How much are Canadian doctors paid?

If you read the newspaper headlines, you will think they are paid, on average, about $307,000. If you ask doctors – and family docs in particular – they will tell you their take-home pay is less than that of many plumbers and auto workers.

What's perplexing is that both those statements are true.

The reality is that there is a distinct lack of clear information.

Yet, beyond our prurient interest, "How much are doctors paid?" is a question that has important public policy implications.

Taxpayers, via provincial health insurance plans, fork out more than $20-billion annually for physician services. Yet, despite this expense – one-10th of all health spending and one-fifth of all public health spending – we have very little idea how much individual physicians actually earn.

Why does this matter?

It matters because the country's 72,000 or so doctors are on the public payroll. While they are independent contractors, almost 100 per cent of their income comes from the state.

It matters, too, because we should be concerned, above all, with value for money. It's pretty difficult to figure out if we're getting our money's worth out of physicians if we don't know how much money we're actually paying them.

So let's look at the data.

Earlier this week, the Canadian Institute for Health Information published updated numbers from the National Physicians Database.

The CIHI data show a "gross clinical payment per physician" of $307,482. That ranges from $250,000 in PEI to $350,000 in Alberta.

Those numbers, for the first time, include fee-for-service payments and alternate payment plans. Doctors still derive most of their income from FFS – they are paid by the "act," and those fees are negotiated with provinces. Increasingly, however, governments are moving to alternate methods of payment such as salary, sessional fees (per hour or per day), and capitation (an annual fee paid per patient).

The CIHI data are also based on gross income. Most physicians, like other small businesses, have to pay overhead costs such as rent, salaries, supplies and insurance. Physicians – for the most part – don't receive benefits or have pension plans, and they can have considerable debt from years of university study.

CIHI does not collect data on overhead costs, but a study published last year by the Institute for Clinical Evaluative Sciences provides some insight.

That research, led by Jeremy Petch of the Li Ka Shing Institute of St. Michael's Hospital in Toronto, calculated net payments to physicians in Ontario. To do so, they looked at physician overhead costs, as collected in the National Physicians' Survey.

Overhead varies widely by specialty, from 38 per cent for ophthalmologists to 10 per cent for medical oncologists, and, of course, many hospital-based docs have little or no out-of-pocket costs. Overall, overhead for Canadian doctors is 26 per cent of their billings. Because that number is self-reported, it may be a tad overstated, but it's the best figure available.

Practically, that means Canadian doctors have an average annual income (before taxes) of a little more than $225,000.

But, again, there is a range, from psychiatrists, the specialists who bill the least ($232,000 gross; $186,000 net), to ophthalmologists, who bill the most ($676,000 gross; $418,000 net).

The last piece of the puzzle is taxes. Doctors, as high-income earners, are highly taxed, right? Well, not exactly.

More than 90 per cent of Canadian physicians are incorporated, which has some tax advantages, such as lower taxes, income splitting (paying a salary to a spouse, for example), and deferring tax payments by holding money in the corporation.

Let's take a practical example of how this works, courtesy of the Canadian Medical Association. A physician with billings of about $250,000 would have a net income of about $200,000 and take home $127,100 after taxes. That same physician, incorporated, would have roughly the same take-home but be able to defer taxes on $60,000.

What you hear, especially during contract negotiation time, is that physicians have overhead costs ranging from 40-60 per cent, and pay 40 per cent income taxes. The available data show that this is self-serving piffle.

But equally spurious is the rhetoric about doctors oozing wealth. During Ontario's recent contract talks much was made of the 252 "millionaire" physicians when, in fact, those who bill $1-million are outliers, not at all representative.

Beyond the crude numbers we have, we don't know how many hours physicians practice, how their income varies by years of experience and other basic information.

All this is to say that physicians are not living high on the hog. For the most part, they are earning wages commensurate with their training and responsibility. Many doctors are, frankly, underpaid.

But what doctors are paid should not be a guessing game. The lack of transparency does not serve taxpayers or the medical profession.