Gray B, Grefer J. — American Board of Internal Medicine and CNA
Presented: Western Economic Association Conference, June 2008
Abstract: We examine the relationship between pay and retention among practicing military physicians (those finished with residency training). To do this we relate retention to the value of career earnings differences between like civilian and military physicians across the years 1991 to 2005. Our approach considers several institutional features unique to the military: 1) a long obligation to serve in repayment of subsidized medical school training; 2) the cliff vested nature of military retirement eligibility -- military personnel only become eligible for retirement benefits after completing 20 years of service; and 3) the impact of special physician retention bonus payments that are set by the military based on medical specialty.
Overall, our findings indicate that compensation has a large impact on the decision to remain in the military in the first unobligated year of service (YOS) and just a small impact on retention in the years afterward. For example, across our sample of physicians, a 10 percent increase in total compensation is associated with about an 18.7 percent increase in retention during the first unobligated year, but just a 0.2 percent average increase in yearly retention thereafter up to the retirement eligibility period. Policy simulations indicate that equalizing career earning in specialties underpaid by the military will significantly affect the number of physicians in the military. For example, our estimates indicate equalizing military and civilian career earnings would result in a 47 percent increase in person years of service associated with a newly recruited orthopedic surgeon in 2004.
Our study breaks new ground in the literature in a number of respects. Our study is the first to account for 1) the impact of civilian and military total career earnings on retention (retirement benefits + military wages); 2) career earnings differences between military and civilian physicians; and 3) the potential bias associated with the endogeneity of the military’s physician specialty pay on retention. In addition to these contributions, ours is the first study to explicitly model the retention decision in three distinct periods: (i) the year just after their military obligation is met, (ii) the years after the obligation up to military retirement eligibility; and (iii) the period after the retirement eligibility is met.
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