value of the stream of cash flows out (for education) and in (for services). But that value isn’t very intuitive for most prospective students. In contrast, debt-toincome ratios reflect what students must borrow rather than what they must pay and, given whatever other assets they may have, how much in the hole they have to go. Thus, these ratios may better reflect how students actually feel about buying education. Figure 1 shows these ratios for selected medical specialties over the past 15 years and reveals that the ratio has become less favorable for students overall but particularly unfavorable for students entering family medicine or psychiatry. Although the cost of becoming a doctor is roughly the same whether you go into pediatrics or orthopedics, you earn much more in orthopedics. The graph is instructive in another way: the debt-to-income ratio reveals the connection between what physicians can charge patients and what schools can charge students. Just as tulip bulbs can be sold at high prices only to people who think they can resell them at still higher prices, schools can sustain their high tuitions only if students can be convinced of higher returns in the form of payments from future patients. So, the amount that schools are able to charge students is inextricably linked to how much we pay doctors now and how much we plan to pay them in the future. Medical students can take on enormous debt only because the costs of that debt can be easily passed along to others down the road. So are we in a medical education bubble? We would realize we have been in one if a sudden collapse in what patients are willing to pay doctors made it impossible to sell medical education at current prices, causing applications to fall and some medical schools to cut tuition to continue to attract qualified applicants. Figure 1 might be seen as suggesting that we are approaching such a collapse in primary care fields and psychiatry. But that is not likely to be the case. First, at least at the level of undergraduate medical education, schools charge a single price to students whether they go into family medicine or orthopedics. Although it isn’t necessarily clear to students or schools which students will choose what fields, the income of the average doctor can sustain the debt of the average doctor even as the differences among specialties create pressures for primary care and psychiatry. Second, as high as the debt-toincome ratios may be for primary care and psychiatry, they are even higher for some other fields — notably, veterinary medicine, opare we in A Medical Education Bubble Market? Ratio of Debt to Income (%) 100 40 50 10 60 20 30 0 70 80 90 Family medicine Psychiatry Emergency medicine Obstetrics and gynecology Anesthesiology General surgery Radiology Cardiology Orthopedics 1996 1998 2000 2002 2004 2006 2008 2010 Figure 1. Ratio of Debt to Income, According to Medical Specialty. Data on median income are from the Medical Group Management Association. Data on average debt are from surveys conducted by the Association of American Medical Colleges
PERSPECTIVE ARE WE IN A MEDICAL EDUCATION BUBBLE MARKET to well-qualified physicians, we also need to keep the cost of ating those physicians down by changing the way that physicians are trained From college through censure Dentistry and credentialing, our Family medicin annual physician-production costs are high, and they are made high er by the long time we devote to Orthopedics Business Although it seems unlikely that were in a bubble market for med re may already be in one for That bubble will burst when po tential students recognize that the costs of training aren't matched by later returns. Then the optom- etry may burs by the pharmacy and dentistry ∮心炉炉 bubbles. At the extreme. we will march down the debt-to-income. Figure 2. Ratio of Debt to Income, According to Occupation trists to cardiologists to orthope Data on median income are from the Medical Group Management Association(physi. dists to one ans), the American Dental Association(dentists), and the Current Population Survey but the MBAs. American Bar Association, the American Association of Colleges of Pharmacy, and at NEJM.org ational Center for Educat and Promotion, Philadelphia Veterans Affairs Medical Center: and the perelman school tometry, pharmacy, and dentistry, lot of money, and there are strong of Medicine and the Wharton School, Uni as shown in Figure 2. For veteri- signs that we can't or won't narian, incomes have risen slowly Only about 20% of health care .A. A): Cornell University, Ithaca, NY(. N ) the National Bureau of Economic Research even as student debt has explod- costs are attributable to physician Cambridge, MA( N); and the American ed2 Yet although such company payments, and many of the cur- Dental Association, Chicago(MV) may ease the misery of primary rent efforts to reduce costs are This article was published on October 30, care physicians, it does nothing aimed elsewhere, such as hospi- 2013, at NEJM. org to solve the underlying problem. tal payments, and have only indi- The problem is this: if we aim rect effects on physicians'earn- 1. Thompson EA. The tulipmania: fact or arti- to reduce the costs of health ings. But physicians'and dentists' 2 Segal D High debt and falling demand care, we need to reduce the costs earnings have been sluggish since trap new vets. New York Times. February 23 of medical education. We don't the early 2000s.3.4 Even if pros- 3. Seabury SA, Jena AB, Chandra A Trends have to believe that the high cost pects for physicians' income fall in the earnings of health care professionals of medical education is what fast, a burst bubble can be averted in the United States, 1987-2010. JAMA 2012 causes increases in health care if schools see it coming before 4 Vujcic M, Lazar v, wall TP, Munson B An sense of urgency. We just have to prices J Am Dent Assoc 2012: 143: 452-6 recognize that the high costs of The general lesson is that if cal training by 30% JAMA 2012: 30 edi. 5. Emanuel E], Fuchs VR. Shortening medical education are sustainable we want to keep health care Dol: 10.1056/NEJMp1310778 only if we keep paying doctors a costs down and still have access copyright o 2013 Massachusetts Medical Society N ENGLJMED 369: 21 NEJM.ORG NOVEMBER 21, 2013
n engl j med 369;21 nejm.org november 21, 2013 PERSPECTIVE 1975 tometry, pharmacy, and dentistry, as shown in Figure 2. For veterinarians, incomes have risen slowly even as student debt has exploded.2 Yet although such company may ease the misery of primary care physicians, it does nothing to solve the underlying problem. The problem is this: if we aim to reduce the costs of health care, we need to reduce the costs of medical education. We don’t have to believe that the high cost of medical education is what causes increases in health care costs in order to develop this sense of urgency. We just have to recognize that the high costs of medical education are sustainable only if we keep paying doctors a lot of money, and there are strong signs that we can’t or won’t. Only about 20% of health care costs are attributable to physician payments, and many of the current efforts to reduce costs are aimed elsewhere, such as hospital payments, and have only indirect effects on physicians’ earnings. But physicians’ and dentists’ earnings have been sluggish since the early 2000s.3,4 Even if prospects for physicians’ income fall fast, a burst bubble can be averted if schools see it coming before their students do and lower their prices. The general lesson is that if we want to keep health care costs down and still have access to well-qualified physicians, we also need to keep the cost of creating those physicians down by changing the way that physicians are trained. From college through licensure and credentialing, our annual physician-production costs are high, and they are made higher by the long time we devote to training.5 Although it seems unlikely that we’re in a bubble market for medical education, we may already be in one for veterinary medicine. That bubble will burst when potential students recognize that the costs of training aren’t matched by later returns. Then the optometry bubble may burst, followed by the pharmacy and dentistry bubbles. At the extreme, we will march down the debt-to-incomeratio ladder, through psychiatrists to cardiologists to orthopedists . . . until no one is left but the MBAs. Disclosure forms provided by the authors are available with the full text of this article at NEJM.org. From the Center for Health Equity Research and Promotion, Philadelphia Veterans Affairs Medical Center; and the Perelman School of Medicine and the Wharton School, University of Pennsylvania — all in Philadelphia (D.A.A.); Cornell University, Ithaca, NY (S.N.); the National Bureau of Economic Research, Cambridge, MA (S.N.); and the American Dental Association, Chicago (M.V.). This article was published on October 30, 2013, at NEJM.org. 1. Thompson EA. The tulipmania: fact or artifact? Public Choice 2007;130:99-114. 2. Segal D. High debt and falling demand trap new vets. New York Times. February 23, 2013:BU1. 3. Seabury SA, Jena AB, Chandra A. Trends in the earnings of health care professionals in the United States, 1987-2010. JAMA 2012; 308:2083-5. 4. Vujicic M, Lazar V, Wall TP, Munson B. An analysis of dentists’ incomes, 1996-2009. J Am Dent Assoc 2012;143:452-60. 5. Emanuel EJ, Fuchs VR. Shortening medical training by 30%. JAMA 2012;307:1143-4. DOI: 10.1056/NEJMp1310778 Copyright © 2013 Massachusetts Medical Society. are we in A Medical Education Bubble Market? Ratio of Debt to Income (%) 180 60 80 100 20 40 0 120 140 160 1996 1998 2000 2002 2004 2006 2008 2010 Veterinary medicine Optometry Pharmacy Law Dentistry Family medicine Emergency medicine Orthopedics Business Figure 2. Ratio of Debt to Income, According to Occupation. Data on median income are from the Medical Group Management Association (physicians), the American Dental Association (dentists), and the Current Population Survey (other professions). Data on average debt are from surveys conducted by the Association of American Medical Colleges, the American Dental Education Association, the American Bar Association, the American Association of Colleges of Pharmacy, and the National Center for Education Statistics