It is a fairly well-known fact that doctors in the US are paid more than their neighbors in Canada. The major reason behind this lies in the differences between the healthcare systems in each country and their impact on a doctor’s earning potential. Physicians in the US earn anywhere from $260,000 – $324,000 per annum, whereas their Canadian counterparts receive between $206,000 – $261,000.
Over the years, the gap in doctor’s salaries between the two nations has gradually reduced. While it may seem like a no-brainer to decide based on just headline salary figures, one needs to bear in mind that these figures represent the average gross pay doctors receive in the respective countries and does not take several varying deductions into account.
In this article, we will try to explain the key considerations relative to the wage gap and shed some light on why many Canadian doctors refuse to move their practice to the US despite the potential for higher earnings. So let’s get right into it to see what the differences, pros, and cons of each system are.
Differing Medical Systems
Canada uses a single-payer healthcare system that provides universal healthcare coverage for medically necessary services based on need rather than the ability to pay. Doctors in Canada are required to bill their services to provincial health authorities at standardized rates. While these rates differ from one province to the next, they are mainly stable.
On the other hand, American doctors bill health insurance companies for each procedure and treatment they administer. Additional costs not covered by the health insurance will need to be settled by the patient.
This difference in the billing process is a key factor affecting doctors’ earnings between the two nations. For example, if a Canadian doctor treats a patient for a broken arm, the cost of treating broken limbs is roughly pre-determined by the Canadian government. Therefore, the doctor cannot change that amount in any way.
If the same treatment was administered in the US, there is no set charge as doctors are allowed to set their own markup for their service. Health insurance companies tend to cover up to a certain percentage markup, and the patient will be liable for any balance.
Yes, specialization does play a critical role in pay differences. It’s important to remember that salaries in medicine exist on a spectrum, within which one needs to account for inter-specialty and intra-specialty variability. Simply put, a physician specializing in a related field will earn more.
Interestingly, Canadian family doctors earn relatively similarly (and in some cases slightly more) than in the US. This also partially explains why just under half of all Canadian doctors are family physicians only, and almost 70% of US doctors have a specialization on top of being a physician.
Due to the government-funded medical system, Canadian doctors act as gatekeepers to specialists and hospitals and as a filter for the government to ease the burden on these establishments. Whereas in the US, since health care is privately funded by the patient, they are free to choose where they are treated and who they are treated by.
This also incentivizes US doctors to specialize in additional fields, which will benefit them from referring the patient to someone else. This equates to additional treatment being administered and a separate bill to the health insurance company.
Differing Legal Expenses
Two major legal expenses differ between the two countries, each playing a key role in the total earning potential of doctors. These are:
Tax considerations: Tax in Canada, especially for higher earners such as doctors, is significantly higher than in most parts of the US. Tax in Canada is deductible at 33% for individuals that earn more than $221,000 of taxable income. This is fairly significant, especially when compared to some parts of the states, such as Florida, that do not charge state-level tax.
Malpractice insurance: In Canada, medical insurance is publicly funded. While covering everyone, Canada still spends far less on health care than the United States. Doctors in Canada pay a specific fee based on the type of service they offer and their location. This, in turn, provides them with legal representation in medical malpractice cases by the Canadian Medical Protective Association. Due to the universal treatment approach adopted by the Canadian government, malpractice claims are actively discouraged, and the amount of damages are capped.
In contrast, the onus lies on doctors in the US to take on all the risk and responsibility of seeking their own insurance coverage for malpractice. In addition, doctors in the US may also face malpractice charges by patients and medical insurance companies. The greater the level of coverage, the more it will cost. Therefore, doctors in the US are usually subjected to high insurance bills to ensure that they are sufficiently covered.
Doctors in the US face significantly higher insurance expenses and are more likely to spend more on costs to operate their practice, including:
- Administration (including billing, collections, etc.)
- Employee costs (including salary, benefits, etc.)
- Additional insurance (building, contents, etc.)
- Rental or mortgage
- Cost of equipment (due to higher import costs)
Due to the nature of the medical system in the US, a lot of time and effort is spent on administrative tasks such as billing individual clients, dealing with insurance companies, and maintaining up-to-date accounts. This makes it impossible for a doctor with a decent customer base to maintain a grip on their own and will often require assistance with each task.
The single-payer model used in Canada makes billing and administration straightforward. Billing is generally done to the local government once a month, which massively reduces the burden of having to invoice each patient and follow up on payment like in the US. Plus, since invoicing and receipt of payments are more structured and done monthly, it’s much easier for Canadian doctors to use software systems to track their income accurately and spot discrepancies easily.
A final point of interest worth mentioning that may be especially helpful if you’re still a medical student is that the cost of medical school in Canada is subsidized by provincial governments and varies depending on whether a student is a Canadian citizen, permanent resident, or foreign student, as well as the actual school they decide to attend. Over time this could be a major cost difference as student debt can often linger for many years after one’s schooling career is over.
There is a notable difference in the amount Canadian doctors receive compared to US doctors. However, this observation invites us to ask, what do Canadians “get” in exchange for paying their physicians less than their American counterparts? The simple answer is standardization.
Doctors in the US are subjected to endless amounts of red tape, from insurance companies’ technicalities to legal claims and representation. Therefore, despite the obvious upside of a potentially higher income, one must also consider the cost of that extra income during the decision-making process.
When deciding whether to work as a physician in Canada vs the US, the above consideration will weigh heavily into the decision. We hope you now have all the information needed to make a choice that works best for you and what you want to offer your patients.