The Opportunity Cost

[notdeadyet]

Far too many people are going to point to the "earning in the top 2% of world income" figures, as if that means something in real terms, and as if earning 6 digits a decade from now after a quarter million dollars in debt is a lot compared to the $60-80k many people start at a decade sooner with no debt in a lot of other fields.

Some folks have a skewed vision of paying off their loans after a year, but other folks have a twisted idea of the burden that being a non-earner for 10 years makes.

If you graduate med school at 26 with $300K in debt, do a four year residency at $35K/year, then make on average $170K/year until you retire at 65, you've grossed $5.8 million.

If you graduate college at 22 with $0 debt, and get a job that pays on average $100K/year until you retire at 65, you've grossed $4.3 million.

Obviously there are lots of other variables for either scenario. This is to point out a concept too many can't get their heads around:

It will not be easy to make a fortune and retire early and rich as a physician. But if you enter medicine at a young age and are sound with your money, you will have one of the most stable, highest paying careers around.

The doom and gloom of "oh, I'll never break even as a doctor" and the "I'll have my porsche and two yachts and retire at 40" are extremes.

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[Auron]

Plus if you graduate college and medical school with little or no debt, then you'll actually be making money right out of residency. MINIMIZE DEBT. It's one of my mantras in this whole process. Sure - some college grad has the benefit of time over the doctor but with careful planning and execution the doctor wins out in the end by far.

 

[notdeadyet]

MINIMIZE DEBT. It's one of my mantras in this whole process. Sure - some college grad has the benefit of time over the doctor but with careful planning and execution the doctor wins out in the end by far.

Hats off to you. I can't seem to cut as many corners as I'd like on loans. I'm right near the max estimated by the school.

 

[Doublecortin]

That's one part of it.

I think a more significant part is once you start thinking of health as a commodity, then the worry is that the doctor won't necessarily be working with your wellbeing foremost in his mind. As a Businessman (with a capital "B") the doctor is focused on selling you the more expensive treatment and the more expensive procedure. Given the disparity in knowledge in the health field there's the possibility of supplier induced demand. Doctors (suppliers) know the diagnosis and what treatments are available. Patients (consumers) only know what doctors and the internet tell them. Patients are shielded from the full brunt of the cost by insurance. This and the fact that we're oftentimes talking about life and death differentiates health care from other goods. Think of physicians as businessmen, and you'll begin to question the care you're receiving.

That's why people like to keep the business of medicine quiet.

I understand it's a delicate balance. Obviously we don't want to create the perception that you've described. I might agree that we shouldn't train doctors-businessmen (with big B), but train doctors with sound understanding of the business side of medicine

 

[dienekes88]

I understand it's a delicate balance. Obviously we don't want to create the perception that you've described. I might agree that we shouldn't train doctors-businessmen (with big B), but train doctors with sound understanding of the business side of medicine

That might be the purpose of it, but outsiders won't see it that way. Making business or econ a prereq for med school will probably push the public to make the simplest logical connection (without knowing the big picture of medicine): doctors need to know business and economics, because doctors are Businessmen... they just want our money."

Maybe it could be a secret class in med school...

 

[emttim]

Some folks have a skewed vision of paying off their loans after a year, but other folks have a twisted idea of the burden that being a non-earner for 10 years makes.

If you graduate med school at 26 with $300K in debt, do a four year residency at $35K/year, then make on average $170K/year until you retire at 65, you've grossed $5.8 million.

If you graduate college at 22 with $0 debt, and get a job that pays on average $100K/year until you retire at 65, you've grossed $4.3 million.

Obviously there are lots of other variables for either scenario. This is to point out a concept too many can't get their heads around:

It will not be easy to make a fortune and retire early and rich as a physician. But if you enter medicine at a young age and are sound with your money, you will have one of the most stable, highest paying careers around.

The doom and gloom of "oh, I'll never break even as a doctor" and the "I'll have my porsche and two yachts and retire at 40" are extremes.

I think some of the more realistic worry comes from the fact that salaries are already declining, and with the prospect of health care reform and smaller insurance reimbursements every year, that physician salaries would drop enough that it would be difficult to pay off that 300K in debt.

Although I think if it ever came to that, there'd be the first massive strike of US doctors in history. Plus when medical graduates started to default on their federal student loans that they can't afford the payments on anymore, and the US govt starts to see how massive the mistake it made was, they would probably correct the problem.

Honestly though, yeah salary is important, but I think I would be happy as long as I make enough to pay my bills, live comfortably, and take a vacation once in awhile. I'm sure most people on here wouldn't even ask for that....so I'm hoping the govt, the insurance companies, or something else doesn't take advantage of that.

 

[mfrizzo3]

Some folks have a skewed vision of paying off their loans after a year, but other folks have a twisted idea of the burden that being a non-earner for 10 years makes.

If you graduate med school at 26 with $300K in debt, do a four year residency at $35K/year, then make on average $170K/year until you retire at 65, you've grossed $5.8 million.

If you graduate college at 22 with $0 debt, and get a job that pays on average $100K/year until you retire at 65, you've grossed $4.3 million.

Obviously there are lots of other variables for either scenario. This is to point out a concept too many can't get their heads around:

Finally, somebody understands. Let's bump that salary up to 300-400k, what the average specialist makes where I am from. 7-8mil gross. Seriously people, you will be okay.

 

[TheRealMD]

Finally, somebody understands. Let's bump that salary up to 300-400k, what the average specialist makes where I am from. 7-8mil gross. Seriously people, you will be okay.

Malpractice insurance cuts down on that a bit. And then $300K debt is really pretty variable. But again, there are differences for everyone.

What I think he left out is not how much money will be grossed over a lifetime, but the idea that a doctor will be living a more extravagant lifestyle compared to the "other" guy. In which case, there's not really a lot of money for that. That lifestyle is getting the boot (if not gone already).

 

[mfrizzo3]

Malpractice insurance cuts down on that a bit. And then $300K debt is really pretty variable. But again, there are differences for everyone.

What I think he left out is not how much money will be grossed over a lifetime, but the idea that a doctor will be living a more extravagant lifestyle compared to the "other" guy. In which case, there's not really a lot of money for that. That lifestyle is getting the boot (if not gone already).

Agreed. Just trying to make a point that life will not be cardboard boxes and dumspter diving.

 

[172858]

I knew I had to be a physician after I saw a doc bring a patient in cardiac arrest back to life.

When I saw the look on his face, it looked as though he was enjoying a high better than crack, caffeine, coke, sex, heroine, and salami combined (also know as the Jim Morrison cocktail).

Screw money and opportunity cost. Ever since seeing that look, I knew that I had to have that...

 

[novastorm]

One plus about all the loans is that you wont owe much tax wise during residency as the interest is deductible. So there is always that positive, so invest your meager resident income and use that to pay it off once you start working.

Might as well make the most out of it.

 

[mfrizzo3]

I knew I had to be a physician after I saw a doc bring a patient in cardiac arrest back to life.

When I saw the look on his face, it looked as though he was enjoying a high better than crack, caffeine, coke, sex, heroine, and salami combined (also know as the Jim Morrison cocktail).

Screw money and opportunity cost. Ever since seeing that look, I knew that I had to have that...

Amen brother

 

[notdeadyet]

I knew I had to be a physician after I saw a doc bring a patient in cardiac arrest back to life.

When I saw the look on his face, it looked as though he was enjoying a high better than crack, caffeine, coke, sex, heroine, and salami combined (also know as the Jim Morrison cocktail).

Screw money and opportunity cost. Ever since seeing that look, I knew that I had to have that...

Crack's a lot cheaper than med school, though...

 

[mfrizzo3]

Crack's a lot cheaper than med school, though...

And you could probably make more than a doctor if you were a regional supplier.

 

[8744]

Here's your opportunity cost: Suppose you major in engineering (Civil or Mechanical) and get a job out of college. You can reasonably expect a salary of about $50,000 per year in most areas of the country.

Your four year opportunity cost for going to medical school is therefore $200,000 because your're not making a dime as a medical student.

If you do a four year residency, assuming you're still making around fifty grand you will lose $10,000 bucks a year so your total opportunity cost for medical school and residency as opposed to a different profession is around a quarter of a million bucks not even taking into account the time value of money which I am to lazy too do.

Now you add to that 200 thousand or so of medical school debt. Perhaps, if you are older and have a family, you can add the large balances you carry on your credit cards, the equity in your house that you liquidated, as well as moving expenses required by the match process and you can see that that the real cost of going to medical school can be in the half-million dollar range, again not taking into account the time value of money. Not to mention that you are going to be a decade behind in saving for retirement. (I am 44 and we have absolutely no savings, IRAs, 401Ks, equity, or any assests left...nothing....flat busted...and I still have one year left of residency.)

Fortunately I am in a relatively high-paying specialty but it is going to take us a while to recover. It's not even as if on July 1st, 2009 all of our money problems are going to go away. We will have a huge cash flow problem for many, many months and we may not even have enough money at that time to move.

I made about 70K as an engineer which was probably the highest salary I could reasonably expect and EM physicians make about three times that. Suppose, however, I had ended up in Family Medicine or Pediatrics, both of which are fairly low-paying. If I was a pediatrician and could only make around $100,000 per year, again ignoring the time-value of money, you see how the benefit of a half-million opportunity cost and a decade of my life would only be $30,000 a year...or to look at it another way my "break even point" would be in the neighborhood of thirty years...counting medical school and residency.

As many residents will tell you, medicine sucks. I happen to like it well enough but I am stuck in it, for better or worse. If you don't think money is important than you are incredibly naive and your naivite (which is not idealism) will not survive the first month of intern year.

 

[8744]

I knew I had to be a physician after I saw a doc bring a patient in cardiac arrest back to life.

When I saw the look on his face, it looked as though he was enjoying a high better than crack, caffeine, coke, sex, heroine, and salami combined (also know as the Jim Morrison cocktail).

Screw money and opportunity cost. Ever since seeing that look, I knew that I had to have that...

Hey, I do this all the time and while it is very nice to save somebody's life, don't make it into a religious/orgasmic experience. You also need to keep in mind that of the many cardiac arrests in whose resusictation I have been involved, most of them died shortly thereafter in the ICU as brain-dead vegetables or very soon after discharge from complications of heart failure. I mean, we put them in the "win" column and are pretty thrilled about it but come on now.

Additionally, I don't know any Emergency Medicine attendings who volunteer to do extra shifts to get their "high." Most of them are pretty happy to go home.

 

[notdeadyet]

Additionally, I don't know any Emergency Medicine attendings who volunteer to do extra shifts to get their "high." Most of them are pretty happy to go home.

Good point. I know lots of physicians who volunteer at free clinics. I know a lot more who volunteer with their kid's little league team. I know a total of zero who will volunteer for the job they do for a living.

And it's not a medicine thing. Do any job you love for any length of time and it become's work. Maybe good work you find satisflying, but nothing you'd do for free.

 

[luciabelluci]

I'm concerned that the original quote might not be a fair comparison. For example, a generic "bioscientist" pool would contain everything from a BS to a PhD or even an MD/PhD. It would also contain everything from people who study coral reefs to biochemists working in the pharmaceutical industry or medical researchers trying to improve organ transplantation. A comparison like the one that started the thread is only as good as its isolation of variables!

 

[uzybear]

most surgeons i know still work in their 70s - not because they have to, but because they truly love what they do. that's what i'm looking for.

somebody's got it

 

[45408]

Well, honestly most people who get into med school could also have done well in other things. I think folks sell themselves short around here. Most people with the intelligence and ability to thrive in medicine could do well in almost anything, and be in the upper echelon of wage earners

I have mixed feelings about this sentiment. There aren't a lot of other things in life that could keep me as motivated as medicine. There are other things that interest me, but nothing else (realistically) that I know of that would make me work this hard, for this long.

But the fact that this kind of thread keeps popping up on pre-allo, and the fact that you will continue hearing about folks looking forward to mansions and BMWs means that at some level some folks aren't getting it, or are buying into an image of the profession that hasn't existed for some time. Which makes this kind of reality check discussion a useful one.

Buying a mansion and a BMW (with loans, of course) is a great way to make sure you're never rich. Many of my classmates have a horrific concept of good money management. One of my classmates had a 2-3 minute "hey, how's it going" kind of conversation with me the other day in which she randomly revealed 3-4 different huge mistakes she's making with her money.