For some reason, people assume that doctors get benefits like salaried workers. But most docs pay for their own benefits just like most people pay for their own car insurance.
Almost all physicians buy insurance out of their billings to cover medical, dental or vision expenses. A handful of docs earn a salary with benefits, but they are a tiny minority. Readers of this blog suggested doctors’ benefits warranted its own post.
My relatives love telling me their medical stories (and I enjoy hearing them). A popular theme centres on the shocking price of new prescriptions. I ask whether they have a drug plan. No, they don’t. I tell them I don’t have a drug plan either. They don’t believe me.
This usually leads to an interrogation of physician benefits. They pour out a long list of benefits and ask about each one. Dental? No. Physiotherapy? No. Orthotics? No.
At the end of the list they say, “So, you have no benefits at all? None?“
I shake my head.
“That’s stupid. You need do something about that.”
Benefits Packages
Most people expect their salaries will include at least some funded benefits like:
Eye glasses and contact lens, dental cleaning procedures, medications, medical devices, orthotics, massage, physiotherapy, psychologists’ assessments, counselling, orthodontics, pension, sick/personal/parental time, paid vacation, personal days, maternity leave, unemployment insurance benefits, disability insurance, life insurance, relocation expenses, child care, elder care, flex time, phased retirement, tuition reimbursement, etc. (Read more here )
Not all jobs have generous benefits, but most professional salaries do. The University of Western Ontario publishes a detailed list “Estimating Costs of Benefits for Faculty”. It shows that benefits cost 20-30% for salaries up to $100k. Some healthcare workers have extremely generous provisions for sick days in their contracts. You could also check out Ontario’s Sunshine list. Pick a section (e.g., education) to get a sense of what benefits are worth as a percentage of income.
Some people think that physicians get other benefits like: club memberships, generous salaries for teaching medical students and residents, money for publishing academic articles, paid vacations, and much more. To be sure, those who spend most of their time teaching get paid. But not much. Most teachers in community hospitals volunteer their teaching time. Club memberships, vacations and paid publishing don’t exist, as far as I know.
Self Pity
Doctors generally don’t want to discuss money, billings, benefits or any of this. We just want to work hard seeing patients and bill what our services are worth. We get forced into these discussions because politicians mislead the public with gross billings calling it income.
Many people see through the spin. Despite their initial surprise, family and friends quickly understand the huge cost of self-funding pensions and benefits. Many media outlets accurately explain how physician incomes break down after overhead. But for others, the mythology and confusion about physician earnings serves political ends.
photo credit: cbs-gisx.com
Hello. From what I understand, benefits like the ones you mention generally accompany salaried positions. Are you suggesting that it would be preferable for physicians to become salaried employees with benefits?
It seems the trend over the past 20 years for physicians has been pretty much the opposite, with over 90 percent of physicians incorporating as Canadian controlled private corporations. However, I can see the benefits to society – and to physicians – of being on salary (benefits are one!).
But the benefits to physicians of incorporating are so great (and the financial industry surrounding physician corporations is so great) I don’t see how physicians would ever un-incorporate. The tax rate is, simply, so much lower: “taxes paid by small businesses, at both the federal and provincial level, have decreased dramatically since 2000: a small business with $500,000 in taxable income pays less than half the combined federal and weighted average provincial corporate income tax it paid just 13 years ago.”
Overall incorporation has become so attractive that “between 2000 and 2013 the number of incorporated self-employed individuals in Ontario increased by more than 40 per cent. That means incorporated self-employment now makes up 43 per cent of all self-employed individuals in the country.”
This means that most of these people (including the majority of doctors, lawyers, dentists and accountants) are not on salary and will therefore not have the kind of benefits salaried employees have.
What is the impact on society? Overall, fewer taxes to pay for the services provided by… physicians!
“But these small business owners face a marginal tax rate that is much lower than the top federal-provincial marginal income tax rate that is paid by people who are wage earners. This difference makes it attractive to incorporate for tax planning purposes. It provides a way for high-earning individuals and families to reduce their taxes as well as their contribution to public services that build equity and fairness into the economy.”
For more about the “costs” of low small business taxes, and for the source of all those quotes see: http://rabble.ca/blogs/bloggers/behind-numbers/2015/01/small-business-tax-cuts-canada-been-there-done?utm_content=buffer479f7&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
I would be curious to hear about your views of being on salary with benefits vs being incorporated.
Thank you.
Thanks again, Tammy.
You mentioned that you collected a government salary. Do you happen to work in the Ministry of Health or some other bureaucracy? 😉
You seem extremely interested in incorporation. You should speak to an accountant and explore setting up a corporation for yourself so you can speak from experience. I speak as an incorporated MD. I use up all of my $120k medical billings (after overhead) to feed my family (4 kids). I haven’t been able to leave anything in my corp for the last few years.
I discussed benefits because most people I speak to don’t realize that MDs have to buy their own benefits just like others buy car insurance.
As for taxes, I don’t know where to start. In Canada, 50% of taxes are paid by those with the top 10% incomes. Those with the lowest 50% of incomes pay only 4% of the taxes in Canada. See this article.
Progressive taxation penalizes those who try to work harder and earn a little more. A flat tax seems much more fair and conducive to encouraging industry. Hitting people with higher and higher taxes the more they work discourages individual industry.
Finally, a number of MDs have called for salaries for years. The trouble is that it takes 2.5 salaried workers to accomplish the work of one person on piece work. The government could not afford to pay for MDs on salaries even if the rates were set equal to a principal’s salary. Government gets an amazing deal by keeping docs scurrying on treadmills.
Regards,
Shawn
Hello Shawn. Thank you once again for your thoughtful response. The way you are compensated is so different from the way I am in the “Department of Health” that I appreciate your detailed responses and explanations.
I know you feel that people are surprised to learn you don’t receive “benefits” the way salaried employees do. I think one important reason for this is that most people don’t quite understand that you aren’t salaried employees but rather are self-employed, like other small business owners. I think people would be even more surprised to learn that most physicians are incorporated – I know I was when I first learned this, which is why I feel that it is important to include this point when you start addressing the nuts and bolts of physician compensation.
I think it is easy to get people worked up about physicians not getting benefits. Of course our society wants to reward our physicians properly, as you are – rightly – one of the most highly respected and essential professions in our economy. But if you explain that side of things (the benefits salaried employees get that physicians don’t get) then I think you should explain the other side (what physicians get that salaried workers don’t get) as I believe it helps to even things out and also helps us – non-physicians – to feel we are better informed and have a fuller picture of how our government compensates physicians. After all, an informed populace is much better able to participate in an informed discussion.
I am very interested in your assertion that it would take 2.5 salaried workers to pay for 1 piece work worker. I would like to hear more about this and the pros and cons of physicians being on salary. Are there some countries where physicians are on salary? Are there some provinces where they are on salary? Is there a better model somewhere? Maybe a topic for a blog post?
Thank you.
Respectfully,
Tammy
Thanks again, Tammy.
I’ve tried to be as open as possible (perhaps even more than prudence allows). I know for certain that many (many!) doctors would jump at the chance to be paid a respectable salary with pension, sick time and health benefits. I will struggle to match my father who retired from teaching at 53 on a full pension with benefits. I should be able to catch up by my mid to late 50s. However, if all the hours I will have spent working would have been spread out and put in at the rate he worked as a teacher, I doubt I would catch up by 75 years old or later.
With respect to your 2.5:1 question, I offer the following. Doctors on an hourly rate in emergency medicine advocate seeing 1.9-2.3 patients per hour. In fee for service, doctors see 5 patients per hour routinely (assuming a mixture of difficult and easier patients). In an efficient ED with proper nursing and clerical support, doctors can see 30% more again. Just ask nurses how physician productivity changes in emergency departments when they go from FFS to AFA (hourly pay). One nurse director said, “It was like suddenly someone put the brakes on.” Of course, dozens of reasons exist to support a slower clinical pace. That’s another argument in itself with solid arguments for both sides. Either way, alternate funding arrangements cost the ministry of health at least 25% more than the FFS total billings in the same department. That’s one reason so many ED groups sign up for AFAs.
It’s good to know I have an interested reader in the ministry of health. I hope you read out of genuine interest and not just to promote the Ministry’s version about my work and income.
Kind regards,
Shawn
Please read my response below.
Cheers,
Family Doc
This is to add a bit more info to the topic the gentleman above mentioned.
If docs would be paid a decent salary, with benefits and sick days and paid mat leave and holidays, as well as dental, glasses, orthotics, physio, etc etc, I guarantee you 100% if docs would jump at that chance. Why? Because we would work 9-5 ( including paperwork, follow ups, forms, admin work). Because we would have A lunch break and eat food and drink fluids like all normal employees, a 1 hr break fir lunch, none of which I have had the pleasure of experiencing ever since I started to work as GP, even when pregnant, I had no time to eat or drink, and often even empty my bladder, because my waiting room was packed and ppl constantly complaining how “the govt should hire 2 physicians for thus clinic to work at the same time, how come they only have one doc”!
Because I’d see 2 patients an hour, which is the time most if our patients deserve, and it wouldn’t burn mds to the ground, like it has.
Because I’d go on a vacation without caring that I have bills to pay (secretary, lease, computer software EMR etc etc).
Because I’d have all evenings to myself and my 2 beautiful little girls, who have been used to live without mommy for mos of the weekends and evenings in a year.
I could continue with more, but you see my point by now.
Govt on the other hand, can’t afford a doc that is good to patients and take 2 patients an hour. It would need ASAP at least 4 times more MDs to do our job. I let you do the math for that.
What a fantastic comment! People have no understanding unless they hear stories like you just shared. Thank you for taking the time to share when time is so obviously a rare commodity for you.
Best,
Shawn
And one more for the road. I am also not incorporated. After overhead, dental expenses, other medical expenses fir physio or occupational therapy, coupled with income loss from sick days or injuries, as well as 3-4 weeks of vacation scattered throughout the year, which I owe to my kids and husband who put up with me not being much with them, add on top of that daycare costs for my 2 kids whom I had to leave under other people’s care at te age of 3 months, as I had to return to work, almost forgot to mention our several mandatory professional memberships, CMPA fees, insurances ( as it turns out I can only collect after 90 days if being completely disabled to work, so my injury that left me 1 month unable to work dug another hole in my pocket), pension plan funding etc etc, I have 0$ left at the end of the year. So not enough to be incorporated. I have been practicing for 7 years. Even my family doesn’t believe that I’m not “loaded”.
I sure hope Tammy, the government employee who commented earlier, reads your additions! The sick thing is that people will think you’re either lying or represent only one of the 35,000 doctors in Ontario who are all loaded. We have to keep sharing our personal stories like you did. The public needs to understand that cuts will hurt patient care.
Thanks again for sharing!
Shawn
The sick thing is that people are questioning our income and asking why they don’t gross that, as if we live in a communist country. I have visited communist countries. A doctor, a farmer, an engineer, a mechanic and a janitor, all make the same money. What bothers me is that ppl who live in a capitalist country actually question why doesn’t everybody make the same amount! As if the length of training, legal responsability, stress and expertise that docs have, is the same with any other profession (I don’t want to mention any). Patient care yes. But I’m not ashamed to say that I expect to make a certain amount of money per hour, just like any profession. The fact that ppl think we docs make a lot of money must mean that they think we deserve it! I agree! We deserve every cent we make, and we work extremly hard for it! What docs in this blog are explaining is that contrary to popular belief, and to our belief too, we don’t make that money! And many of us are either contemplating closing our practices, or turning them factory style, to stay afloat!
You nailed it with “…people are questioning our income and asking why they don’t gross that, as if we live in a communist country”
Fortunately, most of the readers don’t think that way (I hope!). Only the vocal Marxists seek that kind of revolution. We need to save our energy to convince the large, reasonable middle crowd that the government is behaving more like a totalitarian regime than a civilized democracy.
Thanks again for sharing!
Shawn
Hello again. I am finding this discussion very interesting! Thank you for taking the time to wade in.
Here are my take-aways from Family Doc: she does not make as much as people assume she makes, or as much as many other physicians make; she works very hard and is a very diligent, conscientious doctor; and she says she would prefer a salary over her current self-employed situation.
I have been reading posts from other physicians and discussing the situation with my own dear friends and family members who are physicians. It is very clear to me that, as in all walks of life, there are very different situations for different individuals within the same profession.
Here is what I have observed and learned, some of which is different from what I am reading here:
Most physicians are incorporated (over 90 percent in Canada).
The ones I personally know say they feel they are very well compensated and have no complaints about what they earn.
Most physicians are not “loaded” – but some are. All but one of my 8 physician friends have a working spouse and rely on this second income.
About half of my physician friends work reduced hours.
The older generation of physicians (of which my very almost-father-he-is-so-close uncle is a member) worked very very long hours and many could support their whole family on one income.
The newer generation of physicians work shorter hours than the older generation, and have a greater desire for work-life balance.
I was interested to read that Family Doc felt all physicians would jump at the chance to be on salary. I would love to see this compensation option be seriously analysed. However, I don’t think it would mean physicians would only work 9-5. Many salaried people work odd hours and weekends, if that is when their services are required. Patients need doctors at all hours and all days, so I think whether physicians are on salary or not people entering the field must be prepared to work those hours.
Something I have also seen, even in my own life, is that it is easy to only see the negative in one’s situation. I know that all jobs have their annoyances; however, there are always nice perks that you might not see until someone reminds you.
Here are some benefits that you may be overlooking:
Job guarantee; no worry of losing your job (many of my friends have lost a year of wages here and there due to losing a job)
Business deductions: it is a bonus to be able to deduct a home computer, an iPhone, an iPad, parking, car and other expenses that serve multiple purposes
Job flexibility: it is very nice to be able to work part time when kids are young or to work more hours when your life stage allows it.
If you are incorporated, it is great that you can benefit from the lowest corporate tax rate of G8 countries as well as numerous other beneficial financial arrangements.
Above all, you are doing something meaningful and essential for society, and everyone is deeply thankful for the work you do. You save lives and help people have a better quality of life. How awesome is that.
Respectfully,
Tammy