Examining returns on education has been an important economics topic for at least 60 years (Rev Econ Stat 1959;41:24-8; Am Econ Rev 1960;50:346-54; Social Forces Influencing American Education. 1961). Investment in education and training, like investment in one's health, is considered an investment in human capital. Important economic questions can be addressed using a return on investment (ROI) framework, including:

  • What are the economic returns on a college education? On graduate education?

  • What are the returns on education and training related to selected professions, such as business, medicine, law, or a skilled trade?

  • Within the House of Medicine, what are the relative financial returns on education and training by specialty?

Beyond the monetary measures

ROI calculations are usually based solely on monetary considerations, the investment of education weighed against potential higher income (returns) of a chosen profession. Personal decisions regarding education and occupation, however, go well beyond the direct financial impact. The indirect economic considerations can be substantial, although difficult to measure and weight. They merit a brief discussion.

In addition to influencing one's choice of occupation and the related future financial rewards, education can impact major life outcomes such as marriage and family. Education can also change you as person, increasing self-esteem and self-awareness. Education may make you more opinionated and more decisive. It may promote trust and provide life skills such as managing budgets and time (Economics of Education Review 2011;30:1118-22).

There is utility, or personal satisfaction, associated with college. The college years are often considered “some of the best times in life” where lifelong friendships are established. For some, the stress of college and being away from home are negative factors that diminish the enjoyment of the experience. For persons continuing to graduate school, there are non-monetary differences associated with the experiences in business school, medical school, and law school.

The choice of a profession is influenced by factors other than potential monetary rewards. Being in law enforcement, a lawyer, a physician, or tradesperson may represent a longstanding family tradition or childhood dream. One may like the prestige associated with being a physician rather than a tradesperson. There may be a sense of civic duty or benefits to society that are difficult to quantify and include in an ROI analysis. Similarly, within the medical profession, the choice of specialty may be influenced by family history, perceived stature, or perceived societal need.

The economic assessment

The costs of education and training and the subsequent incomes of different professions and physician specialties can be estimated, and the ROI associated with each can be calculated. Therefore, most published studies assessing the value of education and training for various professions focus on the monetary costs and benefits and not the qualitative factors discussed above.

The ROI is measured as a net present value (NPV) or internal rate of return (IRR), based on estimates of annual cash flows over many years, from the investment in education up to retirement.∗ Ignoring student loans for the moment, there are likely net cash outflows during medical school and net cash inflows in subsequent years. Of course, the inflows are substantially lower during residency and fellowship training.

In published assessments of returns to education comparing professions or physician specialty, there are two important but complicating factors that are not consistently addressed: student debt and opportunity costs.

Student debt: In 2019, the median four-year cost of attending medical school was $272,000, and the median education debt level was $227,000 (asamonitor.pub/2OJFPJP). In 2019 dollars, the cost of attending medical school increased 20% between 2010 and 2019, while the median education debt levels increased 5%. During this nine-year period, the percentage of medical school graduates with medical school debt decreased from 85% to 70%. Some have expressed concern that these trends would result in only the wealthy able to afford medical school (Health Aff (Millwood) 2005;24:527-35).

There are important consequences to student debt. Large education debt affects life choices and timing related to marriage, children, and buying a house (Med Educ Online 2014;19:25603). Substantial indebtedness may affect mental health and academic performance (BMJ Open 2019;9:e029980).

But does student debt affect the choice of physician specialty? Some studies based on surveys have concluded that to be the case; however, studies based on actual data did not find an association (BMC Med Educ 2019;19:395). In its 2020 report on physician education debt, the Association of American Medical Colleges (AAMC) also concluded that debt does not determine specialty choice (asamonitor.pub/2OJFPJP).

Although the magnitude of student debt is large and impactful, in an analysis of ROI among specialties, student debt should be ignored. That is, the cash flow analysis should assume an all-equity perspective. There are both theoretical and practical reasons to take this approach, beyond the fact that debt does not seem to determine specialty choice.

Opportunity costs: These are real and can be substantial over the ROI timeframe. However, there are always opportunity costs to any decision, and the ROI analysis can be simplified by excluding them. When comparing the ROI of alternatives, such as the financial returns to different specialties or professions, it is more transparent to evaluate the ROI of each alternative's expected net cash flows and then compare the resulting NPVs or IRRs. If just comparing two alternatives, some authors may prefer to combine the analysis into one ROI calculation with appropriate opportunity costs included throughout the relevant period. I prefer to compare the cash flows and resulting ROI on the two alternatives separately; it seems clearer and more informative. When comparing the ROI among physician specialties, the medical school opportunity costs are likely to be similar, and excluding them is a reasonable approach.

Returns to medical education and training

Seven published studies comparing financial returns across specialties in the U.S. are summarized in the Table. Anesthesiology was included in two of the studies. Although there are differences in the ROI calculations used by the authors, I did not critically review their data and methodology. These differences are probably not enough to change relative rankings of the specialties' financial returns on education. With a few exceptions, more highly compensated specialties had higher returns on education, expressed in terms of NPV or IRR.

Weeks and Wallace also compared the ROI of four professions and found that business, law, and dentistry had higher financial returns on education than medicine. Not surprisingly, procedure-based medicine had a higher return than primary care medicine (Acad Med 2002;77:312-9).

Is the time and expense of medical education and training worth it? From a monetary perspective, the answer seems to be yes, although there are only a few recently published studies that address the question. The non-monetary costs and benefits could be substantial. For persons making an education and career choice, the qualitative considerations and individual preferences may outweigh the net financial returns.


Summary of Studies Comparing ROI on Education and Training among Specialties and Subspecialties

Summary of Studies Comparing ROI on Education and Training among Specialties and Subspecialties
Summary of Studies Comparing ROI on Education and Training among Specialties and Subspecialties

Personally, I am curious about the recent phenomenon of “free” medical schools and their impact on the number of applicants, characteristics of the persons accepted, and the students' subsequent choices of medical specialty (www.leveragerx.com/blog/free-tuition-medical-school). From an economics perspective, the costs of and returns to education and training for different professions or physician specialties are complex. There are several interesting research questions, one or two of which I will examine in future columns.

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I appreciate the opportunity to contribute brief articles on health economics to the ASA Monitor. Although these topics may not be of everyday concern to anesthesia professionals, I hope that others are as curious as I am. I welcome your suggestions for future issues.

Thomas R. Miller, PhD, MBA, ASA Director of Analytics and Research Services.

Thomas R. Miller, PhD, MBA, ASA Director of Analytics and Research Services.