The Cost of Primary Care Doctors

This study uses a human capital model to estimate the societal cost of producing a physician service. Physician human capital consists of the underlying human capital (productivity) of those who become physicians and the job-specific investments (physician training) added to this underlying capital. The value of physicians' underlying human capital is estimated by forecasting an age-earnings profile for doctors based on the characteristics in youth of NLSY cohort participants who subsequently became doctors. Published estimates are used to measure the total cost (wherever paid) of investments in physician training. These data are combined to compute the societal cost per primary care physician visit. The estimated societal cost per primary care physician visit is much higher than the average co-payment per primary care service and generally higher than the current Medicare compensation rate per service unit The private return to primary care physician training is relatively low, in the range of 7-9%. At current levels of supply, the marginal social costs of primary care visits appear to be equal to or greater than marginal social benefits.