Doctors are often perceived as benevolent professionals. They are hard-working individuals who extend their largesse by giving away free medical care to those in need. Studies by Cunningham and May (2006) and the American Hospital Association find that doctors provide uncompensated care equal to 6.3% or 5.6% of their cots annually respectively.
A recent Journal of Health Economics article by Gruber and Rodriguez concludes that these figures may be overstated. In fact, the study finds that physicians provide negative amounts of uncompensated care to the uninsured.
How is this possible? While it is true that doctors do give away free care to the uninsured and that many of those without insurance do not pay their bills, the uninsured patient often pay a large portion of the list price whereas those who have insurance receive a negotiated lower price. Thus, the authors find that “the majority of physicians actually make money, on net on their uninsured patients…12-14% of physicians found their uninsured patients more than twice as profitable as their insured patients; that is the net payments from the uninsured were more than twice the expected payments from the insured patients.”
Even when the authors ignore the higher list prices the uninsured pay, they still find that only about 1% of total revenues are given away as free care to the uninsured. Much of this amount, however, is due to non-payment by the patients rather than free care given away by the physicians.
Medicine may be a business after all.
- Gruber J, Rodriguez D. 2007. “How much uncompensated care do doctors provide?” Journal of Health Economics, 26(6): 1151-1169.