While the USA is not an outlier on the high-end of medical labor provision per capita and physical resources, the fact remains that Americans pay the most for healthcare in the world by a large margin. A key component of this high cost is labor. According to the American Hospital Association’s (AHA) 2025 Cost of Caring Report, labor expenses are the largest cost for hospitals and health systems at roughly 56%. However, while doctors and nurses in the US are paid significantly more than their colleagues in other developed nations, this fact is driven by several factors.
A 2019 Medscape report noted U.S. physicians have the highest annual salaries, at $313,000, while German physicians have the second-highest annual salaries, at $163,000. However, as noted by the Education Data Initiative, US graduates incurred an average of $216,659 in medical school debt in 2025; whereas medical school graduates in many comparable countries (the UK, Canada, and Australia excepted) graduated with little to no debt based on OECD and UMCH analyses. According to a Center for Health Workforce Studies brief in 2019: “In 2017, the average education debt of new physicians surpassed their average annual income for the first time since the exit survey has been conducted…” with the highest debt to income ratio consistently existing for primary care physicians. It is likely that US doctors respond to this reality by specializing at a higher rate (over 60%) than other developed countries – who have closer to a 50/50 split between general practitioners and specialists – which has also driven a shortage in primary care physicians in the US.
A basic economic principle is that price is a function of supply and demand, and the US is near the bottom of developed countries with 2.7 doctors per 1000 population. As noted by the AHA 2024 and 2025 reports, critical labor shortages exist which drove up hospital employee compensation up 45.0% between 2014-2023 which was faster than the 28.7% inflation during the same period – with advertised salaries for Registered Nurses outpacing inflation by 26.6% over the past four years. Compounding this shortage is US population density, with 17% of US population in rural areas (much higher than other developed countries). Despite an increase in medical school enrollment, a residency shortage is capping the number of doctors being licensed. This necessary step in obtaining a medical license is primarily federally funded through Medicare and was capped at 1996 levels since the Balanced Budget Act of 1997 (due to concerns that an oversupply of doctors would drive up healthcare costs) until the Consolidated Appropriations Act of 2021 authorized an additional 1,000 residencies over five years.
Contributing to high costs and labor shortages is burnout. In a 2023 Fact Sheet by AHA addressing the trend of physician practices being acquired and incorporated into hospital or health systems reports that “…commercial insurer policies, such as prior authorization, are creating unworkable environments forcing physicians to prioritize administrative duties over caring for patients. The result is increased burnout among physicians with no signs of stopping anytime soon.” Similarly, the relatively high cost of liability insurance against malpractice has been driving US physicians out of private practice – with other developed countries having 50% fewer malpractice claims and more limits on potential damages, with their government covering at least part of the liability insurance rate if not all. In the realm of nursing, a 2023 NIH study notes that between 2020-2030 there is a projected national shortage of 275,000 nurses – largely driven by “…a lack of potential educators, high turnover, and inequitable workforce distribution.” In 2022, “the national average turnover rate ranges from 8.8% to 37.0%, depending on geographic location and nursing specialty.”
Thus, while comparatively high medical practitioner compensation is a fact in the US, this is a function of high medical education costs, consequent debt, limited residency availability, and a cycle of labor shortages and burnout. It is entirely reasonable for medical practitioners who are saddled with high education debt to seek the maximum compensation to pay off that debt. Likewise, medical practices reasonably attempt to attract and retain talent – among a pool of talent that is potentially limited by the high cost of medical education and limited residency availability.
