To alleviate the country's shortage of primary care physicians, one economics professor from Princeton (N.J.) University has proposed that the healthcare providers be treated "as equally precious" as hedge fund managers, according to a New York Times' Econimix blog post.
Uwe E. Reinhardt, PhD, a professor of political economy at Princeton, said the income stream for primary care physicians can be enhanced by borrowing lessons from the managers of private equity and hedge funds. He says the financial aspects of primary care are much easier to manipulate than other factors influencing medical students' decisions to enter the specialty, such as lifestyle preferences.
Hedge fund managers are typically paid a performance bonus, which is called carried interest, by other investors in the fund. The carried interest is earned if funds under management yield a return that exceeds an established benchmark. The carried interest is then taxed at the low capital-gains rate, which is currently 15 percent, instead of the income tax rate, which is 35 percent plus payroll taxes.
"As long as this tax preference accorded private equity and hedge fund managers remains on the books — presumably because they are deemed precious and important to our country — why doesn't Congress treat full-time primary care physicians as equally precious and important?" Dr. Reinhardt asked in the blog.
He also said an effective method of lowering the cost of investment for a primary care career is to charge medical students full tuition but lend students the funds for it at reasonable interest rates. Significant portions of the student's accumulated debt should then be forgiven for each year of full-time practice in a designated primary care specialty or geographic location that is undergoing a shortage.
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Uwe E. Reinhardt, PhD, a professor of political economy at Princeton, said the income stream for primary care physicians can be enhanced by borrowing lessons from the managers of private equity and hedge funds. He says the financial aspects of primary care are much easier to manipulate than other factors influencing medical students' decisions to enter the specialty, such as lifestyle preferences.
Hedge fund managers are typically paid a performance bonus, which is called carried interest, by other investors in the fund. The carried interest is earned if funds under management yield a return that exceeds an established benchmark. The carried interest is then taxed at the low capital-gains rate, which is currently 15 percent, instead of the income tax rate, which is 35 percent plus payroll taxes.
"As long as this tax preference accorded private equity and hedge fund managers remains on the books — presumably because they are deemed precious and important to our country — why doesn't Congress treat full-time primary care physicians as equally precious and important?" Dr. Reinhardt asked in the blog.
He also said an effective method of lowering the cost of investment for a primary care career is to charge medical students full tuition but lend students the funds for it at reasonable interest rates. Significant portions of the student's accumulated debt should then be forgiven for each year of full-time practice in a designated primary care specialty or geographic location that is undergoing a shortage.
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